FullCycle has raised $75 million for a fund that will help promising companies scale solutions aimed at reducing heavy pollutant greenhouse gases such as methane and nitrous oxide, according to a market source. The Los Angeles-based growth equity provider is on track to close FullCycle Climate Partners near its $250 million fundraising target by the end of the year, the source told New Private Markets.
Stephan Nicoleau, a partner who leads the firm’s capital formation strategy, declined to comment on the fundraise, but said FullCycle is planning to deploy a strategy that focuses on “growth equity for scaling real assets” that help curb “high-impact climate pollutants.”
The firm raised $60 million for its first fund, which focused on investing in companies developing new technologies for turning solid waste into clean energy and fuel.
Although carbon dioxide is the overwhelming greenhouse gas contributing to global warming, 20 percent of US emissions in 2019 came from methane, nitrous oxide and fluorinated gases, according to the US Environmental Protection Agency. It takes around 100 years for these gases to break down and dissipate, though they have a greater atmospheric impact within the first 20 years of being emitted. Methane, for example, traps heat at 84 times the rate of carbon dioxide.
“Part of what we have at our core at FullCycle is a model that is purpose-built for solving this issue and solving it in a way that generates a financial return for investors,” Nicoleau said. “It’s going to take trillions of dollars compounding annually every year through 2050 to meet this issue. How do you galvanize that quantum of capital?”
According to the source, FullCycle will target unlevered returns in the mid-20s to low 30s from investments scaling “market-ready” solutions.
“We’re an engine of value creation for our investors,” said Nicoleau. “We drive whether or not we’ll make an investment based on the readiness of the technology. We don’t take technology risk.”
FullCycle was founded in 2013. On its website, it lists a team of six professionals, including co-founders Ibrahim AlHusseini and Giffen Ott, alongside 11 members of its advisory board. AlHusseini is a venture capitalist and environmentalist who was an early investor in clean energy developer Bloom Energy, green financial services company Aspiration and renewables utility CleanChoice Energy. Ott is a veteran of the private equity and clean technology space who founded waste recycling company Synova Power and served as operating executive of Golden Gate Capital.
Nicoleau built a career scaling financial solutions across capital markets before joining FullCycle. In the mid-2000s, he helped create a boutique strategy consultancy working on sell-side deals for investment banks; managed the development of Credit Suisse’s global markets division; and advised Barclays Capital on mergers and acquisitions. More recently, he founded LaGuardia Development Partners, a minority-owned infrastructure development firm helping to finance the rebuilding of New York’s LaGuardia Airport.
The size of FullCycle’s climate fund is smaller – and its focus narrower – than other climate-focused vehicles in today’s market, such as TPG’s Rise Climate Fund and Brookfield’s Global Transition Fund, which have raised $5.4 billion and $7 billion in commitments respectively.
“You’ve got to make it so that LPs of all stripes – sovereigns, pensions and everyone in between – can pile into this sector and have it be a major component of their portfolios,” Nicoleau said.