Australian government-owned investor Clean Energy Finance Corporation invests to promote a low-carbon economy, through both direct investment and private fund commitments.
CEFC’s first PE commitment was to mid-market private equity vehicle Adamantem Capital Fund II. Part of Adamantem’s value creation plan involves systematic reduction of portfolio companies’ carbon footprint.
More recently, CEFC committed A$50 million ($36 million; 31 million) to Gunn Agri Partners’ second fund. Gunn’s strategy for the fund involves buying underperforming small- to medium-sized farms and improving land use by integrating row crops, grazing, carbon sequestration, biodiversity conservation and other natural capital assets at an institutional investment scale.
So what does it take to get a fund commitment from CEFC?
There are two things the investor looks for, says CEFC executive director Rory Lonergan in a short video interview with New Private Markets.
First, the manager must be “philosophically aligned” with the investor, meaning “they are genuinely trying to raise capital into an investment philosophy that has decarbonisation at its core. They have done the work and thought it through”.
Second, the manager must have adopted a leadership position, adds Lonergan. “No one manager is going to save the planet with a $1 billion or $2 billion fund – we are looking for managers that can show true leadership to a sector… so you get a systemic effect across the asset class.”
Ultimately, the LP is looking for managers that can “prove that decarbonisation and returns go hand in hand with each other, and not at the expense of each other.”