KGAL launches first ‘dark green’ impact renewables fund with €750m target

German infrastructure manager KGAL’s fifth renewables fund will meet the EU SFDR’s Article 9 requirements.

Germany-based real assets manager KGAL has launched its first ‘dark green’ fund, a renewables-focused vehicle, under the EU’s SFDR.

KGAL is aiming to raise €750 million for Enhanced Sustainable Power Fund 5, as reported earlier this year by affiliate title Infrastructure Investor.

The Enhanced Sustainable Power Fund 5 is designated as an Article 9 fund under EU SFDR, which means it must pursue a social or environment objective as well as doing no significant harm.

ESPF5 will have a 10-year life and will target net returns of 7-9 percent IRR, KGAL said in a statement. It will invest in European renewable energy generation assets including photovoltaics, onshore and offshore wind power, and hydropower, and will also consider battery storage opportunities.

Carsten Haubner

“We will combine the acquisition of project rights in the development and construction phase with value-add approaches for undervalued existing assets and tapping new markets in the develop-and-hold area,” ESPF5 portfolio manager Carsten Haubner said in the statement.

KGAL closed its fourth renewable energy fund at €750 million in October 2019 and has committed more than 90 percent, according to the statement. ESPF4 has focused on Eastern European opportunities including in Bulgaria, Poland and Hungary, Infrastructure Investor reported. Haubner told Infrastructure Investor that KGAL had seen “a yield compression [in Western Europe] due to increased liquidity and increased number of market participants”.

In the statement KGAL said it had experienced “increasing institutional demand since creating its ESPF product series”.