Dutch impact manager Polestar Capital is set to receive commitments from four new investors for its Article 9 circular economy debt fund, bringing the total amount raised to €187 million.
Netherlands state impact investor Invest-NL and insurers Onderlinge ‘s-Gravenhage and De Hoop have already invested, while the Province of Limburg is in the process of formalising its commitment, said the firm. The new investors join Pensioenfonds Detailhandel, which served as anchor investor with a €100 million commitment.
In what is widely considered a slower private markets fundraising environment, director Jan-Willem König told New Private Markets that allocations for impact are starting to come online. For “the last three years, everyone was busy with defining their investment strategies and their investment buckets [to be allocated to impact investing and private debt]” but now investors are “more and more up to speed in what they can do”, he said. As a result, there is “quite some traction evolving” in the fundraising market compared to last year.
Launched in 2022, Polestar’s circular debt fund seeks to invest in innovative projects with the potential to reduce and recycle waste or replace fossil fuel consumption. The fund has a cap of €20 million per portfolio investment and a mandate to deploy 80 percent of its capital in the Netherlands, with 20 percent in neighbouring countries.
The fund has a cap of €250 million, said König, and the firm expects to reach or have nearly reached the cap by the end of this quarter. There is then the opportunity to launch a co-investment strategy of a further €150 million, bringing the total size of the strategy to €400 million.
On the measurement front, König explained that there are “three types of impact that that we measure”. There are the headline measurements, which are “CO2 reduction, amount of waste reduced, amount of fossil-based raw materials that we no longer use to make new products”. Polestar then also takes measurements across approximately 60 metrics to ensure the fund complies with Article 9 of SFDR
Third, there is data collected specifically to respond to the requests of particular investors. “For example, if you invest in hospitals and making them more sustainable and the pension fund is the pension fund for nurses and doctors, then they typically want to see how many hospitals [you] are making more sustainable and how many people are working there, etc,” König explained.
König anticipates a return of 6 percent, though market conditions may change that. “Right now, the interest rates are a little bit higher than we started with, [during the] marketing of the fund. Perhaps our end result could be a little bit higher [than 6 percent].”