TPG and M&G Catalyst take a stake in the circular economy

TPG Rise Climate has inked its third deal: leading a $170 million funding round in waste-to-materials recycling company UBQ Materials. TPG Rise Climate and other TPG Rise funds collectively contributed $120 million. Other investors in the round included M&G’s £5 billion ($6.6 billion; €5.9 billion) Catalyst impact fund and venture capital firm Battery Ventures, an existing investor in UBQ Materials.

It was “very competitive” to get into, said Alex Seddon, head of M&G’s Catalyst fund. “The best management teams… want aligned investors. If it’s a purposeful business, they want purposeful capital behind them. They want impact investors.” M&G had to “show we’ve got patient, flexible capital,” Seddon added.

“Investing alongside TPG Rise is a real positive, given they’re one of the pioneers of this global impact investing at scale,” Seddon added.

TPG has collected $5.4 billion so far for its third impact fund, a climate-focused vehicle, which launched in June 2021 with a $7 billion target. In July it said it expects to announce a final close by the end of this year. TPG Rise Climate announced investments in energy storage company Form Energy in August and Indian motor company Tata Motors’ electric vehicle subsidiary in October.

M&G created Catalyst, a £5 billion allocation to impact investing across asset classes, in February 2021 from its £136 billion With Profits fund, which invests on behalf of customers of M&G subsidiary Prudential, a private pension and insurance provider. Catalyst invests in private equity, private credit and real assets. Catalyst has made a number of investments: it invested in chemical recycling company Plastic Energy in November and invested via debt provider Ardcairn Capital to finance affordable and social housing developers in Ireland in September.

UBQ Materials, a B-Corporation, converts organic and other solid household waste into a plastic substitute material, reducing landfill waste and associated methane emissions. A ton of UBQ’s plastic substitute can prevent up to 12 tons of carbon dioxide equivalent from entering the environment, UBQ claims. The funding round will support the development of a UBQ conversion facility in the Netherlands, and research and development.

“Our investment in UBQ reflects our focus on scaling solutions that are greening the industrials, materials, and manufacturing spaces,” said Ignacio Giraldo, business unit partner at TPG Rise. “These are critical areas where we see a broad opportunity to introduce new technology and meaningfully reduce or avert greenhouse gas emissions.

“As UBQ grows, its potential impact increases by reducing methane emissions created by waste that was once destined for a landfill and by using that waste to create a recyclable alternative to carbon-intensive materials.”

“In addition to converting municipal waste into functional thermal plastics, UBQ’s material solution is energy efficient, uses no water and produces no effluents,” said Steve Ellis, co-managing partner of The Rise Fund. “UBQ can be utilised in a broad array of industrial and consumer applications. We’re excited to be partnering with management to scale the business globally.” Ellis and Giraldo will join UBQ’s board of directors.

“Supporting the circular economy is a central theme in our sustainable investment strategy,” Alex Seddon, head of M&G Catalyst, said in a statement. “We can’t live with or without generating waste and we need to address the challenge through innovation and technology, as UBQ Materials is doing. This is an important driver of the circular economy and, importantly, will keep more waste away from landfill.”