A new investment fund that will require the companies that it invests in to become carbon neutral within ten years has received the backing of the Clean Energy Finance Corporation (CEFC), which will invest $80 million in the new venture.
The $700 million Adamantem Capital Fund II says it will adopt a ‘cradle to grave’ approach to the emissions footprint of the fund, and will set emissions reduction targets from its target companies that either entirely mitigate or offset their emissions within the next ten years.
The CEFC will be joined by superannuation fund Aware Super, formerly First State, which will also make an $80 million cornerstone investment, and which this week announced a $50 million investment in two battery storage projects in the US.
The Adamantem fund will focus on a range of sectors that have not traditionally been the focus of emissions reduction efforts, including consumer staples, healthcare and business-to-business services.
Companies that receive investments from the Adamantem fund will be required to engage an independent assessor to undertake a measurement of the company’s energy use and emissions footprint, covering scope-1 and scope-2 emissions.
The fund will target mid-market, private equity-owned companies, and the CEFC sees an opportunity to engage with this market segment to improve engagement with the wider transformation underway in the economy.
“The private equity sector is an asset class that is still in the early stages of climate transition. With more than $30 billion of assets under management in Australia’s private equity and venture capital industry, engaging this sector is critical to the continued decarbonisation of the Australian economy,” CEFC CEO Ian Learmonth said.
“We want the sector to lift its emissions reductions ambitions to new levels. Working with an industry leader like Adamantem provides an opportunity to catalyse real change by improving the sustainability profile of mid-market companies across a diverse range of assets.”
The fund will establish a new Emissions reduction Committee, which will include the involvement of the CEFC, to engage with companies added to the portfolio and will work with them to develop planned pathways towards meeting the emissions reduction targets that they adopt.
Aware Super said that it sees the fund as helping to fulfil the growing demand for retirement savings to be used for climate-friendly investments.
“We know that climate change poses one of the most significant financial risks to our portfolio and our members’ retirement savings in the long term. We believe we can generate strong long term returns while also supporting the economy to transition,” Aware Super senior portfolio manager Jenny Newmarch said.
“This year Aware Super has set ambitious targets and goals for how we will respond to these risks and support our portfolio to transition to a low-carbon future. Investments in funds like this are just one way we are working to support a more sustainable and resilient economy.”
Institutional investors, such as superannuation funds, have often found Australia a difficult market to find suitable climate-friendly investments, with funds often looking offshore for better opportunities to find the diversified and larger-scale opportunities that institutional investors search for to meet growing demands from customers for sustainable investments.
A recent example of this is Aware Super acquiring an ownership stake in two big battery projects in the United States, while looking for opportunities to invest in similar projects locally.
Adamantem Capital Managing Director, Rob Koczkar said that the new fund, and the increased engagement between investors and the companies that they invest in, was a key opportunity to drive the swift towards decarbonisation.
“We are delighted to have attracted the CEFC as an investor in our second fund, and as their first private equity partner, we believe this is the direction needed to accelerate Australia’s transition toward more sustainable economic activity,” Koczkar said. “We look forward to working with the CEFC and Aware Super on further developing and refining our emission reduction strategies that target long-term positive impact.”
