F&C Investments has announced the first close of F&C Climate Opportunity Partners LP, a new private equity fund of funds focusing on a climate change investment theme. The fund has so far attracted EUR30 million from three institutional investors.
This new fund offers investors access to investment opportunities arising from global efforts to tackle the causes and impacts of climate change. Policies to cut greenhouse gas emissions, and to adapt to the worst impacts of the changing climate, are having a transformational effect on the global economy, providing a range of opportunities for companies providing climate change solutions. Many of these companies are private and will require private equity backing to capitalise on their climate change business opportunity. The fund is structured as a private equity fund of funds, giving investors a unique chance to gain financially, with reduced risk through diversification, while at the same time addressing the world’s foremost environmental challenge.
F&C Climate Opportunity Partners LP will commit to a diversified range of private equity funds and project-focused funds, as well as direct investments, across the entire climate change opportunity set as defined by nine internally identified themes.
The new fund builds on the experience of F&C’s Edinburgh-based private equity funds team, headed by Hamish Mair. The team has investments in 98 funds managed by 65 different private equity managers. A significant proportion of these are with emerging private equity managers. With over 70 years of combined investment experience and a top quartile track record, the team currently manages around £500 million in 3 private equity funds of funds.
F&C Climate Opportunity Partners’ strategy will benefit not only from the team’s considerable experience in private equity fund investment, in particular in backing emerging managers, but also from the support and expertise of F&C’s Governance & Sustainable Investment (‘GSI’) team which has been involved at the leading edge of climate change themed investments through the development and monitoring of the nine investment themes: Alternative Energy, Energy Efficiency, Sustainable Mobility, Waste, Advanced Materials, Forestry & Agriculture, Water, Acclimatisation and Supporting Services. The GSI team, headed by Karina Litvack and supported by former Stern Review climate change expert Vicki Bakhshi, will act as an in-house advisor to the fund.
F&C will invest at least 70% of the fund in private equity funds offering exposure to climate change themes. Up to 30% may be invested in renewable and sustainable project-focused funds. The majority of investment is expected to be through funds although direct co-investments may represent up to 30% of the total value of the fund.
The portfolio will also be diversified by management group, industry, stage, theme and geography. Given the relative immaturity of the investment universe it is likely that there will be a significant proportion of the fund invested with emerging managers.
It is anticipated that the portfolio will consist of 12 to 15 funds and be complemented by selective co-investment directly into private companies. The portfolio of co-investments will be constructed to enhance returns whilst maintaining diversification.
“We believe private equity represents an attractive way to gain exposure to the climate change investment niche. As an investment theme, climate change is universal in relevance, unprecedented in scale and sustained in longevity. F&C is well positioned to offer this new investment vehicle that combines our experience in private equity investment and our in-house expertise in climate change themed investment” says Hamish Mair (pictured), Head of Private Equity Funds at F&C.
The fund has been set up as a Scottish Limited Partnership. Management fees will be calculated as 1.5% of total commitments.
