The fundraising highlights how big asset managers are looking to tap into the transition towards cleaner energy through investments in physical assets at a time when many public-market securities trade at valuations that are stretched by most measures.
“In a world where traded asset prices are so inflated what we find compelling is the opportunity to invest in projects that are low-risk relative to their predicted cash flows,” said Ramsay Ravenel, chief investment officer of the Grantham Foundation. “We see healthy growth in clean energy investing opportunities in emerging markets.”
The fundraising includes $US112.5m in “catalytic capital”, something that shows the risks associated with long-term investment projects in emerging markets. The catalytic tranche will absorb losses associated with investments undertaken by the fund and this cushion is designed to encourage other investors to participate.
Contributors to the catalytic capital tranche include the French Development Agency, Germany’s KfW Development Bank, the Japan Bank for International Co-operation, the Grantham Environmental Trust and the Quadrivium Foundation.
Kathryn Murdoch, co-founder of Quadrivium, said the catalytic element would “leverage much bigger players” to invest in “climate tech solutions” with the “global scale and ambition necessary to have a real impact”.
Ravenel said some investors in emerging markets have doubts about clean energy projects, while others have broader reservations about EM exposure. “Our hope is to encourage institutional investors to not sit on the sidelines,” and in regard to providing some of the risk capital, he added: “We are taking a bet that our insurance premium will not be called.”
Projects in Vietnam and Malaysia are potential early targets for deployment, said Edwin Conway, global head of BlackRock Alternative Investors.
The list of institutional investors that have made commitments to the fund includes Dai-ichi Life Insurance, a leading European pension fund, Standard Chartered Bank and Mitsubishi UFJ Financial Group, according to BlackRock.
Capping the fund at $US500m reflects a targeted focus on carbon-free infrastructure projects, Giordano said. “We want the fund to be nimble and selective in the deployment of capital.” He added “these are long-term infrastructure projects that are important building blocks in portfolios and offer investors a diversified source of returns”.
The real assets team at BlackRock manages about $US12 billion in private funds of invested and committed capital for renewable power platforms.
The new fund follows a push last month by the Rockefeller and Ikea foundations to each commit $US500m of risk capital with the aim of encouraging additional funds from international development agencies.