Investcorp, an alternative asset manager that counts Mubadala Investment Company as its biggest shareholder, is launching a new climate-focused investment platform and will have the funding in place before the start of Cop28 climate conference in the UAE, its co-chief executive has said.
The new investment vehicle under Investcorp’s private equity business will take up stakes in companies in sectors ranging from mobility to climate technology, as well as the carbon management and energy transition and storage industries, Rishi Kapoor told The National in an interview.
It is “all about capturing the opportunity resulting from a clear consensus that has developed around the world with respect to reduction of carbon emissions”, Mr Kapoor said.
There are areas that require commercial-scale new and innovative technology that will, in turn, help to decarbonise the entire spectrum of the global industrial landscape.
“That's where we, as Investcorp, sense one of the most attractive opportunities, not just in a decade, but in a generation,” he said.
Investcorp will provide growth capital to energy transition technology companies that have a proven business model and require funding to scale up.
It will invest between $25 million and $75 million either directly or with partners to add more green assets to its private equity portfolio.
“If you want to take a broader array … that's the sweet spot for growth capital investing,” Mr Kapoor said.
The company is in the process of setting up the new climate-focused growth capital platform, which is “already beyond the initial creation and conceptualisation stage”, he said.
“By the time Cop28 comes around, we're going to have all the building blocks and the foundation well in place to be able to deliver on the commitment to be a steward of investor capital, towards the commercial scale-up of these technologies.”
As is the case with their global peers, money managers in the six-member GCC economic bloc are increasingly looking to launch dedicated investment platforms as demand for sustainable investing continues to increase globally.
Last year, Apollo Global Management, one of the world’s largest alternative investment managers, launched a sustainable platform to boost investment in the energy transition and decarbonisation of the industry.
The company is investing $50 billion in clean energy and climate capital over the next five years and expects investment to rise to more than $100 billion by the end of this decade, it said at the time.
Consultancy McKinsey estimates about $9.2 trillion a year will be needed to meet near-term emissions reduction goals for 2030 and 2050.
To reach net-zero emissions by the middle of this century, annual clean energy investment worldwide will need to more than triple by 2030 to about $4 trillion, according to estimates by the International Energy Agency.
As governments in the GCC intensify efforts to reduce their carbon footprint and achieve their renewable energy targets, sustainable investing has also become a popular theme for investors across the region, particularly in the UAE, which is hosting Cop28 from November 30 to December 12.
More than 40 per cent of investors in the Emirates want to put their money towards addressing climate issues, a report by Standard Chartered has found.
The final size of the funding Investcorp will eventually raise for its new climate-focused growth capital platform has yet to be decided, Mr Kapoor said.
“The framework [of the new investment vehicle], the format, how we approach this, etc, it is all a little bit of work in progress,” he said.
Investcorp, which in March raised more than $1.2 billion for its inaugural North American private equity fund, has so far received great response from investors for the planned climate-focused funding vehicle.
There is “very large and growing investor interest” in the space as the investor community recognises the existential risks in respect of climate change, Mr Kapoor said.
“So, they get that but I think, even more importantly, the investor community has embraced the commercial opportunity that exists in terms of these transition technology that will help adapt all sectors of the current economic landscape,” he said.
“Commercial opportunity to generate attractive risk-adjusted return is really what is attracting investment.”
In terms of locations, the bulk of innovation is happening in North America, so it will be a major target market for the new investment fund.
Investcorp will also look for attractive investment targets in Europe, as well as in parts of Asia and the Middle East, he said.
Cop28 is expected to make the new green platform become even more significant for Investcorp’s investment strategy.
The investment manager on Tuesday released its latest environment, social and governance (ESG) report that took stock of the progress made on the company's core commitments to build high-performing sustainable businesses.
Titled Responsible Growth, the report also analysed how the company can take advantage of diversity to drive greater social impact and use its resources and capital to hasten decarbonisation efforts within the company and across its investment portfolio.
“This report underscores our commitment to be a leader in responsible investing, and we hope that it reflects the breadth of our efforts, our achievements to date and the challenges that lie ahead of us,” Investcorp said.
Set up in 1982, Investcorp has grown to become one of the leading alternative asset management companies in the region. It has assets worth more than $50 billion and plans to double them by the end of this decade.
The company went on an acquisition spree after the onset of the Covid-19 pandemic, to capitalise on lower asset valuations, and continued its aggressive portfolio expansion in 2022.
Investcorp has carried its deal-making momentum into 2023 and said in January that it plans to invest up to $1 billion in the GCC property market over the next five years.
It is also looking at new investment deals in Japan, Asia’s second-largest economy, as it continues to expand its operations globally.
Canada is the next market that Investcorp plans to include in its geographical footprint, Mr Kapoor said.
Investcorp’s North America Private Equity group has completed about 70 transactions involving mid-market businesses, with investments worth more than $22 billion since inception.
