INVESTMENT platform Decarbonization Partners – jointly set up by Singapore state investor Temasek and global asset manager BlackRock – has raised US$1.4 billion at the close of its inaugural fund focused on investing in decarbonisation technologies, surpassing its initial target of US$1 billion.

The late stage venture capital and early growth private equity fund had attracted over 30 institutional investors from 18 countries, said the joint venture (jv) on Thursday (April 25). 

They include public and private pension funds, sovereign wealth funds, insurance companies, as well as corporates and family offices across North America, Europe and Asia-Pacific.

Financial institutions Allstate, BBVA, Mizuho Bank, MUFG Bank, and Kirkbi, as well as energy company TotalEnergies are among some of the 30-odd investors. There was also capital committed by high net-worth individuals. 

Decarbonization Partners was set up in 2022 by Temasek and BlackRock – both committing a combined US$600 million in initial capital – to accelerate capital deployment into the emerging climate tech asset class. 

The fund, which is classified under Article 9 of the European Union’s Sustainable Finance Disclosure Regulation, focuses on companies with proven technologies that are ready to scale up. Funds classified as Article 9 have to make a positive impact on society or the environment and have a non-financial objective at the core of their offering. 

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Temasek’s chief executive officer Dilhan Pillay said that the participation of more than 30 investors will support the acceleration of innovative solutions for real-world decarbonisation at scale. 

“Addressing the climate crisis requires innovation at scale, as well as significant and sustained financial resources to enable that. No single entity can do it on their own,” he added. 

BlackRock’s chairman and chief executive officer Larry Fink said that Decarbonization Partners would be looking to identify generational investment opportunities in climate technology that will help to bring down the green premium, enable a more affordable energy transition, and generate long-term financial returns for their clients. 

“There is enormous demand for energy infrastructure as many countries seek to transition to lower-carbon sources of power while also achieving energy security,” he said. 

The inaugural fund has invested in seven companies, which span across various decarbonisation technologies. They include sustainable materials, clean hydrogen and science-based carbon management services. A majority of the fund is channelled towards clean energy and advanced mobility solutions. 

In terms of geographic breakdown, about 50 per cent of the capital has gone into companies based in the United States, while the rest are similarly split between Europe and Asia-Pacific, said Dr Meghan Sharp, global head of Decarbonization Partners. 

The team is still building a pipeline of investable companies in Asia-Pacific, and have made trips to Japan, South Korea and Australia. 

However, Dr Sharp said that while some of their investee companies have their first or second plant based in the US, the subsequent plants would likely have to be in Asia-Pacific, as many customers and users of these solutions would be in the region. 

“We’re expecting our Asia-Pacific footprint, where plants are concerned and activity is concerned, and dollars going into the region to be broader than that,” she said. 

With costs of capital rising as a result of the high interest rate environment, Dr Sharp noted that investors’ risk appetite was no longer like in 2020 and 2021, which was “a crazy period of time where it was about who could write the fastest cheque over the weekend”. 

However, she said that there are still competing term sheets for companies with high growth potential even in the current environment. 

“The entrepreneurs want investors that are going to sit on their boards and be there long-term and support the companies through their growth cycle... And we as investors want to find those great entrepreneurs that we feel are capable of executing on the business plan, because these are often heavy lifts,” she added. 

Dr Sharp added that they are still seeing significant investor appetite towards the strategy of investing in decarbonisation.