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Growing evidence that energy transition investments are enjoying a revival
By Natasha White
U.S. President Donald Trump may just have dubbed climate change the “greatest con job,” but there’s growing evidence that energy transition investments are enjoying a revival.
Brookfield Asset Management said on Tuesday that it had raised US$20 billion for the world’s biggest private fund dedicated to the clean-energy transition. That coincided with an announcement from Resolution Investors LLP that it had launched a global equity climate fund targeting US$1 billion within a few years.
Investor interest in green stocks has picked up this year despite efforts by the Trump administration to ax policies that support the clean-energy transition. Since the end of December, the S&P Global Clean Energy Transition Index has risen close to 40 per cent, compared with a roughly 15 per cent gain in the S&P 500 Index.
There also are signs of growing optimism around green strategies in the private markets. Private equity transactions targeting climate solutions hit US$73 billion last year, with BCG recently describing the current market for climate investing as a “post-bubble” period.
Energy demand “is growing fast, driven by the growth of artificial intelligence, as well as electrification in industry and transportation,” Connor Teskey, president of Brookfield Asset Management, said in a statement. “Against this backdrop, we need an ‘any and all’ approach to energy investment that will continue to favour low carbon resources.”
Teskey, who’s also chief executive of Brookfield’s renewable power and transition unit, said the fund — Brookfield Global Transition Fund II — received contributions from institutional investors worldwide. Alterra, a fund of funds launched by the United Arab Emirates at the COP28 summit in Dubai, committed US$2 billion. Norges Bank Investment Management, the world’s largest sovereign wealth fund, pledged US$1.5 billion, it said.
The Brookfield fund, which had been co-headed by Mark Carney before he became Canada’s prime minister, was launched in 2023 with a first close in early 2024 after reaching US$10 billion. It has now successfully deployed about a quarter of its capital, including to a public-to-private takeover of Neoen SA, a renewable power producer, and Evren, a joint venture to accelerate wind and solar projects in India, Brookfield said.
Resolution, which is run by former executives from ex-U.S. vice-president Al Gore’s Generation Investment Management, said its decision to launch a climate fund in the current market was based on an assessment that investors now have a better sense of what to expect.
David Lowish, portfolio manager at Resolution and a former partner at Generation, said the intention is to tap into what he suggests will be a sudden acceleration in the pace of the green transition as the fallout of climate change intensifies.
“The transition to net zero is a major event,” Lowish said. At first, “things take longer to change than you think, and then they change much faster than you think.” Investors who don’t adapt may face “very big losses,” he added.
The goal is to deliver investment returns that are two-to-three percentage points above the MSCI World Index, net of fees, Resolution said. The fund has US$25 million of startup capital, an amount Resolution expects will grow to about US$200 million within the first year with a capacity limit of US$10 billion.
The Resolution fund will contain roughly 30 publicly traded companies, with top holdings including Taiwan Semiconductor Manufacturing Co., Microsoft Corp., Alphabet Inc. and Aon Plc. The focus will be on companies that are leading efforts to decarbonize, as well as those whose products help others cut emissions or adapt to a warming world.
Lowish says climate investing has evolved a great deal since its early days. Investing in green small-caps proved a troubled strategy once interest rates started to rise after the pandemic. The subsequent move into large-cap companies making bold climate pledges has also since fallen flat, paving the way for what Lowish describes as “climate investing 3.0.”
Those allocating capital are now a lot more “demanding and discerning” about the content of their portfolios, Lowish said.
Resolution’s Global Equity strategy will be registered as an Article 9 product, which is the strictest green investment category in the European Union. The firm intends to launch an equivalent U.S. strategy within a year, he said.
Bloomberg.com
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