Asset owners testing climate change theme through PE fund-of-funds route

Institutional investors are increasingly testing climate change-related investment themes through private equity strategies as asset managers raise money through fund-of-funds structures. In two recent fund closes, F&C Investments said it had raised €30m in commitments from three unnamed institutional investors in the UK and the Netherlands for the first close of its F&C Climate Opportunity Partners private equity fund-of-funds. Separately, Unigestion, the Geneva-based asset manager, made a first close of €60.5m for its Unigestion-Ethos Environmental Sustainability fund-of-funds, launched in partnership with Switzerland’s Ethos Foundation, the RI investor which looks after more than CHF2.3bn (€1.4bn) in assets for over 100 of the country’s pension funds and foundations. The F&C fund, which is investing with managers focused on emerging climate change solution technologies and themes, will be run by the manager’s Edinburgh-based private equity funds team. F&C’s London-based Governance &Sustainable Investment (GSI) team, which researches climate change themed investments, will act as in-house advisor. At least 70% of assets will be committed to 12-15 private equity funds, notably with emerging managers due to the nascent theme. F&C said up to 30% of the fund could be invested in renewable and sustainable project-focused funds or in direct co-investments in private companies. Hamish Mair, Head of Private Equity Funds at F&C, said: “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.” The Unigestion-Ethos fund will also invest in up to 15 private equity funds investing in energy efficiency, alternative energy production, water treatment and pollution control. Inrate, the Geneva-based sustainability research company, is assessing the underlying technology of the investments made by the fund as well as specific ESG issues for non-listed companies.