Friday Funds: LGPS Central, Brunel, Merseyside back NextEnergy solar fund

The latest developments in ESG-related funds: AP2 completes PAB switch for Swedish equities; KLP, Norfund invest in Indian solar.

Renewables investor NextEnergy Capital has raised £327 million (€386 million; $385 million) for the first close of its UK solar fund, with backing from local government pension pools LGPS Central and Brunel Pension Partnership, and the Merseyside Pension Fund. The UK’s Infrastructure Bank and undisclosed Middle Eastern investors also took part in the raise, hitting just under two-thirds of NextEnergy’s £500 million target. The 10-year fund will invest in new-build solar in the UK, with an expected generation capacity of 2GW at its hard-cap of £1 billion. The fund already has two seed assets with an installed capacity of 115MW, as well as a pipeline of projects.

Swedish fund AP2 has completed its planned switch to Paris-aligned Benchmarks for its entire portfolio of Swedish equities. A spokesperson said AP2 had been cutting its exposure to fossil fuels since 2014 so “only minor changes” were made to its portfolio as a result of the switch to the benchmarks, which were internally developed.

In other Scandi news, KLP and Norfund have each invested NKr150 million (€15.5 million; $15.5 million) in the Thar Surya 1 solar project in India. The 420MW plant is currently under construction in the state of Rajasthan by Enel’s green energy wing.

Nordea Asset Management has launched an Article 9 real assets fund in partnership with CBRE Investment Management. The fund will have 50 to 80 holdings across the globe, invested in “sustainable champions” in listed infrastructure and real estate markets. The fund will look at both environmental and social criteria, on top of a “do no significant harm” test.

ESG ETFs made up 42 percent of European ETF flows in the three months to the end of June 2022, according to analysis released by UK retail platform Hargreaves Lansdown. From January 2017, the proportion of Hargreaves’ clients investing in ETFs almost doubled, from 5.1 percent to 9.1 percent, while the proportion that held an ESG ETF increased eight times. Nevertheless, just 1.05 percent of the firm’s clients have invested in one.

Decarbonisation Partners, a joint investment project between Temasek and BlackRock, has led a $60 million funding round for carbon management firm Carbon Direct. Quantum Energy Partners also participated in the raise for the firm, which works on carbon credits, supply chain emissions and low carbon fuels and materials.