Sweden’s AP7 outlines $500m clean tech mandate ahead of tender

Fund to open tender next week and shortly announce consultant hire for manager selection.

The €9.3bn ($13.1bn) AP7 Swedish pensions fund will launch its tender for an $500m (€342m) allocation to two or more clean tech private equity fund-of-funds next week and has outlined details of the mandates to Responsible Investor. The fund, which is currently seeking a consultant to handle the manager selection, will split its allocation between a global fund-of-funds and a similar mandate for the Nordic region where it is looking for private equity managers to create a product that is not currently available to investors.
The fund has also tied up with Mistra, the Swedish foundation for environmental research, for the mandate. Mistra will co-invest in the funds while AP7 will benefit from Mistra’s experience and contacts in the clean tech field. The alliance suggests institutional investors are increasingly looking for partnership investments when making investments into the new area of clean technology. Christian Ragnartz, chief investment analyst at AP7 said: “To date there are no specific clean tech fund-of-funds on offer in the Nordic region and we are hoping that a provider will be willing to meet what we believe is a strong demand. We believe there is a particular need for growth funding in the stage between seed capital in university-type technological research andproduct creation and full marketability, which is where we would like to allocate a portion of our investment. All our investments are financially based and we believe the Nordic region shows strong prospects in the clean tech space.”
Other leading European pension funds that have made investment allocations into the clean tech space include USS in the UK and ABP and PGGM in the Netherlands.
AP7 already has exposure to clean tech companies in the public markets via an unspecified commitment to investments that make up the FTSE ET50 environmental index. It will draw down part of this exposure to fund the new private equity mandates.
The fund expects to hire private equity fund-of-fund managers for the new mandates by the middle of May.
Ragnartz said: “If you read the findings of the International Panel on Climate Change and look at the figures within the Stern Report on the projected investment need to fund the transition to a low carbon economy to avoid dangerous climate change then you realise that there is already potential for good returns and that this potential looks like increasing as the science becomes clearer.”