CEFC and Aware Super commit to emissions conscious private-equity fund

The Clean Energy Finance Corporation and Aware Super, one of Australia’s largest superannuation funds, have both committed $80 million to Adamantem Capital, a private-equity fund which requires its target companies to meet strict emissions reduction targets. For the CEFC, this is the beginning of decarbonisation in a part of the economy lagging behind, namely, private equity.

Image: CEFC

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The Adamantem Capital Fund II (the Fund) is a private equity fund which prides itself on its Carbon Active Carbon Neutral Standard certification, a certification dependent on investing in carbon neutral companies or companies with firm emissions targets. For this reason, the Clean Energy Finance Corporation (CEFC) has decided to invest in a private equity firm for the first time, committing $80 million to the Fund.

As fans of Hugh Jackman and Wolverine are no doubt are aware, Adamantem’s etymological roots are found in the ancient Greek adamas, meaning “unbreakable, inflexible”. Now, the Fund which bears this name may have been intending to excite allusions to more recent meanings of adamantem, namely diamond quality hardness, but perhaps it is the Fund’s unbreakable and inflexible investment policy when it comes to carbon emissions that sets it apart and ensures its diamond standard. 

After all, this very inflexibility is what excited the CEFC to make what the clean financier is calling “a landmark investment that will drive ambitious emissions reduction targets across a diverse range of private equity-owned, mid-market companies.”

It is a landmark for several reasons, but perhaps most obvious at the outset is that this is the first time the CEFC has invested in a private equity firm. By its own analysis, the CEFC estimates that 60% of Australia’s national emissions emanate from companies outside the ASX 300. 

“The private equity sector is an asset class that is still in the early stages of climate transition,” said CEFC CEO Ian Learmonth. “With more than $30 billion of assets under management in Australia’s private equity and venture capital industry, engaging this sector is critical to the continued decarbonisation of the Australian economy.”

The $700 million Fund is the first private equity fund in Australia to adopt this “cradle to grave” approach to emissions awareness in its target companies. Any company acquired by the Fund will be required to implement emissions reduction targets that aim to eliminate or at least offset their emissions within a ten-year period. The Fund will also require each portfolio company to have an independent consultant conduct an anergy and emissions baseline measurement covering Scope 1 and 2 emissions. 

“We want the sector to lift its emissions reductions ambitions to new levels” continued Learmonth. “Working with an industry leader like Adamantem provides an opportunity to catalyse real change by improving the sustainability profile of mid-market companies across a diverse range of assets.”

Adamantem’s Capital Managing Director, Rob Koczkar, said the investment of CEFC is a cause of real delight for the team, and spreads the awareness of “the direction needed to accelerate Australia’s transition toward more sustainable economic activity.”

Speaking of awareness, Australia’s second-largest industry superannuation fund, Aware Super (Aware), has also committed $80 million to the Fund. Aware made the announcement only a day after investing over AUD$40 million in SER Capital Partners’ New York City microgrid projects, an effort to repurpose under-utilised property like parking lots, alleyways, and rooftops, into battery energy storage hubs.

“We know that climate change poses one of the most significant financial risks to our portfolio and our members’ retirement savings in the long term,” noted Aware Super Senior Portfolio Manager, Jenny Newmarch. “We believe we can generate strong long term returns while also supporting the economy to transition.” 

A super trend 

Overall, the trend in green finance and fossil fuel divestment is accelerating rapidly and is particularly noticeable in the superannuation industry, an industry expected to hold the majority of ASX-listed equity by 2040.

Aware’s emissions reduction targets, including a 30% reduction in carbon emissions in its portfolio by 2023 which has already been achieved, is demonstrative of the accelerating divestment in emissions producing assets shown in a recent report from Monash Sustainable Development Institute initiative Net Zero Momentum Tracker and ClimateWorks Australia. 

The report, an assessment of Australia’s 20 largest superannuation organisations which $1.5 trillion in total assets under management collectively, found that one-fifth of the organisations studied have accelerated their intention to achieve net zero emissions across their investment portfolios in the last three months alone.  

Aware joins funds such as Hesta, Cbus, and UniSuper, which have all announced net zero emissions by 2050 targets for their investment portfolios recently, decisions ‘fully aligned’ with the Paris Climate Agreement. Indeed, only last month, Australia’s largest superannuation fund, AustralianSuper, followed up from its dumping of shares in Whitehaven Coal with a commitment to a net zero carbon emissions investment portfolio by 2050. 

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