Dealflow | August 11, 2023

Deal spotlight: Private credit for climate infrastructure

Amy Cortese and Dennis Price
ImpactAlpha Editor

Amy Cortese

ImpactAlpha Editor

Dennis Price

ImpactAlpha, Aug. 11 – Private credit, global infrastructure and the energy transition are among the most compelling investment opportunities of the horizon, says Blackstone’s Stephen Schwarzman. His firm’s latest megafund looks to capitalize on all three. 

The $7.1 billion Green Private Credit Fund III is “the largest energy transition private credit fund ever raised,” the firm says. The record-smashing fund will underwrite loans for solar, wind and hydro power as well as battery storage and other infrastructure needed to transition to a low-carbon economy. 

Blackstone, which hit $1 trillion in assets under management in the second quarter, expects to invest $100 billion in the energy transition this decade. In addition to the green credit fund, the firm is looking to raise more than $4 billion for an equity-focused energy fund.

“This will be an area of a lot of capital needs,” noted Blackstone’s John Gray on the firm’s Q2 earnings call. “The good news is, the investors want it.” The firm estimated the value of its energy transition portfolio across equity and debt at more than $20 billion. 

Impact landscape 

Private debt as an asset class is on the rise among climate as well as other impact investors, especially as traditional lenders pull back. 

The number of private debt impact funds has tripled over the last decade, according to Phenix Capital. The research group counts more than 350 private debt impact funds from 200 fund managers, with €45 billion ($49 billion) in assets. More than 200 funds are actively raising, with targets totaling another €43 billion ($47 billion). 

Roughly a fifth of funds target affordable and clean energy or climate action, while 158 funds are focused on poverty reduction in emerging markets, predominantly through microcredit. 

Institutional appetite

In June, responsAbility raised $106 million for a debt fund targeting climate-smart agriculture and food security in emerging markets. The raise followed London-based M&G’s acquisition of the Swiss impact investor in January, signaling European investors’ growing appetite for private credit and specifically in emerging markets once considered too risky for institutional investors. 

Allianz Global Investors has secured €220 million of a targeted €750 million for its Global Infrastructure and Energy Transition Debt Fund. Carlyle is eyeing $2 billion for an energy transition-focused debt fund.

Last year, Paris-based Tikehau Capital’s impact debt fund secured $110 million from Pensioenfonds Detailhandel, the Dutch pension fund’s second impact investment and second investment in an impact debt fund.