Impact Investing | February 24, 2022

TPG Rise rolls up Element Markets and Bluesource to go big on carbon credits

Amy Cortese and Roodgally Senatus
ImpactAlpha Editor

Amy Cortese

ImpactAlpha Editor

Roodgally Senatus

ImpactAlpha, Feb. 24 – TPG Rise, which last year raised more than $5 billion for a climate fund, is set to become one of the world’s largest marketers and originators of carbon and environmental credits with the rollup of natural gas company Element Markets and Bluesource, a developer, advisor and seller of nature-based carbon credits.

TPG Rise will have majority control of the as-yet unnamed venture, which follows TPG Rise’s acquisition last January of Element. Funding for the combination also came from NGP Energy Capital Management’s energy transition investment arm. 

Carbon prices have soared over the past year as corporations scramble to meet net-zero pledges and get ahead of carbon risks. That has attracted global commodity traders, hedge funds, crypto companies and, now, private-equity firms.  Bluesource has a pipeline of verified carbon and methane credits from nature-based solutions, methane capture, low-carbon fuels, conservation and other sources. 

“We’ve seen a significant acceleration in demand for high quality carbon and environmental credits,” driven by global decarbonization goals and corporate net zero targets, TPG Rise’s Marc Mezvinsky told ImpactAlpha. He said Element and TPG Rise aim to create a platform for both developers and buyers of greenhouse gas credits. 

Houston-based Element is among the largest North American providers of renewable natural gas from methane-capture projects developed with partners including Smithfield Foods, L’Oreal, and Dominion Energy.  

Utah-based Bluesource partners with municipalities, dairy farms and other organizations to generate and sell renewable natural gas credits. It also develops projects that preserve grassland, improve agricultural practices, capture methane emissions and disposal of ozone-depleting substances. 

“The need for scale and immediate engagement on climate management has never been higher,” Bluesource said in an emailed comment.

In December, Bluesource launched a regenerative agriculture program to mitigate more than 500,000 metric tons of CO2-equivalent per year. Earlier this month, it announced a plan to develop a large wilderness and carbon offset project in Vermont, with Inlandsis Fund and the Northeast Wilderness Trust.

“Nature-based credits are amongst the fastest growing sub-asset class of carbon credits, driven by consumer demand for removal instead of avoidance credits,” says Mezvinsky. 

TPG Rise, the impact investing arm of alternatives investor TPG, raised an initial $5.4 billion last year for TPG Rise Climate from large pension, sovereign and corporate investors, helped along by former U.S. Treasury Secretary Hank Paulson. The fund could hit $7 billion.

Earlier this month, TPG Rise Climate took a $500 million stake in Nextracker, a provider of commercial solar-tracking systems. In October, it invested, with ADQ, $1 billion in a new subsidiary of Tata Motors to catalyze electric vehicle adoption in the country.