Australia's Adamantem acquires carbon offset company

This is the first deal from Adamantem’s second fund, which targets companies with enterprise valuations in a range of A$100-500 million ($77-387 million). Climate Friendly’s founder and its management team will remain shareholders in the business.

The investment is part of an ambitious environmental agenda for Adamantem. The private equity firm targets mainstream consumer, healthcare, and B2B assets with a focus on returns, but does so with an overarching goal of achieving carbon neutrality.

Companies in Fund II will be required to take steps to eliminate or offset their emissions within a decade. Independent consultants will be brought in to conduct the necessary measurements, which will include an assessment of indirect emissions in companies’ supply chains.

The plan helped Fund II achieve a first close of A$675 million in September with support from Aware Super and Australia’s Clean Energy Finance Corporation (CEFC). Aware, formerly First State Super, is pursuing an aggressive coal divestment policy, while CEFC has about A$10 billion in various renewable energy and pollution reduction interests.

Climate Friendly helps landowners earn government carbon offset credits by adopting land management practices that reduce emissions and retain carbon in the soil, a process known a carbon farming. It claims to be developing a new approach to carbon farming that is more holistic, facilitating active landscape management and agricultural productivity.

The company recorded 20 million tons of carbon abatement during 2020 and plans to increase this figure to 100 million by 2025. It describes this target as the equivalent of planting a native forest plantation of more than 125 million mature eucalypt trees.

“[Adamantem’s investment] is a great way to mark the start of Climate Friendly’s 18th year in business, and we are very excited to think about meeting and even exceeding our ambitious impact goal together,” CEO Skye Glenday said in a statement. “This investment recognizes the value in the profit-for-purpose goals that drive Climate Friendly’s team and culture and which have been embraced by Adamantem.”

Australia’s Carbon Farming Initiative Act of 2011 introduced a carbon credit program to reach the government’s goal of net-zero emissions by 2050. In the meantime, carbon farming has become a widely recognized practice in the local agriculture industry. The federal budget to be announced in May is expected to include a soil strategy with additional incentives for farmers to reduce emissions.

KKR was active in this space last year, when it made an investment of undisclosed size in GreenCollar, an environmental services provider known for helping establish Australia’s carbon credit market. In addition to advising landowners on carbon farming techniques, GreenCollar helps them sell their carbon credits to private and public organizations seeking to manage their environmental impact.

In private equity, climate change has evolved from a sustainable investment consideration to the understood driver of a wide-ranging set of business risks. Monitoring and reducing a portfolio’s emissions footprint is considered one of the industry’s most immediately actionable strategies for addressing these risks at scale. However, these efforts do not typically encompass indirect supply chain emissions.

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• Topics
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• Buyouts
• Australia
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• Adamantem Capital