IFM's decarbonisation credentials attract Australian LPs

The hard cap has been set at AUD 500m and a final close may not come until the second quarter, according to a source close to the situation. However, approximately half of the excess capacity can be absorbed by existing LPs that could not invest as much as they wished due to minimum cheque size requirements and may scale up if the overall corpus increases.

Nearly all the LPs are domestic, which reflects IFM’s unusual ownership status. The firm has 22 Australian superannuation fund shareholders, and they tend to be prominent contributors to its funds. Most of IFM’s AUD 180bn in assets under management is in infrastructure, with private equity accounting for AUD 900m.

Other disclosed LPs in IFM Investors Private Equity Growth Partners Fund include HESTA and Legalsuper.

CEFC’s involvement is notable because it is an AUD 10bn government agency tasked with addressing carbon emissions challenges in sectors such as agriculture, energy generation and storage, infrastructure, property, transportation, and waste. Most fund commitments focus on infrastructure and renewables strategies.

In 2020, CEFC backed a private equity fund for the first time, making an AUD 80m contribution to Adamantem Capital’s second vehicle, which closed on AUD 794.8m last year. Decarbonisation is part of the fund mandate, with each portfolio company required to take steps towards eliminating or offsetting scope-one and scope-two emissions within a decade.

IFM’s fund will invest in profitable companies with high-growth potential across technology, business services, and healthcare, but selection criteria include an ability to drive a material reduction in emissions. Priority will be given to companies that can capitalise on the transition to net zero emissions by bringing new technologies and business models to market.

IFM will measure the carbon footprint of each investee at the point of acquisition and set them on course to achieve net-zero scope-one and scope-two emissions – which cover direct emissions and emissions from purchased energy – within five years.

Moreover, efforts will be made to reduce scope-three emissions across the portfolio by working with upstream suppliers, downstream customers, channel partners, and industry peers. Tackling scope-three, which involves tracking indirect emissions through a company’s entire supply chain, remains challenging for most private equity firms globally.

“Private equity investors have a strong track record of delivering change across their portfolios and we see it as critical that we bring this expertise to the challenge of emissions reduction,” said Ian Learmonth, CEO of CEFC, in a statement.

“There are real benefits to building the sustainability profile of mid-market growth companies, from cutting their emissions and operating costs to making them more attractive to the fast-growing pool of sustainability-focused investment capital.”

Julia Hinwood, director of investments at CEFC, added that 60% of Australia’s national emissions come from companies outside the ASX 300.

The IFM fund will make equity commitments in the AUD 30-100m range, with most deals coming in at AUD 40-60m. Stuart Wardman-Browne, head of private equity at IFM, told the Australian Financial Review that he wanted to back up to eight companies. He also expressed a preference for longer-than-average holds, noting that the fund has a 12-year life with options to extend.

Investments made so far include an AUD 50m commitment to Paypps, a payment management software-as-a-service (SaaS) provider that serves the construction and facilities management clients. The company was formerly known as Zuuse.

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• Topics
• Australasia
• Fundraising
• Growth
• LPs
• GPs
• Cleantech
• Australia
• HESTA
• ESG
• Fundraising