China’s Primavera seeks $1.5b for carbon neutrality fund
China-focused Primavera Capital Group is looking to raise approximately CNY 10bn (USD 1.5bn) for a carbon neutrality fund, emphasising the increased popularity of sustainability strategies among local private equity investors.
The fundraising process started earlier this year, according to a source close to the situation.
The new vehicle will invest across the sustainability spectrum, from new energy supply to energy storage and transmission to energy applications. Equal importance is attached to early-stage breakthrough technologies and later-stage mature low-carbon enterprises, the source added.
Primavera is in the process of raising its fourth flagship US dollar-denominated fund, which has a target of USD 4bn. Fund III closed on USD 3.4bn in late 2019.
Several leading private equity investors have teamed up with strategic partners to launch carbon neutrality funds of similar size. For example, Sequoia Capital China is working with Envision Technology Group, CICC Capital with GCL Energy Technology, and IDG Capital and Hong Kong-listed Towngas.
Primavera is an investor in two subsidiaries of Envision, a China-based manufacturer of wind turbines, smart batteries, and renewable energy management systems. It backed Envision Energy, which designs, sells, and operates smart wind turbines and energy storage products; and Envision AESC, which focuses on artificial-intelligence-of-things-powered (AIOT) batteries.
While Envision represents the new energy supply and storage, Primavera has exposure to new energy usage through the likes of electric vehicle manufacturer Xpeng. Most recently, it led a USD 100m Series B for Starfield, a producer of plant-based meats.
“We believe that promoting technological innovation, industrial chain iteration, and low-carbon energy will become the natural trend of sustainable and high-quality economic development in China," William Wang, a founding partner at Primavera, told AVCJ in a previous interview.
"The era of power parity for solar and wind energy has arrived. Their cost has reached the same level or be even lower than that of traditional energy."
Private equity investment in China cleantech and renewables businesses is at record levels, spurred by robust government support for the industry and a recognition that this time the boom might be sustainable
Approximately USD 5.4bn was deployed in cleantech - including EV manufacturers - in 2021, while another $1.3 billion went into renewables, according to AVCJ Research. The overall total of $6.8 billion represents a record high, surpassing the previous two years combined. As recently as 2015, the year before private equity got into EVs in earnest, it was less than $550 million.
Hillhouse Capital Group has also established a climate change investment team and is expected to launch a dedicated fund. Meanwhile, Lightspeed China Partners changed its Chinese name to Lightspeed Photosynthesis, reflecting a new focus on green technology. The firm's English name is unchanged.
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