Hillhouse reaches first close on China carbon neutrality fund
Hillhouse Capital has reached the first close on its debut renminbi-denominated carbon neutrality fund, which has an overall target of around CNY 4bn (USD 597m).
The firm didn't disclose the size of the first close, but local media reported it was around CNY 2bn. LPs include government guidance funds, large state-owned enterprises with industrial backgrounds, specialized fund-of-funds, and financial institutions, according to a statement.
Known as the Carbon Neutrality Industry Investment Fund, the vehicle is domiciled in Nanjing, Jiangsu province. Choice of domicile is often driven by regional and municipal governments that offer LP commitments through guidance funds provided a certain portion of investment goes into local projects.
The new fund will support the integration of new technology into the real economy. It will back companies in areas such as new energy, new materials, advanced manufacturing, green transport, and agricultural technology.
“The transformation to a green economy is the most certain trend for the future. Private equity and venture capital firms focusing on new technology investments have strong prospects," said Lei Zhang, founder of Hillhouse. "[We] want to promote more enterprises and talent in green technology innovation by providing long-term capital."
Hillhouse is one of several managers raising carbon neutrality funds. Last month, Primavera Capital launched a vehicle with a target of CNY 10bn, while other firms have teamed up with strategic partners on similar vehicles. Sequoia Capital China is working with Envision Technology Group, CICC Capital with GCL Energy Technology, and IDG Capital with Hong Kong-listed Towngas.
Private equity investment in China-based 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 USD 1.3bn went into renewables, according to AVCJ Research. The overall total of USD 6.8bn is more than the previous two years combined.
As recently as 2015, the year before private equity got into the electric vehicle space in earnest, investment was less than USD 550m.
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