Jacqueline van den Ende, co-founder and chief executive officer of Carbon Equity, talks to Impact Investor about growing investor appetite for all things climate tech.
Carbon Equity, a Dutch tech platform for private market climate investments, closed its second climate tech fund after raising €100m, exceeding an initial target of €75m.
The Climate Tech Portfolio Fund II invests in up to ten selected private equity and venture capital funds and indirectly in 150 to 200 critical climate solutions, ranging from green hydrogen to carbon-free cement and plant-based meat.
Following the successful close of its second climate tech fund, Carbon Equity is launching the Climate Tech Portfolio Fund III today, with a fundraising target of €125m.
“This is a market from which we did not anticipate as much interest, but it turned out to have a very strong product market fit,” Jacqueline van den Ende, co-founder and chief executive officer of Carbon Equity, told Impact Investor.
A broad appeal
Since its inception in 2021, the Amsterdam-based firm has raised €200m from 700 investors, including prominent entrepreneurs, CEOs, private equity professionals, family offices, and institutional investors.
Minimum investments start from €100,000. Via its fund of funds, indirect investments include CarbonCure, which captures and stores CO2 in cement, Twelve, which produces renewable kerosene from green electricity, water and air, and Form Energy, which is developing advanced energy storage systems.
There are different reasons for growing investor appetite for climate tech, according to Van den Ende. “Over the last three years a lot of interest for investing in climate solutions emerged, not only from traditional impact investors, but also from more financially-driven investors,” she said.
“Given the fact that climate solutions such as heat pumps, electrolysers, green hydrogen or low carbon cement have very clear, double-digit growth markets, it is more obvious to investors that they can make market-rate returns when investing in climate technology solutions,” Van den Ende added. “So I imagine we have a rather broad appeal.”
Professional investors are investing in climate tech through a fund of funds for three reasons, Van den Ende said.
“For many climate challenges there are multiple technological pathways. It makes sense to hedge on the direction of travel instead of on an individual horse.”
Second, climate funds are still relatively young and have built up less of a track record compared to conventional private equity markets. “It is not yet clear who the winners will be. Therefore diversification makes sense.”
And finally, given the impact of government policy on climate investments, investors prefer to hedge their bets geographically between the US and Europe, according to Van den Ende.
Unlocking billions
In an interview with Impact Investor in 2022, Van den Ende summed up the firm’s business model as follows: “Providing young investors with the chance to invest with the best that private equity has to offer in well-diversified baskets, with interesting returns, and direct impact.”
In December, Carbon Equity received full authorisation under the Alternative Investment Fund Managers Directive (AIFMD) from the Dutch regulator. This will allow it to lower its minimum investments “in the first instance” to €25,000, and perhaps down to €10,000 “in a next phase,” according to Van den Ende.
“The rationale for doing so is that we want to further democratise access,” said Van den Ende. “Our endgame vision is that anyone with a pension, a children’s saving plan, an inheritance or bonus can help build a net zero future with their capital, and benefit from the upside of doing so.”
Van den Ende pointed out there is $177trn in mass affluent net worth globally, with less than 1% exposure to private markets.
“If we can unlock just a small part of this, we could add billions in additional capital to fund solutions to the world’s greatest challenges,” she said.
