Brookfield Asset Management last month closed its $15 billion Brookfield Global Transition Fund (BGTF), which is focused on the global transition to a net-zero carbon economy. Approximately $2.5 billion has already been deployed to projects in North America and Europe, including ones focused on solar power, battery technology and carbon capture and storage (CCS). To learn more about how Brookfield will invest the fund, PE Hub caught up with Natalie Adomait, managing partner, renewable power and transition.
The fund will be guided by three core themes: business transformation; clean energy; and efforts to decarbonize, Adomait revealed. All three themes align with Brookfield’s overarching goals of transition investing and decarbonization.
“The first [theme] is what we refer to as business transformation,” she said. “This is where we will be helping carbon-intensive companies across all sectors of the economy to invest in the solutions that will help them to reach their decarbonization goals.”
An example under this theme could be Brookfield’s buying a power company and putting it on a path to reduce emissions in line with targets, such as those under the Paris Agreement.
The second theme is clean energy, with a focus on growing the share of renewables as part of the overall energy mix. “This involves building additional renewable energy capacity and investing in things like battery storage, where we can help manage the intermittency of the power grid as more renewables are brought online,” she explained.
The third theme focuses on investing in other assets and services that help decarbonize a broader sector or a large group of customers, Adomait said. This involves rolling up projects, such as CCS. Earlier this year, Brookfield invested C$300 million ($234 million) in Entropy, a CCS company based in Canada.
The criteria for choosing the deals varies, Adomait said. Some of the factors include the project’s ability to meet the firm’s anticipated financial returns, ability to create a positive environmental impact that aligns with Brookfield’s overall theme of decarbonization and the ability to get incremental value, among others.
“We are seeing a very large universe of opportunities across all three themes,” she said, adding, however, that the majority of Brookfield’s deployed capital to date has gone into renewable energy. “It is by far the easiest and most investable decarbonization solution, and it is the first step for most businesses across every sector when they are embarking on a decarbonization plan.”
The amount of capital required to help the world reach net-zero by 2050 is enormous, with some putting the figure at $150 trillion.
“That’s an immense amount of capital, and it creates a great opportunity for investment to be made, where you can make not just good financial returns but also have a positive impact and be attractive to ESG investors,” Adomait said.
Brookfield counts as strengths its global footprint, expertise across many sectors and the scale of its fund to help stakeholders reach their decarbonization plans.
The firm is also part of the Glasgow Financial Alliance for Net Zero (GFANZ), an initiative that was launched in April 2021 by UN Special Envoy for Climate Action and Finance and the COP26 Presidency and other stakeholders as a rallying point for leading financial institutions to accelerate the transition to a net-zero global economy.
Concerning the tight energy supplies across the world emanating from Russia’s war in Ukraine, which has raised concern over the likelihood of nations reverting to high polluting energy sources such as coal, Adomait said the situation has actually prompted many to focus more on renewable energy.
“A lot of companies have been turbo-charging and speeding up their plans to do renewable energy generation projects,” she said. For example, Adomait said the UK and German governments have announced plans to shorten the approval timeline to get renewable projects online. “We think that is exactly in response to the fact that domestic energy security is going to be an increasing focus for governments around the world.”