Decarbonization Partners, a joint venture between Temasek and BlackRock, announced the final close of its inaugural late-stage venture capital and growth private equity investment fund at $1.4 billion, exceeding its target of $1 billion.
The vehicle is focused on investing in next–generation private companies that support the acceleration of decarbonization and the transition to a net–zero economy.
Apart from BlackRock and Temasek, the fund vehicle received commitments from over 30 institutional investors including public and private pension funds, sovereign wealth funds, insurance companies, corporates, and family offices.
Investors in the fund include Allstate, BBVA, KIRKBI, Mizuho Bank Ltd., MUFG Bank Ltd. and TotalEnergies among others.
“This successful fundraising demonstrates the unique strength of our team and platform, which we’ve been building for the last two years. Clients have shown conviction in our ability to execute our strategy of supporting the acceleration of decarbonisation and the transition to a net-zero economy through our investments,” said Dr. Meghan Sharp, Global Head & Chief Investment Officer of Decarbonization Partners.
The fund has so far backed seven companies in the areas of sustainable materials, li-ion batteries, clean hydrogen, science-based carbon management services, low-emissions battery recycling, EV fleet management, and thermal energy storage for industrial applications.
APAC Opportunity
While Decarbonization Partners’s investment strategy seeks opportunities across the world, it expects a broader footprint in the APAC region. Roughly 50% of its deal flow comes from the Americas, with another 20-25% from Asia Pacific and about 25% from Europe.
“We are opportunistic,” said Sharp. “This does not tell the whole story. For these companies to be successful and deliver the returns and the decarbonisation impact they have to go global. So 50% of the companies may be headquartered in the West with their first plant. But their subsequent plants will be in Asia,” she explained.
Therefore in terms of plant locations and investment dollars, the APAC region is expected to see more activity. The firm expects the majority of the investments in this region to be in the EV and mobility space.
“Where we see the vast majority of our regional deal flow is in clean energy and advanced mobility. Those are our two largest buckets in APAC,” Sharp said.
While no specific investments have been made in Singapore, the firm has a five-member team seeking opportunities in Korea, Japan and Australia.
Sharp stressed that as investors, their priority is zeroing in on strong entrepreneurs, management teams and co-investors. The focus is on fostering high-quality partnerships on both sides of the table, she noted.
Dual purpose
Decarbonization Partners, which seeks to invest in the late venture and early growth stage, is focused on generating long-term financial returns as well as driving measurable decarbonisation outcomes, reflecting its commitment to a dual purpose.
The executive said, neither financial success nor decarbonisation is compromised in their approach.
The more financially and commercially successful their portfolio companies become, the greater their impact on decarbonization will be, and vice versa, she observed.
The investment focus encompasses areas like carbon capture, utilisation and storage, bio and low carbon products, advanced mobility, carbon management and carbon markets, and digital transformation.
The digital transformation, as perceived by Decarbonization Partners, entails the digital infrastructure necessary to support hardware investments.
“So in reality, a lot of the opportunities we invest in are hybrids, which have a hardware and a software component. They straddle sectors, some opportunities may yield bio and low carbon products alongside contributions to clean energy,” added Sharp.
The investment firm emphasises the importance of proven technologies and identifying the right customers who are equally bullish about the products that are being developed.
“So we invest really in that scale-up phase, the execution phase when the majority of the technology risk has been mitigated, and now these companies are ready to go global. We also want to see customers that are testing and trying out the materials, demo, or pilot plant, putting it through their internal resources,” she explained.