Eurazeo closes debut €706mn green infrastructure fund

July 19, 2024 (Preqin News) – Paris-headquartered Eurazeo’s maiden infrastructure fund closed at €706mn ($768.5mn), including a €43mn ($46.8mn) co-investment vehicle, with 60% of the capital already committed to investments.

Eurazeo Transition Infrastructure Fund attracted institutional investors from North America, EMEA, and France, including the European Investment Fund, which committed €75mn ($81.6mn) at first close in November 2022.

‘To be successful when you are a first-time fund, you need to have a great team, a great track record, and a clear strategy. “The proof is in the pudding” – you need to deliver what you say you will deliver. Seed capital is also important, as we did our first three investments out of the balance sheet of Eurazeo,’ Laurent Chatelin, Infrastructure Partner at Eurazeo, told Preqin News.

Eurazeo’s infrastructure team was established in January 2021, following the appointments of Chatelin, Martin Sichelkow, and Melissa Cohen as Partners. All three had spent the past decade at Marguerite, an infrastructure fund manager with €1.5bn ($1.6bn) of AUM.

‘First and foremost, we invest in businesses that deliver financial performance. But at the end of the day, when you are looking at exiting, the next owner will choose a business that is sustainable, or has less impact on the environment, over one that isn’t. That’s the way the whole economy is going. Industry is restructuring itself to manufacture products and deliver essential services that are sustainable, that have a longer life period, and that have less of impact on the environment,’ Chatelin said.

Decarbonization initiatives and investor demand have prompted infrastructure fund managers to raise energy transition and climate funds. Most investors (60%) still say they either would (36%) or have (24%) turned down attractive investment opportunities due to a failure to meet ESG standards, according to Preqin’s ESG in Alternatives 2024 report.

‘We were surprised how quickly the investor base became interested, not to invest in ESG per se, but more as a mitigant against a loss of value,’ said Chatelin. ‘If you don’t have a sustainable business on exit, then you don’t have a business to sell to the next investor.’

Eurazeo has committed 60% of the capital to six energy transition companies, focusing on transitioning essential services delivered by infrastructure to a low-carbon economy. Portfolio companies include Ikaros Solar, a Belgian rooftop solar developer, Electra, a pan-European electric vehicle fast charging operator, and Resource, a joint venture operating a plastic waste sorting plant in Denmark.

Infrastructure plays a key role in ESG fundraising. The asset class leads ESG fundraising in Europe, accounting for 36.5% of capital targeted. There are 136 close-ended ESG infrastructure funds raising capital in Europe, targeting $201.7bn, compared with $101.4bn in North America, according to Preqin data.

Private capital is fundamental to financing the climate fight, according to a report from the World Economic Forum. Transitioning to a sustainable and carbon-neutral future would require $13.5tn of investment by 2050, roughly 6.4% of the $210tn in assets managed by the private sector. The multilateral organization’s Net Zero Tracker 2023 recommends that policymakers ‘increase green public procurement and public/private partnerships to provide early demand signals for low-carbon products and mitigate early investor risks.’

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.}