The CEFC has committed $80 million as a cornerstone investor to the Adamantem Capital Fund II (the Fund) in a landmark investment that will drive ambitious emissions reduction targets across a diverse range of private equity-owned, mid-market companies.
The Fund is the first Australian private equity fund to adopt a “cradle to grave” approach to the emissions impact of its assets. It is also the CEFC’s first investment in private equity.
The CEFC is investing on behalf of the Australian Government, alongside Aware Super (formerly First State Super), Australia’s second-largest industry superannuation fund. Aware Super has also committed $80 million as a cornerstone investor.
The $700 million plus Fund targets mid-market companies, with a focus on consumer staples, healthcare and business-to-business services, enabling the CEFC to influence the sustainability profile of a significant part of the Australian economy.
The Fund will assess the likely emissions profile of target companies and the companies that it acquires will be required to implement emissions reduction targets that aim to either eliminate or offset their emissions within a decade.
Portfolio companies will be required to have an independent consultant undertake an energy and emissions baseline measurement covering Scope 1 and 2 emissions, in accordance with the International GHG Protocol.
The CEFC will work with the Fund’s newly established Emissions Reduction Committee to develop and oversee detailed pathways for each portfolio company to achieve its emissions reduction target.
It is estimated that 60 per cent1 of Australia’s national emissions come from companies outside the ASX 300.
CEFC CEO Ian Learmonth said: “The private equity sector is an asset class that is still in the early stages of climate transition. With more than $30 billion of assets under management in Australia’s private equity and venture capital industry2, engaging this sector is critical to the continued decarbonisation of the Australian economy.
“We want the sector to lift its emissions reductions ambitions to new levels. Working with an industry leader like Adamantem provides an opportunity to catalyse real change by improving the sustainability profile of mid-market companies across a diverse range of assets.
“In a highly competitive sector like this, the successful implementation of a leading sustainability agenda by Adamantem will drive an increased focus on sustainability across the private equity sector.”
Adamantem Capital Managing Director, Rob Koczkar added: “We are delighted to have attracted the CEFC as an investor in our second fund, and as their first private equity partner, we believe this is the direction needed to accelerate Australia’s transition toward more sustainable economic activity. We look forward to working with the CEFC and Aware Super on further developing and refining our emission reduction strategies that target long-term positive impact.”
Aware Super Senior Portfolio Manager – Private Equity Growth Assets, Jenny Newmarch said: “We know that climate change poses one of the most significant financial risks to our portfolio and our members’ retirement savings in the long term. We believe we can generate strong long term returns while also supporting the economy to transition.
“This year Aware Super has set ambitious targets and goals for how we will respond to these risks and support our portfolio to transition to a low-carbon future. Investments in funds like this are just one way we are working to support a more sustainable and resilient economy. We look forward to taking our successful climate engagement activities from our public equities portfolio into our private equity portfolio via the Emissions Reduction Committee.”
The CEFC and Adamantem will work with mid-market companies to help drive emissions reduction as part of Adamantem’s approach to assessing and managing climate risk in its portfolio, as well as its broader commitment to the creation of long-term sustainable businesses.
Adamantem Capital is an Australian Private Equity firm established in 2016, with more than A$1 billion in funds under management. Focused on investing in mid-market opportunities in Australia and New Zealand, Adamantem aims to deliver consistent returns for investors by supporting management teams to take considered risks, create change and grow value. It focuses on supporting changes that can transform a business during Adamantem’s ownership, including sustainability-focused initiatives that will continue to accrue well after its ownership has ceased. Adamantem is a signatory to the United Nations Principles of Responsible Investing, a member of the Responsible Investment Association Australasia, and a member of the Climate Active Network.
About Aware Super
Previously known as First State Super, we changed our name to Aware Super in September 2020.
First State Super has been the fund for people who value community as well as personal gain since 1992. In July 2020 we merged with VicSuper and together we are one of Australia’s largest super funds, managing more than $130 billion in savings for more than 1 million members. Our members work in roles that breathe life into their communities and they expect us to do the same. So, we invest in assets that we believe will make a positive difference today - improving our communities, building a more a sustainable economy and supporting employment both locally and globally at the same time as providing strong long-term returns.
1 CEFC internal analysis
2 At 30 June 2018