The CEFC is committing up to $80 million into a new private equity fund managed by Crescent Capital Partners to drive ambitious emission reduction targets across a range of mid-market companies to help accelerate decarbonisation across the economy.
The Fund, Crescent's seventh, has completed its fund raising with commitments of $1 billion. The Fund will make partner and controlling investments into middle market businesses with an enterprise value of $100 million to $500 million.
The CEFC investment will help drive emissions reduction across portfolio companies acquired by the Fund. Significantly, this will see Crescent set decarbonisation pathways for each acquired company, exceeding the requirements of the Paris Agreement, with the goal of achieving net zero Scope 1 and 2 emissions within 10 years of acquisition. Crescent will also focus on value chain emissions, mapping out the supply chain of each asset to identify specific activities and initiatives to drive a reduction in Scope 3 emissions. Similar measures will be considered across existing Crescent assets under management in earlier funds.
While the new Fund is generally sector agnostic, acquired companies are expected to be concentrated in the healthcare, industrial and services sectors. Healthcare companies are expected to make up a significant portion of the Fund's portfolio given Crescent's strong track record in the sector, with the potential to make an impact in an area that has yet to address decarbonisation meaningfully - the emissions footprint of the healthcare sector accounts for up to 4.41 per cent of greenhouse gas emissions globally.
CEFC Chief Investment Officer - Infrastructure and Alternatives, Rory Lonergan said: "Getting to net zero emissions by 2050 requires us to use every lever we can to accelerate decarbonisation. We see the very substantial $42 billion2 private equity sector as having a key role to play here, in influencing the assets it acquires, the way they are managed and in capturing value at exit. As asset owners, forward-looking investors such as Crescent can make a material change across broad portfolios, setting new standards for abatement at the company level while lifting investor confidence via enhanced transparency and disclosure.
"We're particularly pleased to work with Crescent in bringing the advantages of decarbonisation to Australia's essential middle market corporates. Today, these companies account for a significant portion of our economy, as well as our total emissions. By investing in decarbonisation now, we can be confident they will continue to play a significant role in our economy in the future, with sustainability embedded in their operations, delivering lower emissions alongside enduring investor support."
Crescent Capital Director of ESG Lucy Cooper said: "We welcome the CEFC as investors in our seventh Fund, given their leadership and experience in emissions reductions activities in Australian businesses. It's a pivotal time for decarbonising mid-market Australian companies, with a relatively short period of time to act for companies that wish to achieve meaningful emissions reductions by 2030.
"At Crescent we take an active approach in working with our portfolio companies to achieve meaningful change, and we look forward to extending this approach to support our portfolio companies in their decarbonisation journey throughout their investment lifetime within our new Fund.
"If Australia is to successfully shift to a lower carbon economy, now is the time to act. At Crescent we are incorporating emissions reduction activities not just because we believe it is the right thing to do, but also because we believe it will build better and more valuable businesses over the course of our holding period."
Consumer demand for responsible investment in Australia is growing, having reached $1.54 trillion in 20223 up from $1.28 trillion in 2020. The Responsible Investment Association Australasia has found that Australians want the finance sector to act on climate change, with 72 per cent of the population believing that investors can positively impact climate change through their investment decisions.4
Since it began investing, the CEFC has committed $240 million to investments which leverage the power of private equity to cut emissions, including an $80 million investment in the Adamantem Capital Fund II, and an $80 million investment in the IFM Investors Private Equity Growth Partners Fund.
