IFM Investors’ private equity fund ESG leanings draw CEFC, Hesta

The A$179 billion ($132 billion) IFM Investors, owned by around 25 industry superannuation funds, has received commitments from government-owned Clean Energy Finance Corporation (CEFC), as well as legalsuper and Hesta for its Private Equity Growth Partners Fund.

The CEFC will invest A$80 million in the fund, which targets Australian-based mid-market growth companies that have the potential to reduce emissions in their products and services, business operations and supplier and customer ecosystems.

“In addition to the target returns, investors have been attracted by the Growth Partners Fund’s investment strategy, and the aim to accelerate emissions reduction activities, demonstrating the value that a focus on sustainability can bring to mid-market private equity,” IFM Investors’ head of private equity Stuart Wardman-Browne, told AsianInvestor.

The A$380 million PE fund also counts legalsuper and HESTA as investors although the firm declined to provide the amount that either fund had committed.

CEFC director for investments Julia Hinwood said in a statement that based on its analysis that 60% of Australia’s national emissions come from companies outside the ASX 300, “middle market growth companies play a critical role right across our economy, in terms of jobs, innovation and investment… We are confident these companies can achieve long term growth while making sustainability considerations a core part of their strategic growth ambitions.”

To keep its portfolio companies accountable, the fund will focus on measuring and tracking emissions and ensure transparency with investors.

“The Growth Partners Fund has a toolkit in place to reduce scope 1 and 2 emissions to net zero across investee businesses, and to reduce scope 3 emissions by working with suppliers and customers,” Wardman-Browne said.

Scope 1 emissions refer to direct greenhouse gas emissions, while scope refers to indirect emissions. Scope 3 refers to emissions that the firm is indirectly responsible for along its value chain.

“Private equity assets – like those in our growth portfolios - report a great deal of ESG (environmental, social and governance) data to investors. This reporting informs how we engage with those businesses to drive ESG strategy that creates sustainable value,” he said.

Indeed, institutional investors such as NZ Super have said that private markets can provide superior ESG opportunities in terms of quality of data and opportunities for investor engagement.

The Private Equity Growth Partners Fund will focus on the technology, business services and healthcare sectors, and will include firms that will support the transition to net-zero with new technologies and business models.

IFM Investors has committed to reach net zero by 2050 across all asset classes, and an interim target of reducing emissions by more than 1 million metric tonnes of carbon dioxide equivalents in its infrastructure assets by 2030.