Fullerton Fund Management has successfully raised US$100 million in the anchor close of its Fullerton Carbon Action Fund, a unique private equity (PE) fund that aims to capture the enormous climate market opportunity in emerging Asia by investing in companies at the forefront of accelerating decarbonization in the region. 

Seviora Group, an asset management firm wholly owned by Temasek Holdings, and Income Insurance are the anchor investors for this strategy. The Singaporean-based companies say that they are committed to supporting investment strategies that can help to address climate change while seeking to deliver attractive risk-adjusted returns for investors.

Asia accounts for over 50% of the world's carbon emissions, according to data from the Statistical Review of World Energy, 2022, and represents a US$5 trillion climate investment opportunity by 2030.

The region’s climate sector is well-positioned for long-term growth driven by fundamentals that are critical in the world’s transition to net zero. The acceleration of local and global climate regulations also serve as strong tailwinds for the sector.

Within Asia, there is a clear impetus and focus to actively pursue decarbonization outcomes, and countries have announced their carbon neutrality timetable as proof of their commitment – China 2060, Singapore 2050, Indonesia 2060 and India 2070.

The fund will invest, Fullerton points out, in market leading businesses in the rapidly growing manufacturing, industrials, energy and electric-vehicle-mobility sectors. It will seek established, profitable and robust cash flow businesses, and avoid earlier-stage venture capital investments as well as infrastructure related deals. These target companies have lower inherent downside risks and are well-positioned to deliver attractive financial returns over the long-term.

Focusing on leaders in the mid-market space in Southeast Asia, India and China, the fund, the company notes, provides strategic support alongside capital to drive the growth of its portfolio companies in areas like new market entry, mergers and acquisitions, and sustainability improvements.

Backed by a strong pipeline of proprietary deals, the company adds, the fund is currently evaluating several investment opportunities across Asia, with the target to close at least three transactions by the first half of 2024.

The fund is managed by the company’s alternatives team, who have an average of 16 years’ industry experience. The investment approach is underpinned by a proprietary sustainability management framework that seeks to drive significant decarbonization outcomes in portfolio companies.

“With the acceleration of the decarbonization roadmap in Asia, we are at an inflexion point where the fight against climate change coincides with the emergence of very compelling growth areas in PE,” says Jenny Sofian, Fullerton’s CEO. “This strategy provides an avenue to ride the decarbonization wave and advance the net-zero agenda in the region, while capturing long-term opportunities.”