After years of momentum funds based on environmental, social, and governance (ESG) principles have run into some headwinds in 2022 amid a slump in the broader financial markets. In May, investors pulled $3.5 billion from ESG-focused mutual funds based in the United States, according to Morningstar. That represented the first net withdrawal from ESG funds in about three-and-a-half years.
The rare outflow of money underscored that ESG and sustainability-focused funds are still vulnerable to market swings, like any other investment. Even so, many global investment firms remain bullish on funds that aim to help lower the world’s carbon emissions. One of those firms is Brookfield Asset Management, which recently raised $15 billion for its first impact fund to invest in the transition away from fossil fuels.
Brookfield, a Toronto-based investment management firm, announced the Brookfield Global Transition Fund on June 22, led by Mark Carney, former governor of the Bank of England and the Bank of Canada, and Connor Teskey, the CEO of Brookfield Renewable.
The fund will invest in solar power and other green technologies. Brookfield calls it the largest private vehicle of its kind.
The new fund arrives as corporations are under heightened pressure to lower their greenhouse gas emissions. The Brookfield Global Transition Fund will target investments to reduce greenhouse gas emissions and energy consumption to accelerate the global transition to net-zero carbon emissions.
“With the global carbon budget being rapidly run down, now is the time for comprehensive, determined action,” Carney said in a press release. “That means deploying capital across the economic spectrum from scaling clean energy generation to transforming traditional utilities and to providing sustainable solutions for heavy industries like steel and cement.”
The fund has more than 100 investors, with Brookfield being the largest. The money raised reflects growing investor interest in moving toward renewable energy sources, which many consider a key to attaining net-zero emissions by 2050 and battling climate change.
Brookfield agreed to spend about $2.5 billion from the fund in late June. The agreements included acquisitions of U.S. and German solar power and battery developers with a combined pipeline capacity of 25 gigawatts. Brookfield also invested in a carbon capture-and-storage developer, as well as a partnership to develop solar and battery-storage projects in the UK.
Brookfield’s Renewable Power & Transition business is one of five business segments under the company’s umbrella, with the others being Infrastructure, Private Equity, Real Estate, and Credit & Insurance Solutions. The company claims to be one of the world’s largest investors in renewable power, with about 21,000 megawatts of generating capacity, $68 billion in assets under management, and about 6,000 power-generating facilities.
Its renewable energy assets are located in North and South America, Europe, India, and China. They comprise a diverse technology base of hydro, wind, utility-scale solar, distributed generation, storage, and other renewable technologies. Here’s a breakdown of its four main Renewable Power & Transition focus areas:
- Hydro: 8,100 megawatts (MW) of hydro capacity, 229 hydro generation facilities, and 87 river systems.
- Wind: Brookfield’s wind portfolio is diversified across markets in North America, South America, Europe, and Asia and has 5,400 MW of installed capacity.
- Utility-scale solar: 2,600 MW of installed solar capacity on four continents
- Energy transition: 1,400 MW of distributed generation assets and 2,700 MW of pumped storage assets