Carlyle sets $2bn cap for sophomore renewable energy fund

If the $2bn hard-cap is reached, Fund II would be almost triple the size of its predecessor, closed in 2021 at just over $700m.

Carlyle is seeking up to $2 billion for a second renewable and sustainable energy offering, as climate strategies exhibit staying power in a tough fundraising market.

The hard-cap for Carlyle Renewable & Sustainable Energy Fund II was disclosed in a June presentation to Boston Retirement System. The target is $1.6 billion, according to a 2022 report by Reuters.

If the $2 billion cap is reached, Fund II would be almost triple the size of its predecessor, closed in 2021 at just over $700 million. Carlyle declined to comment.

Climate and energy transition products are showing vigor in today’s slow fundraising environment, with a plethora of funds – sponsored by GPs both big and small – entering the market.

Examples include Apollo Global Management’s clean transition private equity strategy, slated to launch later this year; Blackstone’s fourth energy transition fund, targeted to bring in $6 billion; and Brookfield Asset Management’s second global transition fund, which is expected to top Fund I’s $15 billion.

A key factor in this is LPs looking for opportunities that align with their net-zero and ESG policies. Sixty-nine percent of institutions are either starting, maintaining or increasing investments in renewables, Coller Capital’s Global Private Equity Barometer Winter 2022-23 found, up from 55 percent four years ago.

Another is a GP view that there is too little capital available for fast-emerging climate opportunities. “I don’t think there are many times in my career that I’ve seen as much of an imbalance between the amount of specialized capital needed and the amount of specialized capital that’s been formed,” TPG co-founder Jim Coulter said last November.

Carlyle’s Fund II will acquire control or significant minority stakes in renewable and sustainable energy companies and assets “through a private equity value-creation approach,” the BRS presentation said. It will target 10-15 investments of $75 million to $250 million each.

Of particular interest are infrastructure, service and equipment assets. On the renewables side, these include solar, wind and battery storage systems, and on the energy transition side, electric vehicle infrastructure and services, distributed resources and industry decarbonization. Dealflow will be sourced in OECD countries.

Fund I was 78.5 percent invested and 94.4 percent committed as of March, the BRS presentation said. Since 2019, it has deployed roughly $669 million across nine portfolio companies, among them US solar energy business Aspen Power Partners, which secured a $350 million investment last year.

Since a first closing in 2022, Fund II has made four investments – including taking a piece of the Aspen deal – and pledged more than $535 million. It has so far raised more than $591 million, according to Form D documents filed this week.

Fund I was generating a 23.7 percent gross IRR and a 10.4 percent net IRR as of March, the BRS presentation said.

Carlyle’s energy transition strategy is led by Pooja Goyal, CIO of the infrastructure group and head of renewable and sustainable energy.