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Klima Energy Transition Fund reaches hard cap at €210 million

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Financial services firm Alantra and Spanish grid operator and energy generator Enagás (BOL: ENG), through its affiliate Enagás Emprende, announced that it has reached the final close of their Energy Transition Fund.

  • Klima Energy Transition Fund has closed at €210 million, the initial target size of €150 million and with oversubscription.
  • The fund close reflects the increasing appetite for ‘transition’ finance.
  • Given the constraints of net zero however, questions remain as to the definition of ‘transition’ finance.

Investors in the fund include the European Investment Fund, which is a part of the European Investment Bank Group, which committed €30 million. Other commitments to the Fund comprise North American and European institutional investors, corporate investors from the energy field, public institutions, and family offices.

Alantra and its shareholders, Enagas, and the investment team have made a significant joint commitment of approximately €50 million to the Fund, reflecting the strong alignment of interests with its investors.

Klima takes minority stakes in companies with high growth potential in energy transition sectors such as low carbon solutions, smart power grids, energy storage, renewables and enabling technologies, digitalization of the whole energy equation, energy efficiency in hard-to-abate sectors, and sustainable transportation.

“We have seen strong demand for Klima. Investors are looking for experienced partners who can guide their contribution to transform our energy model by accessing new and clean energy sources,” said Jacobo Llanza, CEO of Alantra Asset Management.

“We are delighted to have built, together with Enagás, an investment vehicle that is not only a capital provider but also an operating partner to fast-growing companies aiming to decarbonize the economy.”

The Klima fund is closely aligned with EU policy trajectories

The fund is compliant with the EU’s Sustainable Finance programme, as it is Article 9 compliant with what it calls a ‘clear sustainable objective. It has already completed three investments, US power generator Mainspring, Swiss weather forecast predictor Meteomatics, and Swedish decentralized integrated solar company SunRoof.

According to Arturo Gonzalo, CEO of Enagas:  “Klima fund is anticipating the decarbonisation challenges arising from the new global energy paradigm and is aligned also with the European strategy REPowerEU to reach a self-dependent and decarbonized market. Throughout this Fund, Enagás is playing a role to help these objectives come true.”

“Representing approximately three quarters of greenhouse gas emissions, the energy space needs smart money to scale up impactful innovation,” added Alain Godard, Chief Executive of the European Investment Fund. “We are proud to be backing Klima, an experienced and skilled team located in Spain and Germany, who will target promising companies in this field across Europe.”

Is transition finance sustainable in a European context?

While there is no doubt that the fund is aligned with net zero objectives there are concerns about the growing focus on ‘transition’ finance. There is huge opportunity to invest in enabling and disruptive technologies but there is a danger that the term transition will be used to increase focus on climate damaging companies with improved comparative performance.

There is a reasonable argument that countries with developing economies may be in need of transition finance to accelerate away from reliance on fossil fuels. In fact the Monetary Authority of Singapore has said it expects transition finance to be key in the region.

Yet there are those who are concern that the watering down of policy approaches, such as the recently announced decarbonisation criteria for the European Central Bank’s decarbonisation programme will reward comparative improvements. This leads the way to the continued funding of fossil fuel exploitation and much of civil society is vehemently against such approaches.

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