EQT closes largest infra fund on €15.7bn with ‘a strong sustainability focus’

Head of real assets’ advisory Lennart Blecher talks about the energy transition, future-proofing companies and how it might end investing up to 15% of Fund V in APAC.

Sweden’s EQT – the fifth-largest infrastructure manager in the world, according to our Infrastructure Investor 100 ranking – has closed its fifth flagship fund on its €15.7 billion hard-cap.

EQT Infrastructure V is now the firm’s largest infrastructure vehicle, and the third-biggest unlisted, closed-end fund ever raised, behind only the latest flagships from Global Infrastructure Partners and Brookfield Asset Management.

The fund – which launched in July 2020 and concluded active fundraising in Q2 – saw a 99 percent re-up rate from its predecessor based on committed capital and 68 percent based on the number of investors. Its LPs include pensions, insurers, sovereign wealth funds, financial institutions, endowments, family offices and private wealth platforms from across the globe.

Fund V is approximately 60-65 percent invested already in a portfolio of 12 assets across transportation, energy transition, social and digital infrastructure. It will follow its predecessor’s strategy of investing primarily in Europe and North America, though Asia-Pacific is likely to figure more prominently as an investment destination.

“In Fund IV, we had a smaller carve-out for Asia-Pacific, through which we started our partnership with Temasek in the region,” Lennart Blecher, head of real assets’ advisory teams and deputy managing partner, told Infrastructure Investor. “The head of the region is Ken Wong, sitting in Sydney. Over the last few months, we have hired investment professionals in South Korea and Japan. So, we will try to deploy between 5 percent and 10-15 percent of Fund V in the region”.

Sustainability focus

EQT’s latest flagship is also more invested in the energy transition than ever before, having bought US waste-to-energy firm Covanta in a $5.3 billon deal; solar developer Cypress Creek Renewables, in a transaction reportedly worth over $2 billion; and an €881 million take-private for Spanish solar energy firm Solarpack. The latter, announced in June, was EQT’s then second renewables investment, the first being O2 Power in India last year through its Temasek joint venture.

“The renewables sector has gone through a development and is more mature now than when we started [investing] at EQT Infrastructure. We are also large enough now to be able to buy more mature and stronger platforms. We have always had a strong advisory network in the energy sector, and we are now trying to deploy it in the renewables space,” Blecher says.

When we caught up with Blecher in 2017 – the same year GIP spent a record $5 billion buying Equis Energy – he told us that “you don’t see much of renewables or things like that in our portfolio” because “we are focusing on buying assets where we can do something operationally”.

As the first private markets firm to set science-based targets to fight climate change, decarbonisation is now at the heart of all of EQT’s investments.

“EQT is a value-oriented, purpose-driven organisation and one of our main purposes is to future-proof companies and have a positive impact in everything we do. So, everything EQT Infrastructure is doing these days has a very strong sustainability focus,” Blecher says. “When we look at buying a company, we always try to identify three to five sustainability KPIs that should be transformative for a company. We measure those on a yearly basis using our own internal framework and we want to see yearly improvements.”

From core-plus to core

Traditionally a core-plus infrastructure player, EQT announced over the summer it was exploring the launch of an “infrastructure core strategy”.

“This is early days, but we currently expect that the longer-hold strategy in private capital and the potential infrastructure core strategy over time will constitute about €10 billion of AUM in total,” chief executive Christian Sinding said.

He added that the infrastructure core and longer-hold private capital vehicles will have “slightly lower returns with lower risk, with strong value creation over the long term”.