SDCL raises $126m for ‘first of a kind’ energy efficiency fund

The former Green Investment Bank fund manager and underbidder has rolled over assets from the GIB’s first energy efficiency fund into a new public vehicle.

UK-headquartered fund manager Sustainable Development Capital has raised £100 million ($126.2 million; €110.6 million) for the UK’s first listed energy efficiency fund.

The SDCL Energy Efficiency Income Trust is expected to be admitted to the London Stock Exchange on Tuesday, and will be seeded with 12 project companies previously held by the £104.1 million UK Energy Efficiency Investments Fund managed by SDCL on behalf of the Green Investment Bank – now known as Green investment Group – since 2012.

That fund was followed by other SDCL energy efficiency-focused private market vehicles in Ireland, New York and Singapore. SDCL expects to supplement the new fund over the next 12 months with projects in continental Europe and North America.

“The portfolio had become substantially mature and highly cash generative,” Jonathan Maxwell, chief executive of SDCL, told Infrastructure Investor. “We saw an opportunity to launch a new investment trust that could acquire that portfolio where the cashflow from the existing portfolio could support the dividend in the public market.

“Our private markets vehicles have historically focused on developing and constructing projects. This is focused on operating assets. Our portfolio is an example of energy efficiency projects reaching a certain point of maturity.”

The fundraising was completed “despite difficult market conditions”, according to Maxwell, who believes that energy efficiency could prosper in the current market as a sub-sector not threatened by external factors. The fund is eyeing returns of 7-8 percent and will be chaired by former InfraRed Capital Partners managing partner Tony Roper.

“Energy efficiency has shown it’s capable of getting to an institutional scale and we see that opportunity growing exponentially from here,” Maxwell said. “What might have made us apprehensive with other infrastructure sectors, such as regulatory constraints or headwinds and subsidy removals or changes, don’t affect energy efficiency in the same way.”

The launch of the new fund comes following SDCL’s unsuccessful attempt to buy the Green Investment Bank from the UK government last year, with the group eventually sold to a Macquarie-led consortium for £2.3 billion. Maxwell had envisioned energy efficiency investments playing a key role in SDCL’s ownership of the GIB and believes the market represents the best value from a clean energy investment perspective in the UK and elsewhere.

“With or without the GIB, this is where our focus is and would have been,” he explained. “It’s a hugely specialist area in the marketplace but I hope we’ve been the leading player in this market since we started the first institutional investment fund of its kind in 2012. What we wanted to achieve post-GIB acquisition, I see [the fund] as a very good example of that.”