Equilibrium‘s plans for Asia include expansion of both its controlled-environment agriculture strategy and investments in production of renewable natural gas through anaerobic digestion.
Soon after the Portland, Oregon-headquartered firm partnered with Singaporean sovereign wealth fund Temasek and Canadian pension PSP Investments to back Australian produce supplier Production Fresh, chairman David Chen told Agri Investor it was too soon say whether Equilibrium’s expansion into Asia will necessitate raising a distinct vehicle.
Both the existing CEA fund and carbon infrastructure strategy that includes its investments in RNG, Chen said, are related to an increased focus on ag-related policy issues that is as strong in Asia as anywhere else.
“More and more governments are worried about making sure there is access to reliable, redundant, regional, safe food sources. The recent crises have only just highlighted that,” he said. “More and more countries are becoming increasingly aware of the importance of these food access, food security, national security issues. In the case of many countries, keeping their agricultural communities vibrant is a very important national goal.”
Equilibrium’s expansion into Asia began in September 2020 with the hire of John Baker to serve as principal and strategy lead for Asia. According to his LinkedIn profile, Singapore-based Baker’s previous experience includes positions with Rabobank, Louis Dreyfus Company and a role investing on behalf of the Sultanate of Oman’s Oman Investment Authority. His role in Oman began with a focus on food and agribusiness and culminated in a position with the State Reserve General Fund.
In April 2021, Equilibrium added Godfried Dol to serve as Singapore-based principal of operations for the Controlled Environment Foods Fund in Asia. Dol’s LinkedIn profile shows his experience in glasshouse investments stretches back to 1983 and includes stints in Mexico, the United Arab Emirates, Kazakhstan, Saudi Arabia, Japan and elsewhere.
Chen characterized Baker’s hire as part of an effort to express commitment to Asia and highlighted Dol’s global experience and relationships as beneficial to Equilibrium’s CEA investments across Asian markets, Europe and North America.
“You can’t do it without this level of expertise,” he added.
“When does it become important enough?”
In December 2020, Chen told Agri Investor Equilibrium had paused fundraising towards its second Wastewater Opportunity Fund’s $300 million target in part due to the evolving investment environment surrounding renewable natural gas. Speaking more recently regarding plans in Asia for the strategy, to which the firm now refers to as carbon-related infrastructure, he declined to identify specific Asian countries where RNG investments would be most relevant.
Chen instead stressed a confluence of factors driving recently increased interest in RNG methodologies and infrastructure opportunities that have been widely understood for 100 years.
“The idea of anaerobic digestion is not new by any means, it just wasn’t necessarily commercial or applicable or in demand,” he said. “Are there waste streams and public policy objectives to convert waste streams into usable fuels and energy sources? That has always been theoretically possible. Has it now become something of importance? That is the real issue. When does it become important enough and when do the cost basis and the technology around it become cost effective? These are all timing questions.”
High-tech glass greenhouses at production scale – for which his firm closed its second fund on $1.02 billion in July – is a natural fit for goals related to Singapore’s 30 by 30 self-sufficiency initiative, said Chen. He added that Equilibrium is not actively involved in any program formally related to Singapore’s plan, but the firm sees similar objectives being considered by policymakers elsewhere in the region.
Chen highlighted Japan, which used its development bank to fund a commitment to Equilibrium’s CEA fund, as an example of a country where policymakers have taken steps to keep ag communities with a similarly aging demographic profile to their US counterparts not only vibrant, but globally competitive.
“We certainly are not governmental policy experts on Japan, but we see these [needs] coming up as part of the conversation and it’s not an easy problem to solve,” he said. “It’s a very interesting place to focus on because these are very real needs.”
Even before covid, Chen noted, pressure for a more regionalized approach to food was building and reflected in strong demand within North America for produce from outside California.
“We’ve seen a continued shift in the spreading of the risk in terms of where food is grown,” he said. “In some ways, we spent the last 20 or 30 years optimizing for efficiency and cost. If we’ve learned anything in the past decade, and especially over the past few years, we may now need to be focusing not on efficiency and optimization, but on reliability, resiliency and redundancy. That’s a very different perspective.”