How high will climate fundraising lift agrifood and forestry dry powder?

TPG’s Rise Fund III and Goldman Sachs Asset Management’s Climate Solutions Fund are two of the many climate vehicles closed in 2023 that have an allocation to food and natural assets.

Forestry

At the start of 2023, fundraising figures for the previous year were one of the most highly anticipated data points in the food and natural assets world following the continued cheap money boom of 2021.

In no other segment of the market was this data more hotly anticipated than in agtech, which had an almost unbelievably good fundraising year in 2021, racking up more than $53 billion after another steadily positive year in 2020, with $27 billion raised, according to AgFunder.

The numbers for 2022 did not disappoint in terms of their shock value, as the $53 billion raised the year prior almost halved to finish 2022 on $30 billion.

One of the silver linings of 2022 was that climate-related agtech fundraising largely bucked the downward trend, as ag-specific and general climate investors doubled down on the space. All signs point to a continuation of this trend in 2023 in both agtech and the larger agrifood and forestry sector.

And looking more widely at the private market fundraising space in 2023, CTVC’s September report showed that by the end of Q3, “$13 billion of venture capital and $20 billion of growth/private equity dry powder in closed, climate-specialized funds” were raised.

So, what sort of knock-on effect is this likely to have on agrifood and forestry dry powder for whole-year 2023 figures and the year ahead, given that many climate funds are raised with a mandate to invest in agtech, water, farmland or forestry?

For a start, we already know that the H1 2023 figure of $1.4 billion raised won’t be repeated in H2, simply by looking at fund closes among core agrifood and forestry vehicles.

The H1 figure was singlehandedly more than doubled in whole-year 2023 terms by Paine Schwartz Partners, whose Food Chain VI Fund closed on $1.7 billion in September.

Other notable fund closes included Gresham House’s £300 million ($369 million; €346 million) Forest Growth and Sustainability Fund, Astanor Ventures’ €360 million Fund II and Forward Consumer Partners $425 million close in December.

With regards to climate vehicles closed in 2023 that have a mandate to make agrifood and forestry investments, TPG’s $2.7 billion Rise Fund III is perhaps one of the most notable.

Forming one part of TPG’s burgeoning collection of climate vehicle’s that includes the $7.3 billion Rise Climate Fund I which closed in 2022, Rise Fund III invests across six sectors including food and agriculture.

Goldman Sachs Asset Management’s $1.6 billion Horizon Environment and Climate Solutions Fund I will also bring capital into the agrifood and forestry sector, with two out of its five target sectors named as sustainable food and agriculture and ecosystem services.

Material Impact’s $352 million Fund III, which hit its final close in November, is another impact climate fund that will support food and ag businesses with its focus on food production automation and robotics, farm inputs and precision technology, among others.

There were several other climate vehicles closed in 2023, many of which have allocations to water, sustainable food production or ecosystem services, that are too many to name here and will bring capital into the space and create a more competitive dealmaking landscape.

On the basis of what we can already see ahead of more concrete numbers from Agri Investor’s database and other market participants, climate fundraising looks set to be the wave that lifts the agrifood and forestry sector’s dry power for the foreseeable future.