“We now have institutional LPs asking us very directly: ‘How do we get credit for the carbon credits that [Equilibrium] generates,” David Chen, chief executive of sustainable infrastructure fund manager Equilibrium, said at PEI Media’s Responsible Investment Forum: New York. “They’re not asking about returns. They know they’re getting an appropriate monetary return from us. This is [about] an additional form of return on their investment.”
The Portland, Oregon-based firm closed its second controlled environment agriculture fund on $1 billion in 2021. Controlled environment agriculture – which includes vertical farms – can generate a smaller carbon footprint than traditional agriculture by reducing the distance that freshly grown food is transported. LPs in the fund include the San Francisco Employees’ Retirement System, which invested $40 million, El Paso County Retirement Plan and the Development Bank of Japan.
“Investors are now starting to be very sensitive about the collateral benefits of [their] investment” in Equilibrium strategies, Chen continued. “This awareness is happening at a frightening pace.”
Chen said: “In our other business, we convert farm waste manures into renewable natural gas.” The strategy raised $484 million across two Water and Wastewater Opportunity Funds between 2015 and 2018.
“A great deal of the returns in that market come from the credits associated with the green methane molecule. It’s actually becoming a relatively mature market. Our institutional LPs are incredibly interested in that because they see the monetisation of the sequestration of methane.”