Water-focused investments made by Renewable Resources Group and Capricorn Investments’ SPAC will are likely to focus on ventures that enable efficiency rather than underlying assets, said its chief executive.
Sustainable Development Acquisition I Corporation chief executive Nicole Neeman Brady told Agri Investor “wet water” investments in infrastructure and capabilities surrounding water are unlikely to be a particular focus for the vehicle.
“We’re looking at the irrigation sector, we’re looking at filtration and treatment and re-use,” explained Neeman Brady, who also serves as principal at Los Angles-headquartered RRG, which owns, manages and develops agriculture, water and renewable energy assets in the US and internationally.
“My background is coming from Renewable Resources Group, but I am 100 percent dedicated to this effort,” she said.
SDAC closed its initial public offering on February 9 at $316 million after a listing on the Nasdaq Capital Market. Shares began trading under the symbol “SDACU” at $10 per unit. The special-purpose acquisition company has a focus on the “water, food and agriculture and renewable energy” sectors, targeting offerings that contribute to the UN Sustainable Development Goals that are capable of achieving “attractive, risk-adjusted financial returns.”
Neeman Brady said that given the interconnections between ag, water and energy, it is too early to know where exactly SDAC’s focus will settle. The vehicle was formed because of the number of opportunities to invest in companies aiming to contribute to the SDGs at time when such companies are in great public market demand, she said.
“There is no other SPAC that’s focusing on water and certainly not with anything like the depth of operational and regulatory experience as we do,” said Neeman Brady, who founded a brackish groundwater recovery and purification unit at Rosemead, California-headquartered public utility Edison International before joining RRG in 2017, according to her LinkedIn profile.
“We’ve done deals with companies that focus on irrigation, on handling solutions, on treatments, on pumping. It’s those opportunities and what we’re seeing happen on a global level that are really driving the type of companies that we are looking for.”
SDAC’s prospectus describes the “authenticity, relevance and track record” of the partnership between RRG and Capricorn, an investment vehicle associated with former eBay president Jeffrey Skoll, as being among its core strategic advantages.
That track record is described as eight collaborative deals since 2006, including entitling and acquiring land for utility-scale photovoltaic projects in 2009 and investments in date production and table grape farming and breeding. The development and optimization of the financial value of hundreds of thousands of acre-feet in water supplies and storage capacity is also mentioned, as well as Capricorn’s recent investment in an RRG vehicle focused on water assets in California, Australia and Latin America.
Neeman Brady said confidentiality agreements with co-investors preclude SDAC from revealing the remaining four investments RRG has carried out with Capricorn. She highlighted Capricorn’s technology and public equities expertise and that the structure of the SPAC itself also reflects the depth of the existing co-investment “marriage” between the two firms.
“Unlike most SPACs, where its GPs taking the sponsor interest and putting up the at-risk capital, we’re actually doing it with our funds, as well as making additional commitments to the IPO,” Neeman Brady explained in reference to investments in SDAC by related entities including the Sustainable Investors Fund LP, RRG Capital Management, RRG Global Partners Fund and Capricorn.
In January, SDAC received designation as a “Pending B Corp”, a modified version of “B Corp” certification that gives managers the same ability to consider impacts to stakeholders in decision-making as fully certified companies to companies that have not yet been in operation for the required year. SDAC intends to seek full certification.
SDAC’s prospectus identifies ESG as a key investment criteria and includes reference to a search for companies that can position themselves with consumers by helping “raise the global standard” for ESG in part by considering their suitability for B Corp certification.
“RRG and Capricorn have industry-leading, even pioneering, ESG integration and implementation processes in place,” SDAC wrote.
“In 2019, the firm made significant progress, incorporating environmental, social and governance issues into its investment strategies and processes, an effort that was bolstered by forming a new strategic partnership with a large, worldwide conservation organization.”
Neeman Brady confirmed the conservation organization referenced is the Nature Conservancy. RRG and the group collaborated on a fund that closed on $900 million last year to support land and asset investments in surface and groundwater management in California, Australia and Chile. She declined to discuss the pioneering elements of the partnership, citing regulatory constraints.
Risks highlighted in the filing include potential difficulty in establishing commercial and operational approaches suitable to target markets and potential changes in consumer beliefs around the food security and emissions implications of biomass projects.
SDAC’s prospectus also acknowledges drawbacks to the SPAC structure itself, including potential complications to negotiation with target companies and restraints it imposes relative to competitors likely to include private individuals and partnerships, blank check companies and other entities with similar human and technical resources.
“While we believe there are numerous target businesses we could potentially acquire with the net proceeds of this offering and sale of the private placement warrants, our ability to compete with respect to acquisition of certain target businesses that are sizable will be limited by our available financial resources,” SDAC wrote.
“This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.”