Caisse de dépôt et placement du Québec has teamed up with former US vice-president Al Gore’s investment firm to launch a joint venture focusing on sustainable equity.
The C$308.30 billion ($237.2 billion; €207.4 billion) Canadian pension is working with Generation Investment Management to invest an initial $3 billion. CDPQ-Generation Partnership aims to hold assets for between 8-15 years.
“We are calling this sustainable equity, to distinguish it from private equity,” John Bernstein, a partner at Generation Investment, told Private Equity International. “It has aligned incentives, much longer duration and it’s not reliant on financial engineering which is relatively short-term.”
Some public companies are concerned about the “relatively short-term view of many public market investors”, Bernstein added. “We felt there was a huge opportunity to back entrepreneurs who want to stay private longer and to have a completely aligned product for much longer-term sustainable investing.”
CDPQ will provide the majority of the capital alongside commitments from existing Generation Investment partners, a spokeswoman for the latter confirmed. The partnership will invest between $500 million and $1.5 billion in deals.
Investment professionals from CDPQ and Generation Investment will work together to find companies with strong ESG attributes, are net positive for the environment, benefit society and use technology to drive change.
The Carlyle Group, Blackstone, KKR and CVC Capital Partners among firms that have launched funds dedicated to holding assets longer than traditional private equity funds. Proponents of the strategy argue that by holding assets for longer, managers can gain deeper expertise in the industries they focus on without having to sacrifice returns, as they would in an infrastructure-like fund.
CDPQ-Generation Partnership has already made one investment, acquiring a majority stake in European wealth management fintech firm FNZ from HIG Capital and General Atlantic. The deal values FNZ at £1.65 billion ($2.2 billion; €1.9 billion).
It is understood that HIG, which acquired a stake in FNZ in 2009 through its €600 million HIG Europe Capital Partners fund, made at least a 50x return on its investment.
HIG declined to comment on financial terms of the sale.
CDPQ’s private equity programme has been increasing its focus on direct investments. In May it joined Partners Group and Ontario Teachers’ Pension Plan to acquire Techem in a deal valuing the heat and water sub-metering services company at €4.6 billion, while in March last year it partnered with KKR to acquire USI Insurance Services, a US insurance brokerage and consulting firm, from Onex Corporation for $4.3 billion.
Generation Investment was founded in 2004 to invest in sustainable businesses that provide products and services consistent with a low-carbon, prosperous, equitable, healthy and safe society, according to its website. Al Gore is its co-founder and chairman.
It had $18.5 billion in assets under management as of 31 December.