Commerz Real launches CO2 impact fund for private investors

Earlier this month, German asset manager Commerz Real launched klimaVest, an impact fund for private investors focused on real assets that reduce carbon dioxide (CO2) emissions—primarily the generation, storage and grid capacity of renewable energies.

Over a term of at least 50 years, the fund will grow a portfolio of renewable energy, as well as sustainable infrastructure, mobility and forestry, investments with a value of at least €25 billion, of which about €10 billion will be equity capital. “Traditionally, this asset class has been heavily dominated by institutional investors, but klimaVest is focused on renewable energy assets specifically for private investors,” explains Tobias Huzarski, Commerz Real’s head of impact investing. “True impact means, first, achieving a positive impact on the real physical world to address ecological or social problems. This is why klimaVest focuses on real rather than indirect assets. And, secondly, it requires raising fresh additional capital for fresh new projects. This is why we will consciously refrain from secondary market transactions.”

The fund’s management is aiming for a 3-4% annual return. Investors can buy in with investments upwards of €10,000, out of a minimum total investment portfolio of €100,000—with a recommended investment horizon of at least five years. “The fund’s primary focus are assets connected to renewable energy generation, in particular wind and solar,” says Huzarski. “In terms of return criteria, we target assets promising strong risk-adjusted returns, long-term (20+ years) underlying cash flows, secure counterparties, quality assets in stable investment markets, and a conservative leverage. The majority of cash flow will be generated through operating income rather than the residual value of the assets.”

klimaVest is domiciled in Luxembourg and structured as an ELTIF (European Long Term Investment Fund). The shares in the open-ended fund can be redeemed on a daily basis at net asset value, and the fund’s sustainability parameters are regulated by the EU’s Taxonomy Regulation. 

“Throughout the entire investment process, the EU taxonomy is applied,” says Huzarski. “When sourcing potential deals, our investment specialists use our proven risk sharing framework that combines return, sustainability and formal parameters.” Huzarski and Commerz Real’s head of sustainability, Viola Joncic, will be members of the investment committee overseeing every acquisition. Additionally, klimaVest will employ third-party due diligence specialists to verify both the ecological impact and the EU Taxonomy’s Do No Significant Harm (DNSH) minimum requirements. PwC will be one of the specialists, with the remaining roles yet to be appointed.

According to the asset manager’s calculations, the fund could reduce carbon dioxide emissions by 300,000 to 400,000 tonnes annually with an initial investment of €1 billion. That would equate the fund’s €10,000 minimum investment to 3-4 tonnes of CO2 a year.  “This impact fund concept explicitly includes transparency about the fund portfolio’s ecological impact in terms of the reduction in CO2 emissions achieved. For this, we provide a digital CO2 calculator for our investors,” says Huzarski.

The fund’s seed portfolio consists of seven onshore wind farms, generating a total of roughly 98 megawatts, spread across Sweden and Germany. The German assets benefit from state guaranteed feed-in tariffs, whereas long-term power purchase agreements (PPAs) were agreed for the Swedish farms. The fund has also invested in a solar farm in Tordesillas, Spain, which has long-term PPA and adds another 42 megawatts to the portfolio.

At klimaVest’s launch, Sabine Schmittroth, a member of the management board of Commerz Real’s parent company Commerzbank, revealed that the German bank’s sustainable asset management portfolio had increased by 50% in 2020, to around €350 million. “This trend will intensify,” she said. “Klimavest is therefore the right product at the right time.”