Lightrock to tap net-zero scale-ups with EUR 860m climate fund

With capacity to deploy EUR 10m-40m equity cheque per company, the Lightrock Climate Impact Fund will seek out European and North American businesses with a track record in commercializing their technologies in fields ranging from energy transition, decarbonizing industries, sustainable food and agriculture and sustainable transportation, among others, the source said.

"The fund will not take science and technology risk," the source said. "The fund is looking for businesses where the science has been solved and validated by sophisticated end users, and at a point where Lightrock feels comfortable to helping them scale up, rather than helping them try and cross a technical chasm. This is where a lot of climate tech has tripped up before."

Backed by Liechtenstein anchor investor LGT alongside its private banking clients, the fund closed on EUR 860m yesterday, exceeding its initial hard cap of EUR 600m.

Other LPs include First Swedish National Pension Fund (AP1); New Zealand charitable foundation Bay Trust; Netherlands-based climate technology focused investment platform Carbon Equity; GenZero, an investment platform company wholly-owned by Temasek dedicated to accelerating decarbonisation globally; European asset manager Golding Capital Partners; US-based charitable foundation Grantham Foundation; Thai energy and infrastructure group GULF; German family-owned investment holding Haniel; Australian pension fund NGS Super; Austrian insurance group UNIQA; and Dutch impact investor Wire Group.

Investments
LCIF, which has made seven investments so far, envisions completing deployment within the next three to four years, depending on market conditions, the source said. The investment timeframe is faster than the typical five year investment period fund structure given the "breadth and depth" of opportunities now available in the market.

Among its investments so far are software group Liqid, which focuses on data centre energy efficiency, as well as Sunfire, an electrolysis producer vital to the production of renewable hydrogen.

Despite the increasing popularity of climate impact funds, Lightrock does not feel increasing competition whether on deal hunting or fundraising, the source said, citing the EUR 30tn capex needed just to get EU to net zero by 2050.

But the fund is keen to emphasise the need to maintain discipline: "Some sectors are frankly overhyped in terms of valuation… LCIF has a very clear view on where it will and will not invest at [heightened] valuations and we're not going to chase deals".

Where opportunities with reasonable valuations can still be found include the smart grid space, the source said, noting the need to upgrade existing the electricity grid and related infrastructure to support the advent of on-site renewables. Other attractive opportunities with reasonable valuations include sustainable construction and energy storage, among others, the source said.

Areas where it is "very hyped up" and where the fund will be more cautious include carbon capture technology – a sector that has seen significant interest by strategics that feels the need to put a foot in the door, but with the consequences of driving up valuations, the source said. Areas it will also be cautious on include digital assets, he added.

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