China's Primavera targets $1.5b fund to back carbon neutral businesses

Source: Anastasiya Romanova/Unsplash

Chinese private equity (PE) firm Primavera Capital Group, an early investor in billionaire Jack Ma’s Ant Group, is targeting to raise about 10 billion yuan ($1.5 billion) for a carbon neutrality fund as the race for green investments hots up in the country.

The fundraising plan, which was first reported by Chinese-language media outlet ChinaVenture, marks a move by Primavera to double down on the carbon neutrality craze as Beijing aims to hit peak carbon emissions in 2023 and then achieve net zero emissions by 2060.

Primavera started the fundraising process for the RMB-denominated carbon neutrality fund earlier this year, mainly targeting capital commitments from limited partners (LPs) in the mainland market, a source with direct knowledge of the matter told DealStreetAsia. The source declined to be named because the information is confidential.

The fund will invest across the sustainability spectrum, from new energy, energy storage and transmission to front-end application, new business models and emerging green technologies, said the source. The source added that the fund will target not only mature, growth-stage low-carbon businesses, but also nascent eco-friendly solutions powered by groundbreaking technological innovations.

“Carbon neutrality is an area that we pay great attention to. As an investment firm, we undertake the mission of redistributing resources, and capital should be diverted to industries that can help society become more low-carbon, zero-carbon or even carbon negative,” Primavera Founder, Chairman and CEO Fred Hu had said in an interview to ChinaVenture this month.

Since the ex-Goldman Sachs Group rainmaker founded the firm in 2010, Primavera has invested in more than 90 companies as of end-2021, with a portfolio covering some of China’s most prominent tech giants such as Alibaba Group, TikTok-owner ByteDance and ride-hailing firm Didi Global. In the greentech space, it made investments in companies such as Envision Energy and Envision AESC, two subsidiaries of smart wind turbine manufacturer Envision Group, and solid-state battery maker ProLogium Technology.

Primavera invests across all funding stages from venture financing and growth equity to buyouts and control-oriented deals. It has over 60 investment professionals across offices in Beijing, Hong Kong and Silicon Valley.

The firm joined an array of blue-chip investment companies to capture growth opportunities in businesses riding on this growing trend of environmental protection.

Sequoia China in March 2021 partnered with Chinese greentech company Envision Group to set up a 10-billion-yuan fund to focus on global carbon neutral technologies. In the same month, CICC Capital, the fund management arm of investment bank China International Capital Corporation (CICC), launched a carbon neutrality fund in partnership with Chinese clean energy solutions provider GCL Energy Technology, also targeting a fund size of 10 billion yuan.

Hillhouse Capital Group, an investor in the world’s largest electric vehicle (EV) battery maker CATL, last year set up a dedicated fund for carbon neutral deals, as it targets to realise combined net-zero emissions for all its portfolio companies by 2025. In January, IDG Capital joined hands with Hong Kong and China Gas Company, the sole piped-gas supplier in Hong Kong, to raise up to 10 billion yuan for a new fund dedicated to decarbonisation projects.

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