CapDyn closes €300m ESG fund

Future Essentials II makes primary-, secondaries- and co-investments with managers with strong ESG credentials.

Capital Dynamics has closed a fund dedicated to ESG-driven investing, part of a growing trend of firms targeting the segment on a secondary basis.

The Zug-headquartered firm has raised €300 million for Future Essentials II, which makes primary-, secondaries- and co-investments with managers with strong ESG credentials, according to a statement.

Fund II drew commitments from “more than 30 new and existing investors”, including pension funds, insurance companies, banks and multi-family offices, managing director Mauro Pfister said in the statement. It closed at target.

Fund II will target mid-market buyout and growth assets in North America, Europe and Asia, with an emphasis on “limited access” opportunities.

The fund’s 2019-vintage predecessor raised €208 million, against a target of €200 million, according to Secondaries Investor data. Capital Dynamics is also in market with its sixth flagship secondaries fund, targeting $850 million.

The ESG and impact secondaries space has traditionally been driven by specialists such as North Sky Capital, which is currently investing its 2018-vintage, $200-million Clean Growth Fund V.

More generalists have started exploring the space. In April, Commonfund Capital closed its debut sustainability fund on $233 million, Secondaries Investor reported. Environmental Sustainability Partners 2020 makes direct and secondaries investments in assets focused on sectors such as renewable energy, agriculture and resource efficiency.

The passive role of secondaries investors and the lumpiness of the market has made it difficult to ensure a firm is targeting ESG-compliant assets, particularly in the LP portfolio market, according to the head of ESG at Coller Capital.

“Sometimes you just don’t have much information and very limited influence. That’s the nature of the private secondary market. You often only have a helicopter view,” said Adam Black, in remarks reported in April by Secondaries Investor.

“There are certain types of indirect secondaries that come to market that might contain some fossil fuel assets. It’s often an all-or-nothing investment, and the exposure might be tiny, but it’s there,” he added.