Ara Partners, an investment firm focused on industrial decarbonization, has raised $800 million in an oversubscribed round for its first infrastructure fund. The fund, which sought to raise $500 million, will take majority stakes in mid-sized industrial assets in North America and Europe.
Interest from institutional investors, sovereign wealth funds and endowments was buoyed by Houston-based Ara’s track record investing in industrial decarbonization via a private equity strategy, which is now on its third fund.
“Private equity plays a role in scaling, commercializing, and proving that the technology works,” Ara Partners’ Teresa O’Flynn told ImpactAlpha. “But when it’s proven and you need to do mass build out, the right type of capital to do that is infrastructure. As a firm, we felt we had a front row seat on the emerging infrastructure opportunity.”
Greenfields
Industry accounts for about 60% of global emissions, but has attracted less than 10% of climate-focused capital, says O’Flynn, who joined Ara from BlackRock in 2022 to lead Ara’s infrastructure strategy alongside George Yong, who joined from infrastructure investor ArcLight Capital.
Within climate-focused infrastructure, the bulk of the funding is for renewable energy. Ara will look to less crowded sectors, such as infrastructure for biofuels, recycling, green chemicals, energy efficiency and food and agriculture.
“It’s a huge opportunity, but has been significantly overlooked,” said O’Flynn.
Geographic diversification
The fund will invest in new projects and transition existing infrastructure to align with current and long-term trends. In Europe, for example, a push to reduce reliance on imported natural gas is creating demand for bio-based fuels, while US fuel distribution networks need to be retooled for low-carbon alternatives.
The fund has made three investments to date. USD Clean Fuels is a Houston-based developer of renewable fuel feedstocks and logistics infrastructure on the West Coast. Lincoln is a Greenville, SC-based logistics operator for conventional and biofuels. Natural World Products in Ireland recycles organic waste.
