NPS commits $100-200 mn to UK PEF's energy fund to bolster ESG portfolio

The National Pension Service (NPS) has committed between $100 million and $200 million to an energy and infrastructure fund set up by UK-based private equity firm Actis LLP to invest in Africa, India, and Latin America, according to investment banking industry sources on August 24.

Actis Energy 5, its fifth green energy infrastructure fund, raised $2.9 billion in its first round of fundraising, with commitments from around 20 institutional investors, including the Employees Retirement System of Texas and Denmark's Industriens Pension. The fund is aiming to raise $4 billion in total.

The energy fund will invest in renewable energy projects that include wind and solar power in emerging markets across Latin America, Africa, India, and others. The respective countries are expected to provide guarantees for the investments given the risk in these markets, despite huge growth potential.

In addition to offering high returns, the energy fund also encompasses Environmental, Social, and Governance (ESG) criteria, which have increasingly become the global investment standard.

Such factors likely nudged NPS to commit, as earlier this year the South Korean pension fund added "sustainability" to its fund management guidelines, alongside efforts to steadily increase ESG investments in its portfolio.

“The fund is popular among institutions because it covers ESG standards and also provides satisfying returns,” said a source from the investment banking industry. “It’s currently difficult to select a completely fresh management firm, so the recent trend is injecting additional capital into existing firms,” he explained.

The surging coronavirus pandemic has rendered international travel nearly impossible, making overseas due diligence more difficult than ever. Thus the increasing allure of funds launched by management firms with proven track records.

The NPS previously invested into Actis Energy Fund 4, which completed its funding in 2017 with $2.75 billion.

Actis has been active in its Korea-bound investments. In May, Actis offloaded Young City, a grade-A twin-tower office building in Mullaedong, western Seoul,  for $447.4 million. In June, the private equity firm was selected as the preferred bidder to acquire Pfizer Korea's office building in Myeongdong, Seoul.

In 2004, Actis spun off from the Commonwealth Development Corporation to specialize in emerging countries’ energy and infrastructure investments. In 2017, the firm acquired Standard Chartered’s real estate business in Asia and began its foray into Korea’s real estate market.

As of 2020, Actis manages $12 billion of assets under management.

Write to Jung-hwan Hwang at jung@hankyung.com