Commerz Real impact fund Klimavest hits €1bn: Market is ‘hot for renewable investments’

Target is to grow the fund to €10bn

Commerz Real’s Klimavest fund has reached an equity volume of €1 billion, just two years after its inception.

The fund has invested in 33 wind farms and solar parks in operation and 10 solar park project developments in Germany, France, Spain, Finland and Sweden: ‘We’re happy to see how the market is attracted to this fund,’ Timo Werner, fund manager for Klimavest, told REFIRE. ‘We had €60 million of equity when we launched the fund and five wind and solar investments. Our long-term target is to grow it to €10 billion.’

Currently, the fund is 27% invested in Germany, 30% in Spain, 11.8% in France, 1% in Sweden and 30% in Finland, Werner said. ‘This year, we want to develop projects in Germany; we have three solar plants and three photovoltaic ones, which we’re building on higher ground. Our target is €500 million in investment from investors this year, of which we’d like to invest €400 million this year. We’ll also focus on the Finnish market and wind farms and develop solar farms in the Swedish market. We want to go to the US market as well. We’d like to diversify to the whole of Europe because the market is hot for renewable investments. Sales partners and private investors reflect the ongoing demand for investments in renewable energy. Given the great significance of renewable energy supply in Europe we expect to see a further acceleration of the energy transition coupled with new and attractive investment opportunities for investors.’

Klimavest is a European Long-term Investment Fund - or ELTIF for short - and plans to develop a broad-based portfolio of sustainable infrastructure and plants for renewable energy generation. It invests in real assets which make a demonstrable contribution to the avoidance of greenhouse gas emissions. In doing so the fund takes into account the sustainability parameters in accordance with the current EU Taxonomy Regulation as well as the transparency requirements placed on an impact fund in accordance with the EU Disclosure Directive. 

‘It shares so many characteristics with the real estate investment market’

And interest in renewables is growing, according to Konstantin Kortmann, Country Head, JLL Germany: ‘It shares so many characteristics with the real estate investment market,’ he told REFIRE. ‘It’s a massive market, a lot of people are looking at it because usually you have a long-standing cash flow and you don’t have to worry about demand. But it takes a lot of time; building a complicated office building is not as difficult as getting permission to build a wind farm. Encavis in Hamburg, they’re traded on the M-DAX, they’re a big supplier. Commerz Real, they’ve got some legacy in that part of the business. And corporates like BASF have invested in a wind farm off the coast of Belgium.’

However, Werner admits that competition in the sector has increased: ‘It’s pretty hard to find operating assets but we have joint ventures with project developers. There’s more risk but mainly building risk on the fund side. We also have a joint venture with Elysium Solar on Agri Photovoltaic.’

This year, Commerz Real is aiming to attain a return of between 3.5% and 4.5% for Klimavest, using the BVI method. Investors can participate with sums of €10,000 upwards, and in addition to seeing value appreciation they are provided with regular reporting on the climate impact of the assets in the fund. Shares in the open-ended fund can be redeemed at the net asset value on any stock exchange day. 

In the fund’s 2021/2022 business year, the existing plants generated a total of 661 gigawatt-hours of green electricity. According to figures from Germany’s Federal Statistical Office, this volume is sufficient to cover the electricity requirements of more than 200,000 German households.

Other sizeable renewable energy funds are also attracting investors. In November, Qualitas Energy, a Madrid-based private equity firm specialized in renewable energy investments, reached the first close of its fifth flagship fund with more than €1.1 billion raised, most of which will be invested in Germany.

The vehicle, known as QE V, is broadly the same size as the group’s previous fund, and has a a target size of €1.6 billion. It is clear to see the reason behind Germany’s attraction: earlier this year, the German government announced that it had brought forward its goal of only using renewable power to 2035, attracting investment into a market that has the world’s third-largest capacity of wind and solar power. In addition to Germany, the QE V fund will also invest in its home market, the UK, Italy and Poland.

More such funds are likely to be launched given the huge surge in interest in renewable energy in light of the current fuel crisis and the German government has taken steps to make investment easier. Last month, the German Parliament voted to make it easier for property funds to invest in renewable energy. It voted to increase the annual limit for tax exemption on revenue generated by Spezial Investmentfonds, in a move designed to up the production of renewable energy.

Under the terms of the new rule, which forms part of the Annual Tax Act for 2022, the limit has been doubled from 5% to 10% of the total revenue for income coming from the production or supply of electricity linked to the rental and leasing of real estate properties. As a result, property funds will be able to invest in systems such as photovoltaics. The fund industry itself came forward with various initiatives, including more flexible regulations in the draft act. Germany’s upper house, the Bundesrat, has now to approve the law.