Germany’s KGAL launches impact fund for renewables

Munich-based KGAL Investment Management has launched its first renewable energy impact fund, KGAL ESPF 5. The fund is one of the first impact funds created under Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR).

The new fund will invest in renewable energy generation through photovoltaics, onshore and offshore wind power, and hydropower. Investments in other renewable energy generation and storage technologies as well as grid infrastructure will also be considered.

KGAL ESPF 5 will “give institutional investors the opportunity to simultaneously pursue their financial goals and to have a positive impact on the global environment,” the firm said, explaining that the decision to launch KGAL ESPF 5 was a response to the increasing institutional demand that KGAL has experienced since creating its ESPF product series.

Predecessor fund KGAL ESPF 4 closed at the end of 2019 with €750 million in equity commitments.The firm said that its deal pipeline remains robust, with over 90% of the predecessor fund’s capital already contractually committed.

“For investors, sustainability and impact measurement are increasingly essential, and we at KGAL can fully relate to this as sustainability aspects are an integral part of our business and risk strategy,” said Christian Schulte Eistrup, head of KGAL’s international institutional business.

Schulte Eistrup, added that KGAL puts “huge importance” on the decarbonisation of the European economy both from a corporate and an investment perspective.

KGAL ESPF 5’s Core+ investment strategy will focus particularly on the EU-27 and the EFTA member states. The fund aims to achieve a target return (net IRR) of 7-9% over its 10-year term.

“The European investment market for renewable power generation offers immense growth and diversification potential,” said Michael Ebner, Managing Director and head of sustainable infrastructure.

Since 2003 KGAL has acquired over 150 photovoltaic plants, wind farms and hydroelectric power plants on behalf of clients and total investments in the area now exceed €3.2 billion across ten European countries.