This week, Aflac Global Investments, the $129 billion global asset management arm of insurance giant Aflac, announced a $2 billion strategic partnership with Denham Capital, a private equity fund that invests its $10 billion in managed client assets in sustainable infrastructure, energy and mineral projects. The firms will jointly develop Denham’s Sustainable Infrastructure business to include a credit platform that will invest in the senior debt of sustainable infrastructure projects, and has also committed $100 million to a second Denham equity fund for acquisition of sustainable infrastructure assets.
Under deal terms, Aflac Global Investments will hold a 24.9 percent non-controlling equity interest in Denham Sustainable Infrastructure.
In a joint statement, the companies said the deal will position Denham Sustainable Infrastructure to become a global leader in facilitating debt and equity investment capital toward assets that support economic growth while protecting the environment. All investments will be evaluated using Denham Sustainable Infrastructure’s screening and ESG scoring methodology, to insure that all portfolio targets support climate change mitigation, natural resource conservation, pollution prevention and control, and digital connectivity.
Trillions with a “T”
The companies point to research from the Global Financial Markets Association and Boston Consulting Group that estimate the size of demand for sustainable infrastructure investment at $100 trillion to $150 trillion by 2050, or $3-4 trillion per year.
“Part of Aflac Global Investments’ long-term growth strategy is to identify and partner with successful third-party managers like Denham, which has a track record and is a leading asset manager of infrastructure assets,” said Aflac Global Chief Investment Officer, Aflac Executive Vice President and President of Aflac Global Investments Eric M. Kirsch. “The nature of these asset classes will enable us to capture higher yields while providing enhanced credit protection, adding value to our portfolio and to our stakeholders, while advancing our ESG priorities. In addition, our equity stake enables Aflac to participate in the expected growth of an attractive asset management partner in a growing asset class while broadening our sustainability exposure and commitments.”
“Now is the optimal time for this transaction as we look to provide solutions across all parts of the capital structure,” Denham Capital CEO and CIO Stu Porter said. “The partnership with Aflac will trigger the rapid growth of our Sustainable Infrastructure platform, enabling Denham to play a pivotal role in accelerating the transition toward an electrified, clean economy.
“Global demand for assets which fulfill ESG objectives has significantly bolstered the need for investing in sustainable infrastructure, and as such, we expect energy transition initiatives and investment into sustainable infrastructure to increase materially well into the future. Our expanded Sustainable Infrastructure strategy will focus on markets where we see the biggest growth opportunity, and we believe we can make the biggest positive impact. Denham looks forward to partnering with Aflac as we seek to address climate change with capital, infrastructure and technology,” he added.
As of December 2020, Aflac’s has invested more than $1.7 billion in sustainable and impact investments, including bonds supporting affordable housing, education, hospitals and public transit in the United States and Japan.
The credit platform will target investment-grade and below-investment-grade sustainable infrastructure investments, leveraging Denham Capital’s global presence but with an initial focus on developed markets, including North and South America, Asia, Europe and Australia. Denham Sustainable Infrastructure’s equity strategy will continue the firm’s focus on targeting mid-market companies, with the majority of investments expected to be in renewable power and energy storage in both developed and developing markets.
