On behalf of its clients, APG is participating in the Mentha Impact Fund I, a buy-out fund that supports companies with achieving climate and environmental goals. What makes this participation so attractive and how do you find and select an investment like that? We asked Carlos García Rivas (Manager Private Equity) and Bob Vriend (Analyst Private Equity). “We’re addressing a lot of priorities in one go.”
Mentha, the Amsterdam based private equity firm, has announced (October 2024) the closing of the Mentha Impact Fund I fund at €153 million. It is the first buy-out fund in the Benelux that solely focuses on investments in companies that contribute to achieving climate and environmental goals. The fund will invest in themes such as resource efficiency, sustainable production and process technology, and energy transition. It targets small-to-medium sized businesses (SMEs) with revenues between EUR 5 and 100 million in the Benelux and Denmark. Mentha aims for significant and measurable results in climate and environmental impact, combined with financial returns. García Rivas and Vriend were closely involved with the selection of the investment.
What makes the investment in the Mentha Impact Fund I attractive to APG?
García Rivas: “First, our clients ABP and bpfBOUW want to do impact investments, particularly on climate. It is looking for investments that help to make the energy transition happen. Secondly, ABP wants to increase investments in the Netherlands, focusing on innovative, growing companies that can be supported to expand and succeed. The opportunity to invest in the Mentha Impact Fund I was interesting to us, because apart from the attractive risk-return profile, this investment meets those two important goals of our clients’ responsible investment ambition. The fund will invest most of the capital locally, in the Netherlands, and is focused on investing in the energy transition and the likes.”
But there are probably more ways to invest with impact in the Netherlands. What makes the Mentha fund stand out?
García Rivas: “This particular impact fund is new, but the organization behind it has been around for quite some time, investing in private equity. So it has proven private equity experience and a track record delivering good returns. That, combined with addressing the specific needs of our clients that I mentioned, made this a pretty unique investment opportunity. We’re addressing a lot of priorities in one go.”
Vriend: “Another reason why this fund is attractive is that it’s the first impact fund in the Netherlands that focuses on buyouts. In the market, broadly speaking, there are plenty of more venture strategies, but Mentha launched the first buyout fund pursuing a climate strategy. For our client ABP in particular, the investment is attractive because this fund invests in SMEs in the Netherlands that contribute to achieving climate and environmental goals. It is part of ABP’s ambition to support the growth of these kind of local companies.”
How easy or difficult was it to find this investment opportunity?
García Rivas: “Well, we had to put in a lot of work to make this investment happen for our clients. Again, this is the first type of fund like this in the Netherlands and opportunities like that aren’t available just like that. You can’t just go on Bloomberg. Last year and this year, we’ve been busy understanding what’s happening in the market very thoroughly. We have been speaking to parties in the market and talking to all the other funds that are being raised, just to understand what’s available, what’s interesting and what’s less interesting. All to get a good understanding of what impact investing in Europe is all about.”
Vriend: “And since we’re an anchor investor in this fund, we can be influential and be a good partner to them. Not only by providing capital, but also by aligning the way we measure and report on impact metrics, we’re available to them to reach out to, if needed.”
How do you define impact in the context of these kinds of investments?
Vriend: It’s important for us that this investment generates a measurable, environmental impact, alongside a financial return. Our investment in the fund enables Mentha to use their expertise in private equity to accelerate the growth of ‘green’ companies and to support companies with a ‘brown’ business model in their transition to become more sustainable. Ultimately, we expect to have invested in a portfolio of (Dutch) SMEs that contribute to environmental impact through their products or services, measured, for example, by avoided emissions.
García Rivas: “By the way, when we came across Mentha, they were also looking for pension funds as investors in their fund. Next to good returns, they want to deliver impact in the Netherlands too. That corresponds nicely with the ambition of our client ABP. And the fact that Dutch pensioners including teachers, construction workers and public servants will benefit from these investments was an important element for Mentha, that resonated well with them.”