Ara Partners’ new $800M fund will decarbonize old industrial assets

Addressing the Funding Gap for Climate Tech Startups

Many startups face challenges after their initial rounds of funding, finding themselves too large for venture capital but still in need of financial support. This issue is particularly pronounced for companies focused on industrial-scale hardware, including those in the climate tech sector, due to the substantial capital requirements involved.

While infrastructure funds have traditionally been a source of funding for such companies, their reluctance to invest in climate tech has created a gap in the market.

Recognizing this opportunity, Ara Partners recently raised an impressive $800 million infrastructure fund with a specific focus on reducing carbon emissions in industrial sectors that have historically been challenging to decarbonize.

Originally targeting $500 million, Ara Partners received strong support from a diverse group of investors, including pension funds, insurance companies, endowments, foundations, and sovereign wealth funds from around the globe.

The fund has already made three investments, including in a household organic waste recycling company based in Ireland and a developer of biofuels terminals. Ara’s decarbonization strategy centers on repurposing existing assets for new low-carbon developments.

This significant fundraising effort comes at a time of uncertainty regarding decarbonization in the U.S. political landscape. However, there is increasing clarity on the economic viability of low- and zero-carbon technologies, as companies have successfully reduced costs in recent years, making these solutions competitive with traditional approaches.

Ara Partners’ previous investment in Divert exemplifies the financial and environmental benefits of sustainable practices. Divert recycles edible food and converts non-edible waste into biogas, a valuable resource for generating electricity and heat, thereby reducing methane pollution from landfills.

Ara Partners has indicated that they will be announcing their fourth investment under this strategy in the near future, further solidifying their commitment to driving sustainable change in the industrial sector.