July 2, 2024

BCI’s Global Partnership Fund (GPF) has a distinct and flexible mandate that allows the team to pursue opportunistic investments including those driven by or linked to systemic ESG trends like climate change. We launched the GPF as an actively managed investment fund in 2019 to generate returns in excess of the MSCI World ex-Canada Index through the employment of both traditional long-only equity security selection and absolute return strategies. Absolute return strategies give our clients access to investments that are expected to deliver positive returns irrespective of broader market performance and have low correlation to equity markets, with strong downside protection.

Rod Prat, Managing Director, Partnership Portfolio, shares how the GPF considers sustainability themes in its strategies and his perspective on future ESG trends and opportunities.

Why is the GPF uniquely positioned to invest in sustainability-related themes?
RP: Across BCI, we strive to understand and manage ESG-related risks while identifying underlying ESG factors that could inform future investment opportunities by collaborating closely with our dedicated ESG team and colleagues throughout the organization. The GPF is differentiated by a distinct mandate to invest in absolute return strategy investments that does not constrain us to a specific asset class. We have the flexibility to be highly opportunistic and explore a diverse range of asset types and structures. A key advantage of this is our ability to invest in unique deals that may not have a natural home within BCI’s other funds and strategies, including those that not only aim to deliver on the fund’s investment objectives, but also seek to deliver positive sustainability outcomes. For example, the GPF can allocate capital to environmental commodity markets and niche sectors that are important to advancing global ESG and climate-related ambitions.

With such a wide mandate, can you elaborate on the types of deals you look for and provide some examples of the GPF’s recent sustainability-themed investments?
RP: Investments that fall into our absolute return strategies’ investable universe seek to achieve positive returns in rising, falling, or flat market conditions. This can include fund investments, co-investments, and direct investments that capture pricing discrepancies, market inefficiencies, and other opportunities not directly tied to the performance of market indices.

The GPF has invested in a range of opportunities that align with sustainability themes. We tend to focus on market inefficiencies and situations that require nimble, opportunistic capital versus large-scale projects and investments that are more suited to BCI’s other assets classes like infrastructure & renewable resources. For example, AB CarVal’s Clean Energy Fund II, which invests in lending opportunities in clean energy generation and storage assets. Our relationship with AB Carval also led to two sustainability themed co-investments last year.

Another recent investment that shows the flexibility and uniqueness of the GPF’s mandate is Three Hills Capital Partners, a European-based manager with a diverse portfolio of assets across Europe and North America. The GPF recently committed to its Impact Fund I S.C.Sp., which aims to make a positive difference by investing in innovative and impactful mid-cap businesses that address environmental or social challenges. The fund invests in secured debt and preferred equity instruments, seeking out business models that promote solutions to these challenges.

The ESG landscape is evolving quickly. Where are you seeing the most interesting opportunities and trends?
RP: We are excited about new and emerging opportunities resulting from the global push towards a low-carbon economy. As the world transitions to renewable power sources, there is an increasing need for advancements in storage solutions, large-scale low-cost batteries, and sustainable supply chains for critical minerals. Innovations in clean carbon technologies and carbon capture have also proven essential for reducing global greenhouse gas emissions and achieving broader sustainability goals. These trends are creating opportunities from exploration and extraction to processing and production of finished products.

The GPF’s structure and investment objectives enable us to participate in these themes across the entire supply chain by way of optimal, downside-protected structures and asset class types. For example, we are invested in asset-based credit and private credit investments for renewable energy projects, green buildings, commercial and industrial solar and wind-powered assets, storage solutions, and carbon capture and storage. We are also invested in opportunities that benefit from the need for battery metals, and environmental commodity markets that provide financial incentives for emissions reduction and promote renewable energy generation.

Our team is always looking for unique deals that meet the risk-return characteristics of our investment mandate and we anticipate that ESG trends and global action on climate change will continue to present attractive opportunities for our clients.

Learn more about the GPF in BCI’s 2023-2024 Corporate Annual Report.