OGCI Climate Investments, the investment firm created by a group of oil and gas companies, will likely court external investors as it turns its attention from early-stage investing to growth equity.
The firm’s debut vehicle – the $1.1 billion Catalyst Fund I – made its first investment in 2017. The fund was backed with equal commitments from OGCI’s 12 member companies: Saudi Aramco, BP, Chevron, CNPC, Eni, Equinor, ExxonMobil, Occidental, Petrobras, Repsol, Shell and TotalEnergies.
OGCI, short for Oil and Gas Climate Initiative, has given itself a mandate to deliver “greenhouse gas impact at an industrial scale through investments in new technologies and projects.”
Catalyst Fund I fund has now made 29 investments. In an interview with New Private Markets, CEO Pratima Rangarajan and chairman of OGCI Bob Dudley decline to be specific about how much capital had been invested and committed. Rangarajan says: “We are exactly where we need to be in the timescale of a 10-year fund.” Assuming the typical five-year investment period, that would put the firm in advanced discussions about its next vehicle.
“We do have a successor strategy,” says Rangarajan, “We will unveil it later this year.”
That strategy will move up the deal-size curve from the firm’s venture capital-focused debut fund.
“We plan to focus in the successor strategy on the growth stage, rather than the early catalyst stage, because it is time to deliver impact. We can’t constantly be looking at early stage.
“As things stand, there has been a dramatic decline in the investment capital available to growth stage opportunities within the climate tech space,” says Rangarajan. “The capital has been very directed at early-stage venture.”
New model private markets
OGCI Climate Investments has an unusual model. The limited partners represent not only providers of capital, but also a potential marketing opportunity – and testing ground – for investee companies with emerging decarbonization technologies. Rangarajan references 80 pilots and commercial deployments among the OGCI members.
Acting as a bridge between 12 different companies is what is unique about OGCI, says Dudley: “I don’t think there is another industry that does that on a global scale.”
Another fund manager – Energy Impact Partners – operates a similar fund model built on industrial collaboration, this time in the utilities space. New York-based EIP was launched in 2014; it gives its wide group of industrial LPs early sight of potential investee companies and uses their assessment of the nascent technologies as investment guidance. It runs multiple fund strategies and now counts financial investors, as well as strategics, among its limited partners, although the majority of its LPs are still industrials.
EIP’s founder and managing partner Hans Kobler, like OGCI CI’s Rangarajan, is a veteran of industrial conglomerate GE and the two executives know each other. “When we started in 2017,” says Rangarajan, “he was the first person I turned to, to say: ‘tell me what you have learned.’”
OGCI CI has already announced the launch of a China-focused platform. As well as expanding its fund range to include growth investing, it seems reasonable to assume that the firm will follow EIP’s lead in bringing in external investors from the financial community.
“We will probably accept external investment,” says Rangarajan, adding that she cannot comment further than that.
OGCI CI “often” gets inbound inquiries from organizations, says Dudley: “They have watched the Climate Investments fund, they know that it does significant due diligence on these companies, and they want to work with CI in some way.”
“The CEOs [of the OGCI companies] would like to see Climate Investments expand the reach and the impact, because we know we can do it, that it’ll help the industry, and will help the energy transition,” says Dudley. “It is something to stay tuned [to].”
OGCI CI recently published its first impact report. The methodology behind the report’s data is the result of three years’ work undertaken to develop a way of measuring both realized and planned greenhouse gas reduction.
“In 2017, when we made our first investment, there were few funds focused on GHG reduction and no standard methodologies for estimating or measuring the impact of their portfolios,” writes Rangarajan in the report. The firm has had consulting firm ERM validate the methodology. It was also a founding member of Project FRAME, a collaboration now involving more than 100 investors and climate experts to develop common frameworks to measure forward-looking GHG emissions.
Measuring impact is a live topic in the investment industry, with multiple stakeholder groups around the world refining different frameworks. The compulsion to measure impact is, says Rangarajan, “a very GE mindset.”
“If you don’t have the right measures or metrics, you are not going to succeed,” she says. “When we see funds announcing they are impact funds, but are not measuring what they are doing… this is not the GE way of doing things. You need to know what your targets are, you need to know what your measurement systems are.”