Scalar International and Mergence Investment Managers have announced the launch of a $150 million private equity fund to finance clean energy and digital infrastructure in sub-Saharan Africa.
Scalar International, a black-owned international venture capital and private equity firm, has been selected by Luxembourg’s International Climate Finance Accelerator (www.icfa.lu/) to form part of its 2024 cohort. The ICFA aims to accelerate emerging fund managers to advance sustainability-based finance solutions for carbon reduction, mobilising international institutional capital to build a stronger and more integrated climate finance system. Out of an initial expression of interest by 66 firms, 48 were selected for consideration with a final five selected.
Scalar has partnered with Mergence Investment Managers to launch a fund-in-concept, called the Africa Decarbonisation Fund I. Mergence is a leading black-owned institutional fund manager with a strong impact investing track record in SADC.
The fund has a target size of $100-150 million and is also one of only 10 so-called “Article 9” funds worldwide, launched recently by the EU’s Sustainable Finance Disclosure Regulation (SFDR) to facilitate attraction of Limited Partners to private equity funds.
Via the fund, the Scalar and Mergence impact partnership will invest in energy-efficient decarbonisation projects in the private commercial and industrial (C&I) sector by supporting the emergence of first-tier, indigenous, women- and youth-led companies that are developing new technologies in clean energy solutions and digital infrastructure. At least 25% of the fund’s investment will be into underserved communities The fund’s first stage of investments aims to target C&I decarbonisation and energy efficiency in Southern Africa.
The pipeline of projects is primarily in the data centre and manufacturing sectors, which have seen a 40% decrease in grid energy reliability due to their reliance on the regional energy pool. Most SADC member states consume their energy from the Southern African Power Pool, which is primarily 40% hydro energy and 50% coal- powered energy.
Some target investment areas include:
- On-site power generation
- Critical infrastructure utilities
- Smart grid technology
- Manufacturing energy efficiency
- Digital infrastructure energy
- Industrial energy storage, EV, battery storage
- Enterprise on-site electric vehicle infrastructure
- Commercial energy efficiency (equipment retrofit)
- Blockchain/AI infrastructure that supports digital transformation
- Aggregated virtual solar power purchase agreements (PPAs)
Author: Bryan Groenendaal
