Ontario Teachers’ Pension Plan Buys Majority Stake in KKR’s Australian Carbon Project Developer

A Canadian pension fund Ontario Teachers’ Pension Plan (OTPP) has agreed to acquire KKR’s stake in a leading Australian carbon markets platform GreenCollar.

KKR acquired the 49% stake in GreenCollar three years ago for $100M. Greencollar is now worth close to $800 million so KKR pocketed a nice return on their investment with this sale to OTPP.  This investment marks Ontario Teachers’ deepening commitment to GreenCollar, building upon their initial investment in March 2022. 

The pension fund will now hold a significant majority stake in the company, though the financial terms weren’t disclosed. GreenCollar CEO and Co-founder James Schultz will remain as the business leader and a substantial shareholder.

Delivering Positive Environmental Impacts

The OTPP continues to look for positive environmental impacts of their investments. As one of the world’s biggest pension funds, it boasts net assets of C$249.8 billion as at June 30, 2023.

Since their 2050 net zero announcement in 2021, Ontario Teachers’ saw a significant drop in their carbon emissions by shifting to active exposure. Since then, the Canadian pension fund has been investing billions to reach net zero. 

OTPP’s climate strategy reflects its commitment to lowering the environmental impact of its portfolio. Its strategies also capitalize on investment opportunities that support the transition to a net zero future. And acquiring KKR’s carbon project developer is one of those decarbonizing strategies. 

KKR initially invested in GreenCollar in 2020 as part of its Global Impact strategy, focusing on companies contributing to the United Nations Sustainable Development Goals (SDGs). 

GreenCollar, a certified B corporation, aligns with SDG 13 (Climate Action) and supports other sustainable goals like SDG 15 (Life on Land) and SDG 14 (Life Below Water) through its environmental initiatives.

A notable feature of this deal is that GreenCollar will become the first Global Impact Fund investment to implement a comprehensive employee ownership plan. Under the plan, all GreenCollar workers will join to bolster company strength, financial inclusion, and engagement. 

They also had about 10% of the private equity, meaning they will be dividing around $75 million in cash.

GreenCollar is a profit-for-purpose organization. It’s the leading environmental markets project developer and investor across the Australian climate, water quality, biodiversity, and plastics markets. 

The Australian carbon credit project developer and investor has expanded internationally. The expansion includes forest protection projects in SouthEast Asia, plastic recovery projects in Africa and the Pacific, and cook stove projects in Southern Africa. 

Being the largest project developer in the Australian carbon market, GreenCollar handles 220+ projects covering more than 10 million hectares and generating over 126 million Australian Carbon Credit Units (ACCUs). ACCUs are initiatives that avoid clearing vegetation in Australia. 

Investing in Carbon Credits as Market-Based Solution

In 2021, Ontario Teachers’ has also supported carbon market developer GreenCollar with a $250M investment, apart from last year’s funding. This alongside KKR investment accounted for about 2/3 of the developer’s shares.

The generated carbon credits are sold by GreenCollar to first and secondary markets.

OTPP supports GreenCollar because they see the positive impact of its carbon credit projects which align with their return goals.

In this new transaction, the Ontario Teachers’ Natural Resources group will manage the investment. Operating within the Infrastructure and Natural Resources department, the group boasts extensive experience investing in various environmental sectors, including agriculture, aquaculture, timberland, and natural climate solutions.

Remarking on their new deal, Senior Managing Director Christopher Metrakos said that:

“We are pleased to increase our investment in GreenCollar… a proven leader in delivering positive environmental outcomes with market-based solutions and we are excited to continue supporting the company in its next chapter of growth in Australia and beyond.”

In Australia, KKR has invested across sectors including financial services, healthcare, infrastructure, technology, real estate, consumer goods, etc. since 2007. The global investor has also impact investments in other regions such as in Asia Pacific.

Since 2011, KKR portfolio companies have awarded billions of dollars through broad-based equity programs to 60,000+ non-senior employees. In all these investment programs, a culture of employee ownership is reinforced. 

Ontario Teacher’s transaction with KKR will close in the 4th quarter of 2023, pending customary regulatory approvals.

Interests and investment opportunities in environmental programs are growing, with global carbon markets expected to hit $22T by 2050. 

Ontario Teachers’ Pension Plan’s expanded investment in GreenCollar demonstrates its commitment to environmentally responsible investments and carbon reduction strategies. If more large pension plans choose to have the same goals as OTPP, the planet will see significant carbon reductions.