Startups specializing in large-scale industrial hardware often struggle after raising initial funding rounds. As they become too sizable for typical venture investments yet remain financially constrained, they face a particularly severe challenge. Climate technology firms experience this issue acutely due to their substantial capital requirements. Traditionally, infrastructure funds have bridged this funding gap, but many have been reluctant to invest heavily in climate tech ventures.
Identifying an opportunity in this hesitancy, Ara Partners recently closed an $800 million infrastructure fund specifically dedicated to decarbonizing industrial sectors. Although initially setting out to secure $500 million, the firm substantially exceeded their target thanks to strong interest from institutional investors, including pension funds, insurance companies, endowments, foundations, and sovereign wealth funds.
The new fund is committed to investments that repurpose existing industrial assets into projects supporting low-carbon innovation. To date, Ara Partners’ new fund has completed three investments, including supporting an organic waste recycling operation in Ireland and backing developers of biofuel terminals.
This substantial capital raise takes place amidst uncertainties in the political climate regarding decarbonization policies in the U.S., but also at a moment when clear economic advantages for low- and zero-carbon technologies are emerging. Increasing efficiency and falling costs for these solutions have made sustainable technologies increasingly competitive against established industrial methods.
Ara Partners previously demonstrated their investment strategy’s viability through backing Divert, a waste management firm. Divert reclaims edible food waste for donation, while converting unusable organic residues into biogas. The method significantly reduces methane emissions associated with conventional landfill disposal, proving its worth environmentally and economically.
According to Ara Partners, a fourth investment from the newly established fund is expected to be announced soon.
