Rockefeller Fund Takes First Green Stake in Pivot From Oil

Bloomberg - Jessica Shankleman

Photographer: Chris Ratcliffe/Bloomberg

Summary Fund supports Mainstream's African wind and solar expansion Investment comes after fund pledged fossil fuel divestment

The Rockefeller Brothers Fund, the foundation divesting from the fossil-fuel industry it helped create, took its first direct stake in a renewable energy company in a move meant to bolster the fight against climate change.
The New York City-based fund, founded in 1940 with the profits of Standard Oil Co., provided $10 million to Mainstream Renewable Power Ltd. to expand renewable energy in Africa. The investment was part of an $117.5 million funding round announced last month that included International Finance Corp. and other backers. The investment will help finance as much as $1.9 billion for green energy on the continent.
"The opportunity is huge and for us it's just absolutely in the sweet spot of what we're trying to do with our impact investing," Stephen Heintz, president of the Rockefeller Brothers Fund, said in a telephone interview from New York. "It's completely consistent and advances our philanthropic mission, but does so while supporting market-rate investment and business solutions to climate change."
The Rockefeller Fund joined a group of 800 people and institutions that pledged to divest from fossil fuel companies and boost investments in clean energy, a move intended to put pressure on companies contributing to climate change. Of the fund's $816 million under management, about $97.5 million have gone to so-called "Impact Investments" including its stake in Mainstream as well as positions in vehicles like the New Energy Capital Infrastructure Credit Fund.
The fund is looking to sell 100 percent of its investments in fossil fuel companies that contribute to global warming by at least the end of 2018, said Heintz. The portfolio's exposure to fossil fuel companies has already fallen to 3.3 percent, down from 6.6 percent in April 2014. Investments in the dirtiest sectors -- coal and tar sands -- has fallen to 0.1 percent of the portfolio, Rockefeller said this month.
The Rockefeller investment in the Lekela Power platform, a joint venture between Mainstream and Actis LLP founded in 2015, will help install more than 1.3 gigawatts of renewable electricity across Africa by 2018. Countries targeted by the initiative include South Africa, Ghana, Egypt and Senegal.
"The teaming up of the world's leading independent renewable power developer with a foundation started by members of the family that effectively founded the global oil industry is a significant moment in the world's transition to a new power system based on clean energy," said Mainstream Chief Executive Officer Eddie O'Connor in the statement.
Other investors include IFC African, Latin American and Caribbean Fund and the IFC Catalyst Fund, Ascension Investment Management and Sanlam Ltd. Simmons & Simmons LLP acted as legal counsel to Mainstream and Norton Rose Fulbright LLP to the investor group, according to the statement.
Heintz said the Rockefeller investment is in line with the family's history of pursuing new ideas. John D. Rockefeller, the founder of Standard Oil more than a century ago, was also developing cutting edge fuels when he began investing in oil production at the end of the 19th century. He wanted to displace whale oil, Heintz said.
"I'm absolutely convinced that if he were alive today he would understand this dynamic and he would be on the cutting edge of investing in the clean energy economy because he knows that's where the world is going next," he said.

Future investments
The foundation is looking to expand its investments in renewable energy, with a particular focus on offshore wind farms in the U.K., and the U.S, said Heintz, who has just returned from a trip that included the Scottish Isles and Iceland.
The foundation is also looking at battery storage developments that could help provide stability for intermittent renewable energy technologies such as wind and solar, and is considering investments in renewable energy in the Middle East, where solar auctions have generated record-low prices.
"We're really looking at all those opportunities but we're doing it as very prudent and serious investors. This is not concessional, we're not willing to sacrifice returns and any investment we make, we have to satisfy ourselves that the investment fits the same risk and returns criteria that we would use for any other investment," he said.
In the near-term, RBF is keen to limit risk by investing projects once they're constructed. This could change as the industry matures and it's considering early stage private equity investments.
"This venture capital opportunity is something that's on our radar screen and we're constantly thinking about there's some way for us to be more involved in very promising earlier stage investments," said Heintz.

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