CVCA H1 Quarterly Exclusive: Active PE Investor Profile – Fondaction CSN

CVCA H1 Quarterly Exclusive: Active PE Investor Profile – Fondaction CSN
September 14
11:20 2017

This article is part of a new series, CVCA Quarterly Exclusive, written and published by the Canadian Venture Capital and Private Equity Association. This series provides an analysis of the CVCA’s most recently published VC & PE Canadian Market Overview through expert commentary and perspectives.

“As a shareholder, Fondaction brings a huge amount of credibility and deep expertise in the low carbon space”

When CoPower launched in 2013, it was with a recognition that many viable clean energy projects struggled to find financing. Investors were interested in the low-carbon economy, but struggled to find places to put their money to try to help move it forward.

CoPower is changing that with their online investment platform that gives the average investor the opportunity to put money into energy efficiency and clean energy generation projects, while earning a return.

“You can have good investments that are also good for the planet,” says CoPower Co-Founder David Berliner.

The Montreal-based financial technology platform has since raised more than $12-million from Canadians. The money is used to provide loans for a wide range of clean energy projects, from LED lighting retrofits to solar installations and geothermal heating and cooling for homes. CoPower’s flagship product is a $20M Green Bond, launched in March, which offers up to 5% interest annually over five years, at an accessible minimum of $5000.

CoPower is poised to expand its platform thanks to a $2M equity financing announced in July. The financing was led by Quebec-based Fondaction CSN, a labour-sponsored fund that invests in sustainable companies and projects.

“It was a natural fit,” says Berliner. “As a shareholder, Fondaction brings a huge amount of credibility and deep expertise in the low carbon space.

“With their backing, we’re ready to hit our stride.”

CoPower was one of a handful of “green” investments Fondaction funded in the first half of 2017, making it one of the top three most active private equity investors in the period. Fondaction made 18 deals in the first six months of the year, valued at a total of $305M. That’s up from six deals valued at $99M in the first half of 2016, when it was the fifth-most active investor.

Fondaction attributes the 2017 increase to a few larger deals, including a $35M commitment in a $200M financing over two years for the Coop fédérée.

“While we can now invest larger amounts in bigger size deals, we still do most of our investments in SMEs,” Geneviève Morin, Fondaction’s Head of Investment, said in an email interview.

Alongside the CoPower investment, Fondaction also financed the opening of a local produce market by a cooperative in Lac St-Jean; provided financing to a dry-cleaning chain that is switching to green operations and helped to finance the growth of companies in manufacturing and IT, among other investments.

“The most exciting aspect of these deals is that not only are they solid financial deals but they will also, each in their own way, bring positive impacts on society,” Morin said.

“Sustainable development is an integral part of doing business today. We even see more and more businesses whose products, services or projects aim to better the environment, innovate socially or promote fairness. This opens new possibilities for us in areas like climate change, where there is a high demand for solutions and where innovation can be rewarded by expanding markets.”

The fund currently holds direct and indirect investments in more than 1,200 businesses and has in excess of 137,000 shareholders, with net assets of about $1.7B. Investments generally range between $500,000 and $20M, but can reach up to $75M.

“With committed and disbursed investments now surpassing $1B, and with a sustainable development approach, Fondaction continues to invest in SMEs of various sectors,” Morin said, “with the intention of creating jobs, providing a good financial return for our investors and accelerating positive impacts on society.”

Last year, the fund announced plans to invest more than $50M over two years in projects and businesses that contribute to the fight against climate change.

“Not only does the fund invest in a multitude of projects and companies that contribute to GHG reduction, it also develops and establishes innovative financial products,” Morin said.

It initiated the launch of the Carbon Coop, a cooperative that gives Québec businesses access to the carbon market, which led to the creation of the Inlandsis Fund, which finances carbon offset projects in government regulated carbon markets. Another “defining investment” was the launch of the Biomass Energy Fund in 2015, Morin said.

She said business transfers are also an important trend in today’s market. “They spur new opportunities for growth. They can also be a good opportunity to bring in some increased degree of employee ownership or participation, thereby helping with the challenges linked to attracting and retaining talent.”

In the future, Morin said Fondaction will become increasingly active in all aspects of sustainable development and responsible investment.

“Much is at stake: climate change; a greater accessibility to entrepreneurship for women; the development of a sustainable agro-food industry; new environmental solutions; access and development of strong businesses that take into account their full impact on society as well as the creation of sustainable and quality jobs,” she said.

And while a market correction may be looming, according to some forecasts, Morin said Fondaction’s investment portfolio is diversified and prepared. She describes the fund as an “evergreen investor,” with a long-term approach.

“This long-term vision directs investments in businesses that manage their risks with great care since these businesses are concerned with the sum of their impacts—all of which we believe will make our portfolio more resilient to an economic downturn,” Morin said.

 

To read more about private equity activity in the first half of 2017, read the full CVCA H1 2017 VC & PE Canadian Market Overview here.

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