Ontario Teachers’ Pension Plan (OTPP), a Canadian pension fund, has made a significant acquisition by agreeing to purchase KKR’s stake in GreenCollar, a leading Australian carbon markets platform. KKR had acquired a 49% stake in GreenCollar three years ago for $100 million, and the company is now valued at close to $800 million, allowing KKR to make a substantial return on their investment with this sale to OTPP.
This investment marks Ontario Teachers’ deepening commitment to GreenCollar, as they had already made an initial investment in the company in March 2022. While the financial terms of the deal were not disclosed, OTPP will now hold a significant majority stake in GreenCollar. James Schultz, the CEO and Co-founder of GreenCollar, will remain as the business leader and a substantial shareholder.
Ontario Teachers’ Pension Plan is known for its focus on positive environmental impacts in its investments. As one of the world’s largest pension funds, with net assets of C$249.8 billion as of June 30, 2023, OTPP has been actively working towards reducing its carbon emissions and has been investing billions to reach its goal of net zero. The acquisition of KKR’s stake in GreenCollar is aligned with OTPP’s climate strategy, which aims to lower the environmental impact of its portfolio and support the transition to a net zero future.
KKR initially invested in GreenCollar in 2020 as part of its Global Impact strategy, which focuses on companies contributing to the United Nations Sustainable Development Goals (SDGs). GreenCollar, as a certified B corporation, aligns with SDG 13 (Climate Action) and supports other sustainable goals such as 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. This plan will allow all GreenCollar workers to become shareholders, promoting company strength, financial inclusion, and engagement. Additionally, around 10% of the private equity will be distributed among the employees, resulting in approximately $75 million in cash.
GreenCollar is a profit-for-purpose organization and is the leading environmental markets project developer and investor in the Australian climate, water quality, biodiversity, and plastics markets. The company has expanded internationally, with projects in Southeast Asia, Africa, the Pacific, and Southern Africa. In the Australian carbon market, GreenCollar handles over 220 projects, covering more than 10 million hectares and generating over 126 million Australian Carbon Credit Units (ACCUs) by avoiding vegetation clearing.
Ontario Teachers’ has been a strong supporter of GreenCollar, having previously invested $250 million in the company in 2021, alongside KKR’s investment. The generated carbon credits from GreenCollar’s projects are sold to first and secondary markets, and OTPP sees the positive impact of these projects as aligning with their return goals.
The Ontario Teachers’ Natural Resources group will manage the investment in GreenCollar. This group, operating within the Infrastructure and Natural Resources department, has extensive experience investing in various environmental sectors, including agriculture, aquaculture, timberland, and natural climate solutions.
Christopher Metrakos, Senior Managing Director at Ontario Teachers’, expressed his satisfaction with the new deal, stating, “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 been actively investing across various sectors since 2007, including financial services, healthcare, infrastructure, technology, real estate, and consumer goods. The global investor also has impact investments in other regions, such as the Asia Pacific. KKR has a culture of employee ownership, as its portfolio companies have awarded billions of dollars through broad-based equity programs to over 60,000 non-senior employees since 2011.
The transaction between Ontario Teachers’ and KKR is expected to close in the fourth quarter of 2023, pending customary regulatory approvals. The interest and investment opportunities in environmental programs are growing, with global carbon markets projected to reach $22 trillion by 2050. Ontario Teachers’ expanded investment in GreenCollar showcases its commitment to environmentally responsible investments and carbon reduction strategies. If more large pension plans follow OTPP’s lead, significant carbon reductions can be achieved.