LONDON Sindicatum Carbon Capital has raised $280 million from U.S. endowment funds and a Dubai sovereign wealth fund, Istithmar, to fund carbon emissions cuts around the world, a source close to the deal said on Tuesday.
Global trade in carbon offsets depends on supportive climate change policies, and allows countries and companies in the developed world to pay others to cut greenhouse gas emissions on their behalf.
Sindicatum Carbon Capital's (SCC) first close on a fund-raising launched in December had endured difficult market conditions including an economic downturn, the source said.
"This is quite a strong signal I think that this market works and this company works," he added.
Istithmar had supplied a quarter of the money, and unnamed U.S. endowment funds, foundations and fund-of-fund pension funds had supplied the bulk of the rest.
Founded in 2005, UK-based SCC had originally aimed to raise about half of an eventual $600 million fund in the first three months of this year, but has proceeded more slowly, reflecting the economic slowdown.
"SCC is not looking for money today, but if it deploys this capital quickly then the fund size could increase."
The $14 billion carbon offset market is underpinned by caps on emissions by industrialized nations, set by the U.N.'s Kyoto Protocol and the European Union's emissions trading scheme.
Slower U.N. approval of project applications has added to concerns about the market, and has partly contributed to an 80 percent drop in the last 14 months in the share price of a major project developer, EcoSecurities.
New global emissions caps are being negotiated from 2013 and have looked vulnerable as policymakers try not to add to energy bills during a slowdown and high fuel prices.
However the investors in the new SCC fund had committed to 10 years, suggesting a confidence in continuing carbon caps.
"It's a 10-year private equity fund so the money is locked up for 10 years," the source said.
The fund will co-invest alongside SCC in a pipeline of more than 40 projects, supplying 80 percent of investment and SCC the rest.
It will invest 10-15 percent in the United States, 10-15 percent in India, and 70-80 percent in China and south-east Asia including Indonesia, Thailand and Malaysia, the source said.
Investors in SCC itself include Citi Alternative Investments, AIG Global Investment Group and a subsidiary of Cargill.
Research by Environmental Finance Publications two weeks ago found 80 carbon funds worldwide, with assets under management of $12.87 billion, up 63 percent year-on-year.