Quebec business veterans have raised $250-million for a climate-focused impact fund they say fills an urgent need among companies in their early commercial stages for capital and strategies to scale up.
Idealist Capital, founded by Pierre Larochelle and Steeve Robitaille, aims to cap its fundraising when it hits $500-million. The plan is for the fund to make up to 10 investments of $25-million to $75-million each in areas such as renewable power, energy storage and electric vehicles.
Impact funds are structured to generate measurable environmental and social benefits along with financial returns, focusing on United Nations Sustainable Development Goals. The funds are gaining momentum as developers of technology require increasing amounts of capital to solve some of the world’s biggest problems, such as climate change, hunger and social inequality.
Brookfield Asset Management Inc. and TPG Inc. are among major players that have set up multibillion-dollar impact funds that target large enterprises.
“But you can see there’s a real gap in the ecosystem for growth capital,” said Mr. Larochelle, who is also chairman of EV manufacturer Lion Electric Co., which is backed by the Desmarais family. It went public in 2020 as part of a merger with Northern Genesis Acquisition Corp., a special purpose acquisition corporation, and raised US$200-million.
Idealist’s target market for investments is largely Canadian companies that have reached the commercialization stage and need money and expertise for expansion, he said. That’s a stage where entrepreneurs in this country frequently hit roadblocks or get swallowed up by foreign companies and private-equity funds.
Mr. Larochelle, who was previously president of the energy division of Desmarais-controlled Power Corp., used his experience with Lion as an example of the kind of assistance Idealist is looking to provide as an investor.
“They had school buses going around, they had proven they have a product, the need was there. But they really needed a very significant injection of capital to basically allow them to scale their production capability, their commercial strength and also invest in the C-suite,” he said.
“And I think there’s a very significant need in the market.”
Idealist is looking to fund technology that helps decarbonize power grids, such as supporting software, artificial intelligence and battery storage, as well as various components that go into EVs. Although the focus is Canada, Mr. Larochelle said opportunities in the United States have been bolstered by the recent passage of President Joe Biden’s Inflation Reduction Act, which includes US$369-billion in climate and energy spending.
Big investors in the fund include Desjardins Group, Investissement Québec, Fondaction, Toronto-Dominion Bank and National Bank of Canada, as well as “prominent” family offices and accredited investors, Idealist said. Desjardins and TD are among several financial firms that called last year for an accelerated transition to a net-zero economy in Canada.
Mr. Larochelle declined to say if the Desmarais family is among the investors, only that they remain supportive of his business endeavours.
The fund has also retained strategic advisers with experience in the fight against climate change in the energy and transport sectors, as well as the broader economy.
Mr. Robitaille said Idealist will not be a buyout fund, but plans to invest alongside founders of portfolio companies in hopes of creating top Canadian players in their segments. He worked as a lawyer at Stikeman Elliott for 24 years before signing on as chief legal officer and executive vice-president of mergers and acquisitions at WSP Global Inc., then was general counsel and corporate secretary at Bombardier Inc. He and Mr. Larochelle started Idealist in January.
“We’re really passionate about entrepreneurs. That’s what I did at the law firm as strategic adviser, and I’ve done it on the other side of the table in major organizations,” he said. “And we know how to help them to get to that stage, from smaller company, successful company, to huge champion that can grow internationally.”