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European pension managers go big for indoor ag as Equilibrium closes $1.1bn CEA fund

July 8, 2021

Equilibrium Capital, a US-based private sustainable finance and ESG funds manager, has closed its second indoor ag fund on just over $1 billion – well beyond its $500 million target.

Controlled Environment Foods Fund II (CEFF II) raised $1.02 billion from a group of institutional investors, mostly pension funds, with a strong showing from Europe, according to Equilibrium CEO Dave Chen. Sweden’s AP4 was one of five anchor investors that took over half of the total fund alongside two large UK pension managers, he added.

CEFF II will invest in high-tech greenhouses, indoor, vertical farms, and other sectors that need controlled environment agriculture (CEA) facilities such as alternative proteins and aquaculture.

“The strong investor demand reflects a drive to real assets” and sustainability by large institutional investors, combined with an “interest in agriculture and food systems,” Chen told AFN.

“There is a sense that ag is going through several simultaneous disruptions and that creates an opportunity.”

A press release announcing the fund closing states that investors and retailers “are increasingly looking for more sustainable, and less volatile, ways to invest in and scale agriculture.

“CEA shifts agriculture from a land-centered industry where the land, geography, and weather determines what can grow, into a climate-resilient industry that can now focus on the consumer’s demand for the fresh, safe, and regional fruits and vegetables they want to eat,” it continues.

For Portland, Oregon-based Equilibrium — which has funds across environmental and sustainability verticals including ‘green’ real estate, water, wastewater, and outdoor agricultural production — CEA is a compelling investment opportunity for its ability to dramatically increase the productivity of food production “per unit of resource input [and] land use,” said Chen.

“The ability to ride a tech innovation curve, locate farms regionally for quality and resilience, adapt to climate change, and capture demand from retailers and food service” also make it attractive, he added.

Asked where he expects the market share for CEA-produced food to be in five years, he estimated upwards of 30-50%. “Tomatoes are already there,” he said.

Equilibrium is predominantly a real assets investor, owning or investing in indoor farming facilities and greenhouses, but it also buys equity stakes in operating companies. CEFF II will invest between $10 million and $125 million per deal, primarily across North America. It has made three investments to date — two in the US and one in Mexico — mostly in mature high-wire crops like tomatoes, peppers, and cucumbers, as well as the emerging categories of leafy greens and berries.

Equilibrium’s $336 million Fund I portfolio includes indoor ag companies such as AppHarvest — which went public earlier this year via a SPAC mergerRevol Greens, and Little Leaf Farms.

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