By Maiya Keidan and Shariq Khan
TORONTO (Reuters) - Canadian lender Desjardins Group is seeking to raise up to C$500 million ($394 million) on behalf of clients who need money to deploy for carbon capture technologies, a top banker told Reuters.
Carbon capture, which involves taking carbon emissions from fossil fuel sources and storing or reusing them, rather than pushing them into the atmosphere, has become a hot topic as energy companies seek to make their products greener.
But market participants say the technology is too expensive to develop without buy-in from the private market. Desjardins' capital raise plans could give a big boost to an industry that has been the topic of intense market debate about potential investments, but has not seen a lot of real money put in.
Less than $300 million was raised for carbon capture startups globally throughout the last year, according to PitchBook data.
Desjardins is in the market currently with other banks and talking to several other clean technology issuers, according to François Carrier, co-head of Desjardins Capital Markets.
"Innovation comes from scientists and visionaries, of course – but also from leading energy companies who've understood that they may be facing something of an existential threat," he told Reuters.
"If you are an energy company, every day you're positioning on energy transition and other ESG topics is becoming more critical to your ability to access capital in the markets."
While Desjardins would not reveal any possible investors, private equity, hedge funds, or more traditional money managers often fund development of clean technologies.
Much of the investment so far in carbon capture has come from "non-traditional" investors, like oil companies and governments, PitchBook noted.
Data was not available on the costs of carbon capture technologies but it can run into the billions.
Canada aims to build two new carbon capture hubs by 2030, Reuters reported last month.
Svante, Enbridge, Cross River Infrastructure Partners and OTS also recently established an independent carbon capture development partnership called Cross Carbon Ventures (CCV).
When CCV are ready to announce projects, details of the funding and the financing will "become more evident", a spokesman for Enbridge told Reuters on Wednesday.
"A CCV CCUS project would include the partners funding the capital to capture, transport and sequester the CO2 emissions," he said.
He added that CCUS projects will require clear policy and financial support from governments to meet net-zero targets.
"We see now a number of projects that have been to different degrees incubated," said Carrier, referring to a variety of energy-transition-related projects.
($1 = 1.2657 Canadian dollars)
(Reporting by Maiya Keidan and Shariq Khan, additional reporting by Rod Nickel in Winnipeg; Editing by Denny Thomas and David Gregorio)