Brookfield eyes small tickets, high returns with its $5B Catalytic Transition Fund
Kristie NeoMon, September 21, 2026 at 12:00 PM GMT+3 4 min read
Clean energy investment has long had a complicated reputation, but Brookfield believes the sector is showing seeds of promise in India and Southeast Asia. Its Catalytic Transition Fund (CTF) is a departure from its flagship energy strategy in many ways.
For one, the fund focuses exclusively on emerging markets, with 40-45% allocated to South and Southeast Asia alone.
The US-Iran War has fueled demand for diverse and reliable energy sources in these consumption-led economies. At the same time, the rise of AI is bringing in a new set of investors like Foxconn, Google, Amazon and Microsoft keen to co-develop renewable energy projects with infrastructure players like Brookfield.
Stefano Ghezzi, managing director of energy, Brookfield
"If you look at emerging Asia today, the fundamentals of renewable power are extremely strong. The demand for power is increasing very rapidly by 4-6% every year, and this is before AI. These countries are heavily reliant on fossil fuels and will need to decarbonize," said Stefano Ghezzi, Brookfield's managing director of energy, in an interview with PitchBook.
"Renewable power is also among the cheapest sources of energy in Southeast Asia, and one of the quickest to bring online today. Bringing a new gas plant online can take 5 to 7 years. But building a solar park can take 2 to 3 years," he added.
But capturing this market requires Brookfield to take a careful, curated position.
The CTF is on track to reach its full close of $5 billion at the end of 2026 and is the smallest in its family of energy funds. (The latest vintage of Brookfield's Global Energy Transition Fund II was $20 billion, and its Infrastructure Fund V will be even larger, Ghezzi shared.)
One reason is the fund's focus on emerging markets, which has a much smaller pool of investable deals. The CTF also invests in Latin America, Eastern Europe and the Middle East.
"It's quite hard to find $1 billion-plus investment opportunities in emerging markets. ... While the CTF is smaller in size, it will probably be the largest dedicated energy transition fund to invest in emerging markets. This gives us the ability to do smaller equity investments of between $200-300 million compared to our typical checks of $500 million and above," said Ghezzi, who is based in Singapore.
The fund has made six deployments so far, including the acquisition of Alba Renewables, which oversees 1.8 gigawatts of solar, wind and battery storage assets in the Philippines and Thailand, as well as a recently announced partnership with Foxconn to co-develop 1GW of renewable energy capacity in Vietnam.
Brookfield also had to find ways to hedge against the downside risks often associated with emerging markets, while also mobilizing sophisticated capital into a market usually shunned by institutional investors.
Like most infrastructure investments, the CTF only invests in assets with high EBITDA margins and stable cash flows. It avoids exposure to merchant power and invests only in well-tested technologies. While the majority of CTF's capital is allocated to greenfield projects, it deploys only when these assets are ready to be built, said Ghezzi.
"In the example of a solar plant, we would only deploy the capital when the project has the land and grid connections already secured. It should already have a long-term offtake contract in place and be bankable, with ready financing. It's only at that point that we deploy. That's how we manage the risk and make sure we have very strong downside protection," he explained.
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Altérra, an impact investor backed by Abu Dhabi state funds, is CTF's anchor LP and has committed $1 billion under a "capped return structure," in which any returns above an agreed-upon target will be shared with the other LPs in the fund.
No other discounting or concessional structures are applied, which incentivizes the GP towards commercially driven outcomes—unlike many past cases of philanthropic capital deployed in emerging markets. Brookfield also contributes 10% to the fund as its GP commitment.
"Aside from the return-sharing feature, Altérra participates alongside the fund's other LPs, while the underlying investments are underwritten to the same commercial standards and need to meet our investment criteria. There have been many approaches to catalytic and blended finance, but to our knowledge, we haven't seen another emerging-markets fund of this scale using this type of structure," said Ghezzi.
CTF's other LPs include sovereign-linked and development finance capital, including Caisse de dépôt et placement du Québec (La Caisse, formerly known as CDPQ), Singapore's GIC and Temasek Holdings, Prudential and the World Bank's IFC.
But more crucially, Brookfield is targeting high returns for the CTF. The fund's returns are expected to be as high as 20% IRR compared to the teens for Brookfield's two other flagship funds, PitchBook understands. According to PitchBook data, Brookfield's Infrastructure Fund II (2013 vintage) and Fund III (2016 vintage) each posted IRR returns in the low teens. Brookfield declined to disclose specifics on its fund return targets.
"We expect CTF target returns to be higher than our flagship global transition strategy to account for the greater level of risk associated with investing in emerging and developing markets," Brookfield said in a statement.
This article originally appeared on PitchBook News
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