Blackstone tips $590m into Xpansiv carbon platform

Australian-founded global carbon trading platform Xpansiv has received a $590m cash investment from funds managed by US private equity giant Blackstone.

Xpansiv co-founder and chief commercial officer Ben Stuart: ‘We were probably a bit ahead of our time.’ Picture: Britta Campion

Australian-founded global carbon trading platform Xpansiv has received a $590m cash investment from funds managed by US private equity giant Blackstone.

The money will be used to fund Xpansiv’s acquisition of the rest of APX, a provider of registry services for energy and environmental markets. Xpansiv bought a 20 per cent stake in APX in February and will use the funds to buy out the remaining 80 per cent.

The Blackstone deal comes after Xpansiv was forced to shelve plans for a listing on the ASX – with earlier aspirations for a $2bn valuation – as a result of market nervousness in the wake of recent interest rate rises.

The company’s backers have included the Clean Energy Finance Corporation, Aware Super, Commonwealth Bank, BP Ventures and S&P Global Ventures. Macquarie provides a convertible debt facility that will be repaid or converted to shares in the company at a later date.

The company operates the world’s largest voluntary carbon offset exchange, with 36 per cent of global volume and more than 90 per cent of the exchange-traded spot volume.

The Australian’s DataRoom column reported in May that Xpansiv’s planned listing was affected by market volatility and that it was in discussions with Blackstone over a funding deal.

Xpansiv’s chief executive Joe Madden said Blackstone’s support for his company was a “major milestone” and “the beginning of a new chapter for the company.”

He said the partnership would help the company “solidify our leading position in carbon, and leverage our platform to scale markets and products to accelerate the ongoing transition across renewable energy, digital fuels and beyond.”

Xpansiv chief strategy officer Nathan Rockcliff said the deal would help accelerate the company’s growth following the acquisition of SRECTrade, HVB and OTX in 2021 and its investment in APX this year.

Blackstone senior manager Bilal Khan said Blackstone believed that environmental commodities were a “critical new asset class that must scale exponentially to meet climate change mitigation targets pledged by governments, companies and entire industries”.

“Xpansiv is a leader in this space and we are delighted to provide the capital and resources to help them further expand their offerings and accelerate their growth,” he said.

Blackstone is making the investment through its energy-focused private equity business, Blackstone Energy Partners.

Xpansiv founders Nathan Rockliff and Ben Stuart. Picture: Jane Dempster

The global head of Blackstone Energy Partners, David Foley, said the deal was part of his company’s strategy of “proactively seeking out companies with entrepreneurial management teams that are well-positioned to benefit from long-term trends”.

“As more corporations make net zero commitments, there is an increasing need to efficiently connect them with – and indirectly provide funding for – the most efficient, high-quality developers of carbon reduction projects.”

He said Xpansiv had a “first mover advantage” in this area.

“Blackstone’s investment will enable them to capitalise on that lead, creating a uniquely positioned company with ownership of critical software, technology, and a scalable exchange for trading voluntary carbon offsets and related environmental products.”

“We believe this market will experience exponential growth over the next decade,” he said.

Xpansiv is the world’s leading platform for trading and managing ESG-inclusive commodities, including carbon, energy, water and fuels. It connects buyers and sellers of environmental commodities and provides market data for voluntary carbon offsets, renewable energy credits and low-carbon fuels.

Xpansiv’s chief commercial officer Ben Stuart said the company’s “growing ecosystem” supported companies “seeking to meet environmental and emissions reduction goals”.

The business was founded as CBL Markets in 2009 by Mr Stuart and Nathan Rockcliff as an exchange for trading voluntary carbon offsets. It was also part of a government initiative that established water exchange H2OX.

The Australian company expanded in 2019 with a merger with San Francisco-based Xpansiv, which was founded in 2016 operating a registry and data interface for ESG-inclusive commodities. The company has more than 200 employees with offices across Australia, Europe and the US and more than 1000 customers including BP, Delta, Macquarie, Shell, Tesla, and Walmart.

Its major businesses include CBL, the largest spot exchange for ESG commodities including carbon, renewable energy certificates and digital natural gas; H2OX, the leading spot exchange for water in Australia; XSignals, which provides daily y and historical market data; and EMA, a multi registry portfolio management system for ESG-inclusive commodities.

Mr Stuart said the Blackstone funding would give the company “extra capacity to pursue other acquisition opportunities as they arise”. “They share a vision for how we grow the market and grow the business,” he said. “We have been slugging away at it for a while,” he said. “We were probably a bit ahead of our time.

“But it has allowed us to get all the market infrastructure in place. We have created a pretty big first mover advantage.”

He said the biggest driver for the company’s business was commitments by companies to move towards net zero carbon emissions in their business.

“Financial markets are putting pressure on companies to demonstrate their capabilities in this space,” he said.

New disclosure requirements from the US Securities and Exchange Commission for US-listed companies were also putting pressure on companies to follow through on their commitments.

Additional reporting: Joyce Moullakis