Commonwealth Bank, CEFC back Xpansiv’s $138m raising

CBA and the Clean Energy Finance Finance Corporation have emerged as the newest big name investors in a capital raising for marketplace Xpansiv.

Xpansiv co-founder Ben Stuart said the rapid growth in ESG markets came as companies worked to fulfil carbon-neutral commitments. Picture: Britta Campion

Commonwealth Bank and the federal government’s Clean Energy Finance Finance Corp have emerged as the newest big name investors in the latest capital raising for commodities marketplace Xpansiv, ahead of a mooted ASX-listing next year.

The $US100m ($138m) raising was also backed by Wilson Asset Management, and global energy and commodities firm Hartree Partners, as well as existing investors. The raising size was doubled to reflect investor demand.

Xpansiv is a marketplace for environmental, social and governance (ESG) commodities such as carbon offsets, renewable energy certificates and differentiated fuels. The company counts Macquarie, oil giant BP’s venture arm, US billionaire Thomas Lee, S&P Global and Caledonia Investments’ Will Vicars, among its backers.

Xpansiv was formed in 2019 through the merger of Sydney-based CBL, a commodity spot exchange, and San Francisco-based Xpansiv, a data-led ESG commodities platform.

Executive chair Will Stewart said the capital would be used for the expansion of the platform to develop, register, transact and price ESG commodities.

Xpansiv’s growth comes as companies, investors and policymakers take a bigger interest in how the economy makes a smooth transition to lower carbon emissions. Investors are also demanding companies set clear targets to lower emissions, beyond vague statements that can’t be measured.

Andrew Hinchliff, Commonwealth Bank head of institutional banking and markets.

CBA’s institutional banking and markets executive Andrew Hinchliff said voluntary carbon markets would play “a critical role” in the economies of tomorrow, and the bank saw it had a role to play.

“We are speaking to stakeholders across the value chain so we can help our clients along this path. Xpansiv has built a leading marketplace for ESG commodities, and we are pleased to be able to invest in the next phase of its growth,” he added.

The CEFC – which invests $10bn on behalf of the federal government relating to the transition to a lower emissions economy – made a cornerstone investment in the Xpansiv raising as part of its sustainability goals.

“The marketplace for ESG products is evolving at a rapid rate and Xpansiv is the clear leader in this area,” CEFC chief Ian Learmonth said.

“Providing institutional investment portfolios and corporates with greater access to ESG products through Xpansiv will accelerate the drive toward essential sustainability and carbon-abatement goals.”

WAM was also understood to be among participating investors in an earlier Xpansiv raising round, ruled off in January.

Shaw and Partners and investment bank Barrenjoey worked on the latest capital raising, putting them in good stead to win a role on next year’s slated IPO.

But Xpansiv was not one of 13 parties short-listed to participate in a request for proposal round as the federal government seeks to set up the Australian Carbon Exchange, likely in 2023.

The carbon exchange will operate in a similar way to an online stock exchange, but will focus on the purchase, clearing and settlement of Australian carbon credit units (ACCUs) and potentially other units and certificates.

Chi-X Australia, an alternative exchange to the ASX, this month said the Clean Energy Regulator included it on the shortlist of potential operators for the Australian Carbon Exchange.

An Xpansiv spokesman said the exchange shortlist decision did not alter the company’s plan to launch ACCU trading in 2022.

“From the outset, the key market participants we are working with to launch the contract understood and supported our strategy to go forward with CBL’s ACCU market regardless of the outcome of the government market tender,” he said.

“We are on track with our plan to add ACCU trading next year as we continue to build out the CBL platform.”

Xpansiv has passed a milestone of 70 million tonnes of carbon traded on its platform in the year-to-date, also setting a monthly record of more than 15 million tonnes traded in August, and 812 per cent increase on the prior corresponding period.

“These record trading volumes are being fuelled by the rapid growth in ESG markets as corporates seek to fulfil their carbon-neutral commitments,” said Ben Stuart, Xpansiv co-founder and chief commercial officer.

Xpansiv has also completed the acquisition of HVB Markets and Iguanadata, aimed at underpinning its expansion across carbon, renewables, and energy markets.

But accounts lodged with the corporate regulator showed Xpansiv’s after tax loss swelled to $47.4m in calendar 2020, from a loss of $25.7m in the prior 18 months. Revenue was up strongly to $43.8m for 2020, compared to $24.8m.

The accounts also made reference to research and development incentives in previous years, which the Department of Innovation subsequently determined to be “ineligible expenses”.

“As a result, the group has provided for the full incentive received before any interest or penalties,” the financial statements said.