As banks retreat from financing coal ventures due to environmental and governance concerns, affluent Australians are stepping up as crucial investors in the sector, attracted by high returns. Income Asset Management Group Ltd. (IAM) is at the forefront, appealing to wealthy individuals to provide private loans to coal and mining operations, promising annual returns of approximately 12% to 13%.
Varuna Gunatillake, IAM’s director of debt capital markets, explained in a Melbourne interview that their investors are willing to support non-ESG investments, including mining, provided the returns are appealing. IAM has channeled over A$500 million (about $335 million) into coal and commodity infrastructure over the past three years, including a significant portion of Whitehaven Coal Ltd.’s recent $1.1 billion private credit loan and A$170 million in junior debt for Newcastle Coal Infrastructure Group Pty’s coal terminal in New South Wales. The firm earns placement fees from these transactions.
The global surge in private credit demand aligns with the growing interest among Australian high-net-worth individuals in lucrative resource investments, despite environmental opposition. The resistance to coal has softened somewhat due to delays in renewable energy projects, which face rising costs, extended approval timelines, and grid capacity issues.
Origin Energy Ltd.’s recent decision to extend the operation of Australia’s largest coal-fired power plant by two years, in response to power supply concerns, highlights the ongoing challenges in transitioning away from coal.
Despite the opposition from environmental, social, and governance (ESG) advocates and the withdrawal of traditional lenders like Commonwealth Bank of Australia and Westpac Banking Corp., the financing landscape for coal projects remains robust. Indian conglomerate Adani Group secured a A$500 million private credit loan from non-bank lenders Farallon Capital Management and King Street Capital Management, while Indonesia’s Widjaja family is exploring private credit funds to finance the acquisition of a coal mine in Australia from South32 Ltd.
IAM has identified a lucrative opportunity in financing ventures, especially in mining and mining services, that are overlooked by conventional lenders and institutional investors. With over A$3 billion in assets under management, IAM positions itself as a bridge connecting wealthy investors with these otherwise inaccessible opportunities.
The potential capital from high-net-worth Australians is substantial. A June report by Capgemini estimated that affluent Australians held over $1 trillion in investable assets in 2023, contributing to the global high-net-worth asset pool of $86.8 trillion.
