Toyota and SMFG to help launch Japan hydrogen investment fund
Toyota and SMFG to help launch Japan hydrogen investment fund.
A consortium of Japanese companies including Toyota Motor and Sumitomo Mitsui Financial Group will team up with a domestic investment company to set up a fund to help develop Japan’s hydrogen industry, seeking to bolster infrastructure related to production and storage.
The Japan Hydrogen Association, which has approximately 280 private sector company members, seeks to have the fund in operation by 2024. Domestic investment company Advantage Partners will be the main operator of the fund, the country’s first dedicated to hydrogen investments.
The Japanese government estimates that its goal of reaching carbon neutrality by 2050 will require more than 150 trillion yen (around $990 billion) in public and private funds over the next 10 years. Tokyo is only expected to shoulder about 20 trillion yen, leaving private money to cover the rest.
In addition to association member companies, the fund will also seek investment from domestic and international institutional investors to begin operations with an initial war chest of tens of billions of yen.
In addition to domestic startups, the fund plans to invest in overseas companies with advanced technology and feed the accumulated expertise back to players at home. Investment per project is likely to be in the hundreds of millions yen to billions of yen.
The fund is expected to operate for over 10 years with investments concentrated in the first five to six years. Subsequent funds are planned for the future, with the total scale potentially reaching hundreds of billions of yen.
Sumitomo Mitsui DS Asset Management will also participate in management of the fund. Advantage will handle investment selection, execution and expansion, while Sumitomo Mitsui DS will be responsible for administration and post-investment environmental impact assessments. The fund will also draw on the know-how of association member companies.
Hydrogen, which does not emit carbon dioxide when burned, is considered a next-generation alternative to fossil fuels.
The Japan Hydrogen Association was launched in 2020, led by Toyota, SMFG, industrial gas company Iwatani and others. Including local governments and other organizations, its membership totals approximately 370 entities.
Overseas, investment in the hydrogen industry is already in full swing. In 2021, French oil giant TotalEnergies and industrial gas major Air Liquide led the launch of the Clean H2 Infra Fund, which procured 2 billion euros in total (around $2.1 billion at today’s rates).
There are many Japanese companies with advanced hydrogen-related technologies, according to a Japan Hydrogen Association source. Making high-risk investments in these companies’ growth may help them gain an advantage in international hydrogen competition.
Advantage was established in 1992 and is considered a pioneer of domestic investment funds. It focused on private equity investment until 2021, when it entered renewable energy and sustainability-related fields.