Tortoise Capital shutters sustainability fund as part of $1.2B funds combination

The energy investment firm Tortoise Capital said June 17 that it will fold its Tortoise Sustainable and Social Impact Term Fund (TEAF) into its broader closed-end fund Tortoise Energy Infrastructure Corp. (TYG) as it continues to divest from its dedicated private renewables portfolio.

The combined assets under management of the two funds are valued at about $1.2 billion. As of April 30, TEAF's unaudited net assets were valued at $176.8 million.

The closure of the sustainability fund and sale of the firm's private investments in renewables come as Tortoise Capital saw returns on solar investments getting squeezed by high interest rates and tariffs, according to Matthew Sallee, the firm's head of investments. Tortoise also sees new opportunities in oil and natural gas.

"As we're look forward, we see the prospects for both natural gas and electricity domestically as really strong ... driven by LNG and then thinking of electricity," Sallee said in an interview. "We still invest in and believe in renewables, we just think listed securities are a better way to do it. Our bread and butter are listed energy companies."

With Inflation Reduction Act tax credits for clean energy projects on the chopping block, the residential solar market especially is facing challenges, Sallee noted. Renewables will continue to grow, he said, but added that he sees the big story this year as investors' enthusiasm for natural gas projects.

Tortoise Capital CEO Tom Florence flagged in September 2024 that his firm had been "disappointed" with TEAF's performance and was going through a broader strategic review of all its funds.

"As part of our product restructuring, we are evaluating our entire fund lineup and are making changes that are in the best interest of fund shareholders," Florence said then.

The investment strategy of the surviving TYG fund is designed to "capitalize on the 'age of electricity,' driven by data center growth, electrification, and grid modernization," Tortoise Capital said in a June 17 news release. The fund is also focusing on "unprecedented natural gas and LNG demand as a globally scalable, lower-emission fuel anchoring US energy exports," it said.