By David French

(Reuters) – Quantum (NASDAQ) Energy Partners has raised a fund of $2.25 Billion to lend to U.S.-based oil and gas companies as well as to energy companies that are transitioning away fossil fuels. Investors can choose to back activities that cause higher greenhouse gas emissions or not, people who have been familiar with this matter say.

Quantum was founded in 1998 and is still one of the largest private equity companies in the oil and natural gas sector. However, Quantum, unlike other firms that have historically invested in hydrocarbons has shifted its focus to cleaner forms of energy.

Quantum raises funds as oil prices approach $100 per barrel, the highest level since 2014. This is due to supply limitations and geopolitical issues such as Russia’s claim over Ukraine.

Because of their losses in the past energy price drops, many banks have not been able to lend to U.S. small- and medium-sized oil and gas production and exploration companies. They are also unable to finance new ventures.

Some banks have also been concerned about the climate impact of the oil industry.

Private equity firms continue to find investors willing to invest in their energy credit funds. This includes sovereign wealth funds as well as insurance companies. However, some investors (including public pension funds) have become cautious about supporting fossil fuels which cause greenhouse gas emissions.

Quantum, in response to these worries, decided that the new fund would include a $1.5billion tranche for loaning oil and gas producers as well as a $750m for support companies moving away from fossil fuels. Investors have the option to choose whether or not they would like to invest in both.

These sources agreed to speak anonymously in order not disclose any confidential information. Quantum refused to comment.

Sources said that the cash will go to senior secured and direct loans, rather than mezzanine loans made using Quantum’s old debt fund. Quantum is more comfortable investing in senior secured debt than mezzanine loans.

Quantum’s second fund to finance energy debt is this. The Houston-headquartered investment firm raised a $1.6 billion fund in 2019 that was used to provide structured credit and mezzanine finance to oil and gas companies, including Devon Energy Corp (NYSE -) and Antero Resource (NYSE –) Corp.