Harvard has long been accused of maintaining “dirty” investments tainted by their ties to the genocide in Darfur. Now, a private equity fund that counts the University as a major investor has pledged $500 million toward a “cleaner” objective.

Denham Capital Management announced late last week that the firm has invested in Recycled Energy Development (RED), an Illinois-based energy recovery company that is developing a new form of recyclable energy that could vastly reduce carbon emissions in factories.

RED specializes in improving the efficiency of major industrial plants by installing technology that captures the heat created during production, harnessing it to provide power for the plant.

Many major industrial firms have declined to implement the technology because of the initial cost, estimated in the tens of millions, but Denham hopes their investment will enable RED to overcome this hurdle.

Thomas R. Casten, chairman of RED, said he blames the lack of enthusiasm in his company’s technology on the structure of the energy market.

“There are rules that were set up 100 years ago when the goal was to rapidly electrify the country,” Casten said. “We gave the utility companies a monopoly in perpetuity, and they recover the costs they spend to keep up the monopoly in rate increases.”

Casten said the technology is proven, and that 69 percent of greenhouse gases currently emitted are from the generation of heat and power.

“Electric efficiency has not improved since the end of the Eisenhower administration,” he said.

Denham’s investment will allow RED to cover factories’ initial costs of installing its technology in exchange for long-term “power purchase agreements.”

Riaz Siddiqi, a senior managing director at Denham, said the firm invested in RED because of Casten’s life-long commitment to his field and his ability to win over industrial purchasers.

“We need people who have experience, a track record, and gravitas—and that’s what we saw in the form of Tom and the team he has assembled,” Siddiqi said.

He said that the national push towards greater regulation of carbon emissions seemed to indicate that the time was right for a major capital investment.

Denham, which is headed by former Harvard Management Company (HMC) Vice President Stuart Porter, was spun off in June from Sowood Capital, an investment fund backed by an initial pledge of $500 million from Harvard and headed by Jeffrey Larson, another former HMC vice president.

Shortly after Denham cut ties with Sowood, Larson’s fund closed its doors amid heavy losses in the credit market, marking a loss of $350 million for Harvard’s endowment.

John D. Longbrake, a spokesman for the University, declined to comment on Harvard’s investment in Denham.

—Staff writer Nathan C. Strauss can be reached at strauss@fas.harvard.edu.