As part of its partnership with governments and philanthropic organisations, US asset manager Blackrock has laid out the details of a planned emerging markets climate infrastructure fund.
The Climate Finance Partnership (CFP), which was set up in 2018, is a public/private collaboration consisting of the French Development Agency, the German Ministry for the Environment, the William and Flora Hewlett Foundation, the Jeremy and Hannelore Grantham Environmental Trust and Blackrock.
It aims to launch the fund by Q3 2020.
The fund will invest in southeast Asia, Latin America and Africa, with the latter accounting for at least 25% of the total capital invested.
The climate infrastructure investments will target:
- grid connected and/or distributed generation renewable energy power;
- energy efficiency in residential, commercial and/or industrial sectors;
- energy storage solutions; and
- ultra-low emission or electrified transportation and mobility services.
The partners will apply blended finance, which uses development finance and philanthropic funds strategically to mobilise private capital flows to emerging and frontier markets.
The vehicle will feature a first-loss tranche of at least $100m (€90.7m) in catalytic capital, the majority of which is funded by the participating government and foundation partners.
Blackrock will use the catalytic capital to mobilise a goal of at least $400m in institutional capital commitments.
This would result in a minimum size of $500m at first close, which is planned to be scaled.
Opportunities for investors
John Morton, managing coordinator of the CFP, said that “this partnership provides a replicable template for unlocking private capital toward climate-related investments in fast growing markets around the world”.
Jeremy Grantham, trustee of the Jeremy and Hannelore Grantham Environmental Trust, added: “Emerging market equities are substantially cheaper than those in developed economies and they offer the best choice for growth in an otherwise slow-growth world.”
Brian Deese, global head of sustainable investing at Blackrock, commented: “We believe creative collaboration is essential to mobilising investment into climate infrastructure in emerging markets at scale, providing our clients with further opportunity to invest in the global low-carbon transition.”