DAVOS, Switzerland--(BUSINESS WIRE)--Parties to the Climate Finance Partnership (CFP) have taken another step forward in their partnership to accelerate the flow of capital into climate-related investments in emerging markets, reaching agreement on the core terms and structure of their flagship blended finance investment vehicle. The parties to the CFP are France, Germany, the Hewlett and Grantham foundations, and BlackRock.
Featuring a unique blend of philanthropic, government, and private sector capital, the CFP showcases the power and catalytic role of philanthropic and public capital to mobilize top-tier institutional capital investment into climate-related sectors in emerging markets, at scale. And it is consistent with the shared belief of all CFP parties that aggressive action is necessary in order to limit climate change to well below 2°C, keeping a view to a 1.5°C limit, in a manner that harnesses the economic opportunities embedded in the transition to a global low-carbon economy.
CFP investments will be targeted toward select countries in South East Asia, Latin America, and Africa. Notably, investments in Africa will account for at least 25% of the total capital invested. The vehicle’s focus on what is generally referred to as climate infrastructure sector will include; (i) grid connected and/or distributed generation renewable energy power; (ii) energy efficiency in residential, commercial and/or industrial sectors; (iii) energy storage solutions; and (iv) ultra-low emission or electrified transportation and mobility services.
Rémy Rioux, CEO of the French Development Agency (“AFD”), said: “The unique challenges posed by climate change call for stronger joint action. It is therefore with great pride that the AFD Group, through its private-sector subsidiary PROPARCO, is partnering with BlackRock, the largest asset manager worldwide, to accelerate the mobilization of private-sector financing towards climate. This ambitious partnership, forged with Germany and leading global foundations, will help redirect financial flows towards sustainable development investments across the emerging world, and will include a priority focus on Africa as a key continent to France and one of the most vulnerable regions to climate change despite contributing the least to global warming.”
The vehicle will feature a first-loss tranche of at least $100 million in catalytic capital, anchored by government and foundation partners, that BlackRock will use to mobilize a goal of at least $400 million in institutional capital commitments. This would result in a minimum size of $500 million at first close and CFP parties share a collective goal of further scaling the vehicle going forward.
State Secretary Jochen Flasbarth from the German Ministry for the Environment, Nature Conservation and Nuclear Safety, said: “In 2019, Germany approved a national climate law and an ambitious mid-term climate package to reduce GHG emissions at home. As an EU member state we are committed to achieve net zero carbon by 2050. We are fully aware that a worldwide rise in ambition is required to respond to the climate crisis. Developing countries will need our support to increase their climate action. For that, both public and private funds will be essential. Therefore, we look forward to work together with France, philanthropies and BlackRock to mobilize private capital towards investing in the global transformation of our energy systems. By this we are sending a strong signal of the importance of shifting financial flows towards a low carbon development.”
The Governments of France, through the French Development Agency (AFD), and Germany, with the KfW acting as a trustee, intend to contribute $30 million each to the partnership. The William and Flora Hewlett Foundation and the Jeremy and Hannelore Grantham Environmental Trust have committed $10 million and $7.5 million respectively. CFP parties have committed to help raise the additional capital required to reach the $100 million in catalytic capital.
Larry Kramer, President of the Hewlett Foundation, said: “The Climate Finance Partnership shows that charitable organizations working in partnership with public and private-sector entities can mobilize capital to solve climate change and reduce human suffering. Populations in Southeast Asia, Africa, and Latin America will benefit from this first-of-its-kind partnership in bringing sovereign, philanthropic, and private capital together to target climate change. We hope it will serve as a model for scaling climate friendly projects all around the world.”
The CFP demonstrates an unprecedented partnership to bring sovereign, foundation and private capital together to target 100 percent climate friendly investments at such scale.
Jeremy Grantham, Trustee of the Jeremy and Hannelore Grantham Environmental Trust, said: “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. As clean energy’s cost advantage continues to spread around the world, clean energy in emerging markets should see substantial growth from its current low base. The Jeremy and Hannelore Grantham Environmental Trust is pleased to support this effort to help institutional investors begin building an allocation to this promising sector.”
The CFP is BlackRock’s first vehicle focused on climate infrastructure investments in emerging markets. BlackRock, the world’s largest asset manager, has extensive experience in renewable power and sustainable investing and is committed to factoring climate- and other environmental-related risks into their investment and risk management processes, including developing new approaches to measuring physical climate risks, and stress testing portfolios for future carbon price scenarios. The CFP is part of BlackRock’s ongoing efforts to provide investors with more and more ways to invest their capital in strategies that accelerate the global low-carbon transition.
Brian Deese, Global Head of Sustainable Investing at BlackRock, said: “In line with BlackRock’s recently announced acceleration of a number of sustainable investing initiatives, we are tremendously excited to launch the Climate Finance Partnership together with government and foundation partners. We believe creative collaboration is essential to mobilizing investment into climate infrastructure in emerging markets at scale, providing our clients with further opportunity to invest in the global low-carbon transition.”
CFP partners have been engaged in an intensive and collaborative design process since the CFP was announced at the One Planet Summit in September 2018 under the leadership of French President Emmanuel Macron. Partners are now committed to finalizing due diligence and launching this fund with a goal of Q3, 2020.
John E. Morton, Managing Coordinator of the Climate Finance Partnership and Senior Advisor to Aligned Climate Capital said: “The transition to a global low carbon economy presents tremendous economic opportunities for those investors willing to lead. Parties to the CFP should be proud of their collaborative progress over the last year and of the fact that this partnership provides a replicable template for unlocking private capital toward climate-related investments in fast growing markets around the world.”
About AFD: The Agence française de développement (AFD) Group funds, supports and accelerates the transition to a fairer and more sustainable world. Focusing on climate, biodiversity, peace, education, urban development, health and governance, our teams carry out more than 4,000 projects in France’s overseas departments and territories and another 115 countries. In this way, we contribute to the commitment of France and French people to support the Sustainable Development Goals (SDGs). www.afd.fr/en