Private investors are driving projects that reduce carbon emissions

Climate Fund mobilizes USD 100 million in private capital to fight climate change

December 20214 min read

Zürich 29 November 2021 — Constituting a landmark-deal, a climate fund managed by responsAbility has mobilized an additional USD 100 million from a private institutional investor to finance projects that reduce carbon emissions in developing economies. Against the backdrop of COP26, it is clear that more resources must be mobilized to mitigate climate change. Therefore, leveraging the private sector through blended finance offers a clear path towards reaching the UN Sustainable Development Goals. This investment from a single private institutional investor increases commitments in the fund to USD 756 million. It is one of the largest single investments by a private institution in the blended finance space. Launched in 2009 at a time when climate change was still a nascent topic, the climate fund has developed into a leading protagonist of this novel approach which uses public funds to catalyze private investment.

Getting the world on track for 1.5 °C and reaching net zero by 2050 requires a surge in annual investment in clean energy projects and infrastructure. Some 70% of the additional spending is needed in emerging market and developing economies. Highlighting that the solutions to close the gap with a 1.5°C path are available – and many highly cost-effective – the International Energy Agency (IEA) sees finance as the missing link to accelerate clean energy deployment in developing economies. Most transition-related energy investments will need to be carried out by the private sector, the IEA says. Responding to this call to speed up the fight, this climate fund has mobilized an additional USD 100 million of private institutional capital. The investment by a single private institutional investor grows the climate fund’s total commitments to USD 756 million. The transaction represents the largest single investment by a private institution in the fund. Further, in terms of private capital mobilization, about 40% of commitments in the fund currently come from private investors.

The climate fund tackles the shortage of appropriate financing for low-carbon projects in developing economies. It was set up as a public-private partnership in 2009, at a time when climate change was still a nascent topic. The fund focuses on financing energy efficiency and renewable energy projects for Small and Mid-Sizes Enterprises (SMEs) and private households in developing countries, primarily in cooperation with local financial institutions, but also directly. Through its Technical Assistance Facility, the climate fund provides know-how and project support for partner institutions to develop their green lending portfolio and build their capacities. The fund has been managed by responsAbility since 2014. The blended finance initiative has since almost tripled its portfolio of investments and disbursed USD 936 million in climate loans in 27 developing economies, allowing financing of projects that would avoid the emission of 21.6 m tonnes of CO2 and to install 770 MW of clean energy capacity.

Ulrike Lassmann, Chairperson of the climate fund: "We are delighted about this increase in private investment for the fund, which already has strong backing from public and private investors. Our comparatively high share of private capital demonstrates how successful a forward-thinking investment strategy and commitment to a long-term partnership can be, especially when it comes to delivering strong environmental impact as well as financial returns.”

Antoine Prédour, Head of Climate Finance and Member of Senior Management, responsAbility: "We have a strong pipeline filled by green projects globally. This investment is key as it will allow us to fund innovative projects, reduce CO2 emissions, and continue to mitigate climate change in developing economies." About responsAbility Investments responsAbility has invested over USD 11 billion in emerging markets since 2003, and as an impact asset manager, focuses on climate finance, sustainable food production, and financial inclusion. It works closely with players in local markets, as it maintains eight offices around the globe, in order to strategically take steps to directly contribute to reaching the UN’s Sustainable Development Goals. Currently, responsAbility manages USD 3.6 billion in assets invested in over 300 ESG-vetted high-impact companies in nearly 80 countries.

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responsAbility Investments AG Stacy Fiehler +41 44 403 06 86 stacy.fiehler@responsAbility.com

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