Davos 2020 - Climate finance partnership

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;

• 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.

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.

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 respectively. CFP parties have committed to help raise the additional capital required to reach the $100 million in catalytic capital.

Original source: AFD
Published on 22 January 2019