Exactly 12 months ago, against the backdrop of COP29 in Baku, Azerbaijan, British International Investment, FMO and Norfund committed to the task of mobilizing private capital to meet the climate emergency.
As development finance institutions shift their attention to COP30 in Belem, we felt it was important to address the opportunities and challenges we have encountered in the last year. We do this to provide transparency and accountability and to highlight the lessons we have learned along the way.
British International Investment, FMO and Norfund have mobilized over $3 billion in private capital through our combined investments in the last year – over$1 billion more than in 2023. This is a step in the right direction. But we need to do more to increase the ratio of private capital to concessionary capital invested through our deal flow.
Having met a wide range of private asset managers at the recent meetings of the World Bank and IMF, we are more convinced than ever of the significant opportunities to ramp up private finance mobilization to record levels.
To achieve that, we are looking to move faster. This means moving away from holding investments for long periods of time and generating exits sooner, so we can recycle our scarce capital into more catalytic transactions.
One example of this approach is the divestment of the BII- and Norfund-backed Kenhardt project – South Africa’s first large-scale hybrid solar and battery facility, built by Norwegian company Scatec – to South Africa’s Standard Bank. Our role was to take on the risk of getting the pioneering project off the ground and then to get out of the way as quickly as possible when a private investor was willing to come in.
Second, our organizations are seeing significant progress in mobilizing capital through financial intermediaries. Climate finance needs to support those that are most vulnerable to the impacts of the climate emergency, not least because it is these small businesses that are the most effective agents of change. FMO’s $200 million syndicated facility through Khan Bank to support green financing shows how to do this.
BII and FMO’s investments in the Green Investment Partnership, or GIP, which is managed by Pentagreen Capital to support green and sustainable infrastructure projects in Southeast Asia, provide another template for how providers of concessionary capital can pull in private institutions to support vital climate-related infrastructure projects in our markets.
The investment BII and Norfund made in IndiGrid – a platform for power grid development and energy storage in India – that we announced at last year’s COP is another example of using a platform model to move capital at scale into climate finance.
Pipeline problem
Mobilization is only as strong as the pipeline it feeds. There are not enough projects that meet both the development needs on the ground and the risk-return expectations of institutional investors. The lack of well-prepared, bankable projects remains one of the largest barriers to scaling climate finance.
Creating that pipeline requires deep, early-stage investment – in feasibility studies, regulatory reform, and capacity building – long before a single dollar of private capital can flow. These are activities that don’t fit easily into standard investment mandates, yet they are essential for getting projects off the ground.
Our institutions are stepping into that gap. FMO’s market creation efforts and BII investments, such as GIP Zambia, are designed to do exactly this – supporting local developers and entrepreneurs by building platforms that benefit whole business ecosystems.
If COP30 is to mark a genuine turning point, then Development Finance Institutions and Multilateral Development Banks, or DFIs and MDBs, must collaborate more intentionally on pipeline creation – pooling technical assistance, sharing project preparation facilities, and working with governments to ensure regulatory environments can sustain private participation.
Innovative finance
Moving faster is only part of the solution. We recognize that DFIs are not always the easiest to work with and that we must innovate without adding further complication to the mobilization equation.
In January this year BII launched an initiative that called on private investors to work with the organization to come up with new mobilization opportunities. The £50 million Mobilisation Facility has attracted 27 proposals. The first winner, announced today, is BlueOrchard, with which BII is teaming up to create a new fund to unlock insurance capital for climate risks in emerging markets.
We maintain that we have to simplify how we approached blended finance. One of the first outputs from this fresh thinking was BII’s Practical Guide to Blended Finance Report. It was designed to help realize the potential of blended finance, using FMO’s SDG Loan Fund with $1.1 billion of investor capital as a case study for mobilizing capital at scale.
To accelerate private capital flows into developing nations, DFIs and MDBs need to standardize and scale blended finance structures through clear, replicable models and large fund platforms that reduce complexity, lower transaction costs and attract institutional investors. There is a great deal of heavy lifting still needed in this area.
Capital mobilization
DFIs have a vital role to play in mobilizing private capital. But also, regulation needs to change to make it easier for life insurers and pension funds, who collectively hold trillions of dollars of untapped capital, to commit to the challenge of the climate emergency. Thanks to the GEMS Database we know that investing in climate finance in our markets can deliver appropriate, long-term financial returns.
Norfund has been successful in a long-term partnership with KLP, Norway’s largest pension company. DFIs across Europe now need to be campaigning for provisions that make it easier for other pension funds to follow suit.
We must also continue to work with local pension funds in our markets that historically have favoured passive assets such as US Treasury notes. In Zambia, for example, BII has partnered with Zambia’s National Pension Scheme Authority in GIP Zambia, an investment platform designed to support productive sectors of the local economy.
The tone of the narrative at COP30 is unlikely to be brimming with optimism and good will. Nevertheless, we believe that the vital task of mobilizing private capital at scale now has a momentum that we have not seen before.
Delegates at COP will undoubtedly call for greater acceleration. They would be quite right to do so. We are committed to playing our part.
Leslie Maasdorp , Michael Jongeneel and Tellef Thorleifsson are the CEOs of British International Investment, FMO and Norfund.
