ImpactAlpha, Nov. 17 – The Dutch fund manager reached a first close towards a $1 billion target for Climate Investor Two, its second blended finance fund.
The $850 million Climate Investor One was incubated by the Global Innovation Lab for Climate Finance in 2015 to streamline renewable energy projects in developing countries and entice institutional investors off the sidelines. Climate Investor Two will also invest in adaptation projects, water and waste infrastructure and ocean-related companies.
“Everything that we do as Climate Fund Managers is to put new funds into the market that have scale and the ability to absorb private sector funding,” Climate Fund Managers’ Georges Beukering told ImpactAlpha.
Climate Fund Managers, a joint venture of Dutch development bank FMO and South Africa-based Sanlam InfraWorks, provides support at all stages of a project.
To get projects started, a donor-backed development fund supports feasibility studies, legal contracts, due diligence and other pre-construction needs. A second pool of blended capital provides equity for project construction as an alternative to bank financing, which can slow projects down. Once completed, project developers can tap a refinance fund or banks for operational debt capital. In the final phase, says Beukering, CFM will sell off the projects.
The blended structure reduces risk and increases returns for commercial investors. Institutional investors in the Climate Investor funds include South Africa’s Sanlam, Norwegian pension funds KLP and U.K. pension fund LPP. Beukering sees “a significant appetite for real, green infrastructure assets and endorsement of the blended finance principle.”
Four of the six projects in the Climate Investor One portfolio are fully operational, including 113-megawatts hydropower in Uganda and a 48-megawatt wind farm in Vietnam. CFM expects to have 1 GW of operational assets by year end.