BlackRock raises USD250 million in blended finance to fund climate transition in emerging markets

The world in our hands

BlackRock has raised USD250 million from a consortium of ten institutional investors, governments and charities for its flagship ‘blended finance’ fund, which aims to help emerging market economies reduce carbon emissions.

The Climate Finance Partnership (CFP) is focused on investing in climate infrastructure across emerging market countries in Asia, Latin America, and Africa. 

Blended finance aims to entice private investment by first raising initial capital from public and philanthropic sources. This can lead to lower risks and more attractive returns for investors.

Major infrastructure investment is needed for emerging markets countries to limit rising carbon emissions, with energy demand in these countries poised to double by 2050. Approximately USD9 trillion will be required for emerging markets to derive two-thirds of their energy from renewable power by 2050.

The CFP was first conceived at the One Planet Summit in September 2018 under the leadership of French President Emmanuel Macron.

The governments of France, Germany, and Japan have committed initial ‘catalytic’ capital, through public bodies the French Development Agency (AFD), KfW Development Bank (KfW) and Japan Bank for International Cooperation (JBIC), respectively.

Together with Grantham Environmental Trust, the Quadrivium Foundation, and another private foundation, the consortium committed a combined USD112.5 million in catalytic capital. 

Rémy Rioux, CEO of the AFD, says that the unique challenges posed by climate change call for “stronger joint action, public and private”.

“This ambitious partnership, forged with Germany, Japan and leading global foundations, will help redirect financial flows toward sustainable development investments across the emerging world, with a priority to Africa as a key continent to France and Europe and one of the most vulnerable regions to climate change despite contributing the least to global warming,” says Rioux. 

State Secretary Jochen Flasbarth from the German Ministry for the Environment, Nature Conservation and Nuclear Safety, says: “We are supporting this Partnership because we believe that combining the strengths of the public and private sectors is necessary in order to align finance flows with low-carbon and climate-resilient development."

Clean energy investment in emerging and developing economies has been losing momentum, declining 8 per cent to less than USD150 billion in 2020, according to the International Energy Agency. This needs to rise by more than seven times, to put the world on track for net-zero emissions by 2050.

"The Paris Agreement requires nothing less from us than the climate-friendly transformation of the financial sector,” says Flasbarth.

Tadashi Maeda, Governor of JBIC, notes that the Government of Japan has pledged to reach net-zero greenhouse gas emissions and carbon-neutrality by 2050. “Participating in CFP as a catalytic partner is in line with such mission and we are pleased to contribute to the sustainable development of developing countries and provision of private capital to low-carbon investment opportunities,” says Maeda.

Institutional investors Dai-ichi Life Insurance, Standard Chartered Bank, and MUFG Bank have been among the first private investors to commit capital. The Partnership’s first close has secured half of the its USD500 million target.

Seiji Inagaki, President and Representative Director of Dai-ichi Life Insurance, says: “As an institutional investor, Dai-ichi Life aims to achieve zero carbon by 2050. We actively pursue climate-related opportunities by investing in and financing projects such as renewable power to create positive impacts. We believe CFP will greatly contribute to solving various issues in emerging countries such as decarbonisation, and we are pleased to invest in this fund.”

CFP is targeting climate infrastructure investments in select countries in Asia, Latin America, and Africa. Investments will cover grid-connected and distributed renewable power generation; energy efficiency in residential, commercial and industrial sectors; transmission or energy storage solutions; and ultra-low emission or electrified transportation and mobility services.  

“The CFP’s objective, to invest in a diversified portfolio of climate infrastructure in emerging markets, can help bring about positive environmental and social impact in line with the United Nations’ Sustainable Development Goals. This fits squarely with our aims at Standard Chartered to mobilise finance to where it matters most,” says Simon Cooper, CEO of Corporate, Commercial & Institutional Banking and CEO, Europe & Americas, Standard Chartered Bank.

“We are honoured to collaborate with this group of likeminded organisations from the public and private sectors to raise initial capital that will be used to help unlock the energy transition in emerging markets through the Climate Finance Partnership,” said Edwin Conway, global head of BlackRock Alternative Investors.