Climate Finance Partnership mobilizes $673 million to accelerate net zero transition in emerging markets
BlackRock has achieved a $673 million final fundraise for the Climate Finance Partnership (CFP), a flagship public-private finance vehicle focused on investing in climate infrastructure across emerging markets in order to help accelerate the global transition to a net zero economy.
A global consortium of 22 investors including governments, philanthropies, and institutional investors committed to the fundraise, which was oversubscribed and exceeded its target of $500 million.
The BlackRock Investment Institute estimates that the world needs to invest US$1 trillion annually into low-carbon projects in developing countries in order to achieve a just transition to a net zero global economy.1 This is because emerging markets account for an increasingly large share of global emissions due to population growth and economic development.
However, in 2020 only a total of US$150 billion was invested in decarbonization in emerging markets, excluding China – a sixth of what is needed. Through the Climate Finance Partnership, the public and private sectors have come together to mobilize significant investment into climate infrastructure in emerging markets that seeks to deliver positive environmental and social impact and allow for attractive risk-adjusted returns.
CFP employs a unique blended finance structure with a total of $130 million in catalytic capital raised from the Governments of France, through the French Development Agency (AFD); Germany, through KfW Development Bank (KfW); and Japan, through Japan Bank for International Cooperation (JBIC); together with the Grantham Environmental Trust, the Quadrivium Foundation, and another private foundation; and multi-energy company TotalEnergies.
This catalytic capital seeks to insulate investment risks for institutional investors in the fund and was used to mobilize a broader institutional fundraise totaling $523 million from investors including AXIS Capital, AP2, AXA, Dai-ichi Life Insurance, E.ON, Finnish Church Pension Fund, Mitsubishi UFJ Morgan Stanley, Mizuho Bank, MUFG Bank, the Richter Family Office, Standard Chartered Bank, Sumitomo Life, and a leading European pension fund. BlackRock committed $20 million to CFP.
“Achieving a just transition to a net zero economy by 2050 requires long-term planning and close coordination between the public and private sectors,” said Larry Fink, Chairman and CEO of BlackRock. “This partnership is proof that governments, philanthropic organizations, and institutional investors can come together to mobilize capital at scale into emerging markets, which are most exposed to the impact of climate change. My hope is that leaders across all segments of society will embrace bold, innovative solutions to help meet the climate financing gap.”
“CFP reflects BlackRock’s commitment to embed sustainability in all parts of the business from index to alpha seeking strategies and all the way to private markets. CFP addresses one of the key challenges of investing in the net-zero transition in emerging markets. This innovative structure, in which each dollar of catalytic funding from public development banks and philanthropy has attracted four dollars of institutional capital, shows the power of public-private innovation in driving clean energy in emerging Asia, Latin America and Africa,” said Philipp Hildebrand, Vice Chairman of BlackRock.
“The success of this fundraise, with participation from some of the world’s leading governments and institutional investors, demonstrates the pivotal role that public finance can play in helping raise private capital for investing in emerging economies, where climate infrastructure investment is needed most,” said Edwin Conway, Global Head of BlackRock Alternative Investors.
CFP will target investments in select non-OECD countries in Asia, Latin America, and Africa. These regions present significant investment opportunities for global investors in climate infrastructure over the coming decades due to significant growth in electricity demand, increasing urbanization and rapid economic development. Renewable energy in non-OECD markets are projected to make up 49% of global energy capacity by 2050, compared to 25% for the OECD renewable market.2 The fund’s focus on the climate infrastructure sector include: grid connected and/or distributed renewable power generation; energy efficiency in residential, commercial and/or industrial sectors; transmission or energy storage solutions; and ultra-low emission or electrified transportation and mobility services.
Helena Olin, Head of Real Assets of AP2, said, “We are excited to work with BlackRock and the Climate Finance Partnership as it offers AP2 the ability to diversify our portfolio for sustainable infrastructure investments in emerging markets with a blended finance structure, while meeting our sustainability goals.”
Pascal Christory, CIO of AXA Group, said, “Climate risk and sustainability issues have become critical investment risks for AXA. Today, we are very excited to partner with BlackRock in this joint effort to steer capital towards climate infrastructure investments across emerging markets. This initiative will contribute to AXA Driving Progress ambition by reducing the carbon intensity of our investment portfolio. We believe that the partnership will be an accelerator in the climate action and a great way to move forward concrete solutions to impact transition efforts across emerging markets.”
Marc Spieker, CFO of E.ON Group, said, “Being a sustainable company means not only focusing our business on sustainable activities but making sustainability the core of everything we do. As a consequence, we also apply the same rigorous mindset in managing our pension assets. By investing into BlackRock’s Climate Finance Partnership fund, capital is allocated to foster growth of renewables in non-OECD countries and thereby making a tangible difference to the energy transition in emerging markets.”
Koji Fujiwara, President and CEO of Mizuho Bank, said, “To achieve a carbon neutral society by 2050, we all should look at the same goals and act now. CFP’s aim to invest in climate infrastructure across emerging markets will help promote decarbonization for the world. We are grateful to take part in CFP’s action, and will proactively fulfill our role as a leading financial institution in an effort to develop a climate resilient society.”
Iwao Matsumoto, Managing Executive Officer of Sumitomo Life Insurance Company, said, “Sumitomo Life is delighted to participate in CFP and contribute to supporting decarbonization in emerging markets as a responsible institutional investor. We believe climate change is an urgent issue that should be addressed across national borders, and we commit to achieving net-zero by 2050 and GHG reduction targets by 2030. Climate change and the development of social infrastructure are one of the focus areas that we find particularly challenging when making responsible investment. CFP fits squarely with our policy and provides appropriate risk and return allocation given its unique structure. We are glad to be contributing to the realization of a sustainable society and potentially enhancing return.”
Naoyuki Hamada, Deputy President and Head of Wealth & Middle Market Business Unit of Mitsubishi UFJ Morgan Stanley, said, “We are proud to play a distribution role in this very innovative initiative, and raise more than US$100 million from a wide range of investors including high-net worth individuals and institutions. Witnessing how the interest in ESG has inspired a desire to invest in illiquid alternative products such as CFP, we realize that providing leading-edge products can help cultivate the future of investing. We remain focused as ever in developing the next generation of investors and contributing to the creation of sustainable portfolios through the advancement of state-of-the-art products.”
Patrick Pouyanné, Chairman and CEO of TotalEnergies, said, “TotalEnergies warmly salutes the final close of the Climate Finance Partnership, under the leadership of BlackRock, which perfectly illustrates the ambition of TotalEnergies to achieve a just transition supplying more affordable, more available and cleaner energy to as many people as possible.”
The Climate Finance Partnership fund is managed by BlackRock Real Assets’ Global Renewable Power team, led by David Giordano, Global Head of Renewable Power. BlackRock Real Assets manages approximately US$12 billion of invested and committed capital in renewable power and over US$40 billion in client assets across all infrastructure strategies spanning equity, debt and listed strategies as of June 30, 2021. The Global Renewable Power platform has invested directly in over 300 projects globally, including onshore wind, offshore wind and solar photovoltaic projects.
