By Simon Jessop and Sinead Cruise
LONDON (Reuters) – A BlackRock-backed <BLK.N> group aims to raise an initial $500 million for a private equity fund that will invest in climate change-linked infrastructure upgrades in emerging markets.
The group will provide the first $100 million of funding for the Climate Finance Partnership (CFP), which was set up in 2018 along with France, Germany and the Hewlett and Grantham charitable foundations, it said in a statement on Wednesday.
The funding will go toward a first-loss tranche that will absorb any initial losses, a safety net for other institutional investors that BlackRock expects to help it raise at least another $400 million.
The CFP fund will be invested in renewable energy, energy efficiency, energy storage solutions and ultra-low and electric transport. At least a quarter of the investments would be made in Africa, with the rest in selected countries in Southeast Asia and Latin America, BlackRock said.
The venture is part of a wide-ranging overhaul of the way BlackRock, the world’s biggest asset manager, is responding to the issue of climate change, as part of a broader commitment to environmental, social and governance-related investing.
Climate has also been at the forefront of this year’s annual World Economic Forum in Davos, Switzerland, at which news of the planned initial fund-raising was announced.
Finding novel ways to encourage accelerated investments has been a theme at Davos, and on Wednesday a separate $500 million United Nations-backed initiative also announced a plan to help achieve the UN’s Sustainable Development Goals, ‘SDG500’.
The money raised will target businesses in the agriculture, finance, energy, education and healthcare sectors across many of the regions worst-hit by climate change.
As with the CFP fund, the coalition of private and public sector organizations will also provide a first-loss layer for those investing in the project, which will provide exposure to six funds managed by asset manager Bamboo Partners.
In a recent annual letter to the thousands of companies in which BlackRock holds stakes, Chief Executive Officer Larry Fink said the need to act on climate was “particularly urgent” given many cities were not built to withstand “the new climate reality”.
France and Germany will both invest $30 million of the initial funding, while the William and Flora Hewlett Foundation and the Jeremy and Hannelore Grantham Environmental Trust have pledged $10 million and $7.5 million, respectively.
The CFP members have pledged to help raise the additional seed capital for the fund. BlackRock will also provide an as yet undetermined amount.
(This story corrects “BlackRock” to “Group” in second bullet point; fixes typo in final paragraph)
(Editing by Christian Schmollinger and Alex Richardson)