BlackRock builds next EM infra strategy
BlackRock is working with “catalytic” investors from its oversubscribed US$673m Climate Finance Partnership fund on a new blended finance strategy for emerging markets climate infrastructure.
Participants in the strategy will also include Alterra, the United Arab Emirates-backed US$30bn vehicle that ranks as the world’s largest private climate investor and aims to mobilise US$250bn of institutional investment into the sector by 2030.
Alterra, which put US$100m from its US$25bn Acceleration arm into co-investment alongside CFP, committed a further US$250m from its smaller US$5bn Transformation unit to the new equity strategy at launch at the United Nations COP28 climate summit in Dubai in November.
Alterra Acceleration also put US$1bn into the Climate Transition-Oriented Private Debt strategy that BlackRock launched last October. This uses a proprietary climate transition ratings framework to select committed emissions reducers among middle market companies, mainly in Europe and the US.
In addition, Alterra Acceleration invested US$650m in BlackRock Global Infrastructure Fund IV – an equity strategy with less emphasis on EM.
Alterra Transformation’s anchor role suggests the new strategy will focus on less developed EM countries. While Alterra Acceleration targets “climate investments at scale that have the greatest potential to accelerate the transition to a net-zero and climate resilient economy”, its sister entity “provide[s] risk mitigation capital to incentivize investment flows into the Global South”, according to Alterra.
In total, 22 governments, philanthropies, and institutional investors participate in CFP, which aimed to raise US$500m originally. The strategy is built around US$130m of catalytic contributions from France, Germany and Japan, as well as the Grantham Environmental Trust, the Quadrivium Foundation and another private foundation, and French oil major TotalEnergies.
The sovereigns invested through Agence Francaise de Developpement, KfW Development Bank and Japan Bank for International Cooperation, respectively.
CFP has now invested the majority of its capital in wind and solar (both utility and distributed) projects in Africa, Latin America and South-East Asia. These include investments in the Lake Turkana Wind Project, the largest operating wind farm in Africa; Cleantech Global, a solar energy developer in the Philippines; Chow Energy, a solar operator and developer in Thailand; Brasol, a Brazilian energy transition company; and Ditrolic Energy, a pan-Asia solar developer.
It is unclear whether the catalytic investors accepted capped returns on their stakes as Alterra does in another blended finance vehicle, Brookfield Asset Management’s US$5bn EM “catalytic transition” fund.
BlackRock said only that the catalytic component “seeks to insulate investment risks for institutional investors in the fund and was used to mobilise a broader institutional fundraise”.
This broader US$523m group included AP2, AXA, Axis Capital, 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, which also put US$20m into CFP itself (seemingly in a non-catalytic role), has not identified which of the vehicle’s catalytic investors will be participating in the new strategy. The firm said it would work with Alterra and “several” of the catalytic group to develop and implement it while also consulting the Global Energy Alliance for People and Planet, the G7 Partnership for Global Infrastructure and Investment and the Shell Foundation on it.