A partnership with Blackrock to direct investment into greener finance in developing countries

published on 22 January 2020
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The Climate Finance Partnership (CFP) was first announced on 22 January and aims to direct capital into climate-related projects in developing countries. The fund brings together BlackRock, the world leader in asset management, Agence Française de Développement (AFD), the German Ministry for the Environment and the Hewlett and Grantham foundations.

The CFP plans to invest between $500 million and $1 billion in climate change mitigation projects in emerging countries. The funds will be invested in climate infrastructure in Southeast Asia, Latin America and Africa. This includes the production of renewable energy, energy efficiency in residential, commercial and industrial sectors, energy storage, and low-carbon transport services. 

“The challenges linked to climate change require large-scale collective action,” says Rémy Rioux, Chief Executive Officer of AFD. “AFD Group is therefore proud to cooperate with BlackRock, through its private sector subsidiary Proparco, to accelerate the mobilization of private funds for climate action.”

The partnership’s legal structure 

The CFP is structured as an investment fund managed by BlackRock. There will be two types of investors: foundations and donors like AFD and KfW, and private investors. BlackRock will be in charge of making the investment decisions, in accordance with the established investment policy. 

AFD’s role

France and Germany will each contribute $30 million to this partnership. Other donors and foundations, like the Hewlett Foundation and the Grantham Foundation, will also contribute to this tranche, which will reach $100 million. The remaining balance of at least $400 million will be raised by private investors. AFD Group has been identified as the operator capable of implementing this partnership for France.

AFD will provide knowledge of climate issues in emerging countries and expertise in the field: environmental and social expertise, tools for measuring the impacts (carbon footprint assessment) as well as climate taxonomy (project eligibility will be determined based on the Common Principles adopted by multilateral development banks). 

Rigorous standards

This project, like all projects monitored by AFD Group, will be subject to the same environmental, social and governance standards. These standards will apply to BlackRock and any other fund managers.

Through its subsidiary, Proparco, AFD will be part of the fund's consultative committee to ensure the proper implementation of the investment policy. The most important points of this policy that pertain to governments cannot be amended without approval from France and Germany.

Why use public resources?

Blended finance, or the use of subsidies combined with more conventional financial resources, has become a common financing method for attracting private investors that would not typically approach certain countries or impact investment funds due to perceived risks, such as change, the volatility of political and macro-economic environments, and poor financial return.

For public donors, including France and AFD, this is therefore an opportunity for the large-scale mobilization of private savings and the chance for a world leader in asset management to handle investment projects for climate action and to benefit Africa.