The funding will provide GuarantCo with further capacity to grow its climate change portfolio and diversify its funding base which is currently supported by the governments of the United Kingdom, Switzerland, Australia and Sweden through the PIDG Trust,, and the Netherlands through FMO and the PIDG Trust. The AFD callable funding facility will provide a leveraging of three times, thereby providing GuarantCo with up to a further EUR 300 million guarantee capacity.
Through the provision of a callable funding facility to GuarantCo, this substantial investment by AFD aims to develop climate resilience infrastructure projects that contribute to low-carbon economic development in PIDG markets by mobilising private investment.
Aligned with the PIDG’s climate change approach, climate change projects are an important part of GuarantCo’s origination strategy. This builds on the various portfolio examples of GuarantCo’s pioneering supporting to renewable energy in lower income countries across Africa and Asia.
The purpose of the facility is to develop a portfolio of climate mitigation and adaptation guarantee transactions. GuarantCo will solely allocate the funds to climate change mitigation transactions in its pipeline i.e. transactions that are Paris-aligned: a commitment to support the achievement of the three goals of the Paris Agreement on mitigation, adaptation and finance. GuarantCo has a strong pipeline of those projects and as such the AFD facility aligns with the strategic focus of GuarantCo and PIDG whilst also being aligned to the priorities of GuarantCo’s current funding governments.
Rémy Rioux, CEO at AFD, said: “AFD is proud to support GuarantCo and its innovative business model which contributes to unlock the potential of green financing by facilitating access to long-term local currency credit solutions and mobilising private sector resources. By leveraging up to three times on AFD’s EUR 100 million standby facility, GuarantCo will encourage the low carbon transition of African and Asian economies. Building on the momentum of the Finance in Common Summit, this new cooperation between the AFD group, GuarantCo, the Private Infrastructure Development Group (PIDG) and their companies marks the beginning of a long-term partnership with PIDG to scale-up climate finance and contribute to the achievement of the SDGs.”
Lasitha Perera, CEO at GuarantCo, said: “We are proud that AFD is investing in GuarantCo so we are well positioned to originate more long-term, local currency credit solutions for climate mitigation and adaptation projects across Africa and Asia. Climate change has become a key focus for GuarantCo and will further enhance the impact that we are creating on people’s lives in lower income countries. We are confident that the continued progress and success of GuarantCo will to make a difference to further build local capital markets including through our Blended Knowledge initiative addressing the need for blended finance to support private investment at the scale required to meet the SDGs.”
Philippe Valahu, CEO at the Private Infrastructure Development Group (PIDG), said: “PIDG is fully committed to the goals of the Paris Agreement on Climate Change and to invest in projects that assist countries to transition towards a global net zero carbon economy by 2050. Developing and structuring infrastructure projects that can attract green finance in emerging markets is critical to achieving the SDGs and the Goals of the Paris Agreement on climate change in an equitable manner. We are excited about the new partnership with AFD and joining forces to accelerate progress in this crucial area of work. AFD’s support will not only enable GuarantCo to expand and diversify its portfolio but also provides its counterparties with the reassurance of additional risk capital from another highly-rated sovereign counterparty.”