European Climate Foundation Annual Report 2018

Sustainable finance

To minimise the worst impacts of climate change, there is an urgent need to speed up investment in clean energy technologies and other decarbonisation solutions. Besides public and philanthropic funding, it is critically important to shift private capital into climate-related investments, particularly in emerging markets where energy demand is rising, capital markets are less developed, and perceived political and regulatory risk is often high. The Climate Finance Partnership (CFP), launched in 2018, will feature a flagship blended finance private equity fund that will mobilise top-tier institutional capital investment for the first time into climate-related sectors in emerging markets. By showcasing the power and catalytic role of government and philanthropic capital, the fund will help build momentum in the institutional investor community to commit additional funds to climate-related vehicles.

The political landscape

Interviews with more than 70 governments, development-finance institutions, foundations, asset managers and institutional investors confirmed a clear need for new climate finance models, and guided the creation of the CFP. Simply put, while many public and private banks are beginning to shift lending from carbon-intensive projects to climate-friendly investments, the scale and speed of this transition do not meet the urgency of the climate crisis.

In early 2018, the CFP was formally endorsed by the Blended Finance working group of the Task Force on Philanthropic Innovation, which had been launched by French President Emmanuel Macron at the One Planet Summit in 2017. The ECF and the Aligned Intermediary developed the program throughout the summer, leading to a public announcement of the partnership at the One Planet Summit in New York City in September 2018. Partners to the announcement included the governments of France (French Development Agency) and Germany (Ministry of Environment); the Hewlett, IKEA, and Grantham foundations; and BlackRock, the world’s largest asset manager. Partners have committed to work together to design and operate an innovative new climate finance program—technically, a blended finance vehicle—which will invest in renewable energy, energy efficiency, energy storage and low-carbon and electrified transportation in Latin America, Asia and Africa with the goal of finalising technical terms of the partnership by the end of the first quarter of 2019.

Articles sustainable finance

Jim Barry

Creative collaboration is key to advancing low-carbon infrastructure projects in emerging economies, and BlackRock Real Assets is honored to work with the Climate Finance Partnership to work to mobilize private capital for these important projects. BlackRock has helped clients seize opportunities in the global energy transition since 2011. Now, as one of the largest managers of renewable infrastructure assets in the world, we believe this initiative marks an important step forward in the advancement of low carbon investing worldwide.

Global Head of BlackRock Real Assets

Our work

Foundation and government partners of the CFP will provide up to $100 million in concessionary capital, or impact-focused investments that yield lower returns below market rates. This funding is contingent on BlackRock mobilising at least four times that amount of private capital. When combined, this will result in a fund with a capital mobilisation ratio rate several times higher than the average rate of current blended finance vehicles in the market. The concessionary funds will effectively serve to unlock the resources and breadth of much wealthier institutional investors and ensure that each dollar of public and philanthropic capital has an outsized impact on unlocking climate solutions. Furthermore, concessionary investors will be rewarded for their higher-risk position in the fund with a disproportionate share of the fund’s upside performance. Thus, the CFP provides a unique and innovative mechanism for foundation and government investors to recycle  returns from these loans into additional climate finance opportunities. By selecting BlackRock as the fund manager, CFP partners are encouraging the world’s largest asset manager and its institutional investor clients to deploy capital into climate-related investments in emerging markets, while providing a powerful and replicable demonstration effect for funds to follow. When it launches, the CFP will be a leading example of the power of partnerships in achieving shared climate finance objectives.

Larry Kramer

Climate change is an enormous threat, and we need to start implementing solutions now to save lives, to safeguard our future, and to secure the work we do in virtually every other area of our philanthropic work. Mobilizing institutional capital is a key part of the solution, and we are proud to be a partner in the Climate Finance Partnership to test new mechanisms to move capital at the necessary scale.

President of the William and Flora Hewlett Foundation
Other highlights

EU climate leadership

National mobilisation

Europe's global leadership