Climate Fund Managers raised close to $1.1 billion for its second blended finance vehicle – potentially the largest climate adaptation infrastructure fund for emerging markets.
Climate Investor Two will finance water, sanitation and marine infrastructure in Africa, Asia and Latin America. The fundraise comes as more frequent extreme weather events push adaptation up the investor agenda.
Investors in the second fund include the Nordic pension fund KLP, IMAS Foundation, Dutch life insurance company Aegon, and BNG Bank. Public funders included the European Commission, the Dutch Fund for Climate and Development, the Green Climate Fund, the Nordic Development Fund and SwedFund.
Sanlam Alternative Investments provided a bridge loan, backed by a guarantee from the EC, that will eventually be refinanced with a climate bond, allowing institutional fixed-income investors to access the fund’s portfolio.
The raise “is a major milestone that highlights investor appetite for adaptation and our ability to structure compelling opportunities in this space,” said CFM’s Andrew Johnstone.
Since its first close in 2021, the fund has deployed $339 million in 25 projects, including a debt-for-nature swap that restructured Ecuador’s sovereign debt in exchange for conservation commitments in the Galápagos Islands.
Public-private
Established in 2015 as a joint venture between Dutch development bank FMO and Sanlam InfraWorks, Climate Fund Managers draws on public and private capital for climate infrastructure.
Its second fund uses a three-tier structure to derisk projects, from early planning through construction and operations. A donor-based development fund provides up to 50% of early-stage financing through flexible loans and technical assistance to help projects become investment ready.
A construction equity fund, representing roughly $1 billion, supports up to 75% of construction costs via equity using donor, commercial and institutional capital.
A refinancing fund is in the works to provide long-term debt to operational projects, allowing the fund to recycle capital into new investments.
Climate Fund Managers is raising its third fund, which will be focused on the global energy transition and green hydrogen sectors in emerging markets.
