UK-backed $1 Billion fund to transform climate finance in Africa

Africa is set to receive a significant boost in climate finance, with about 40% of disbursements from the newly launched Allianz Credit Emerging Markets fund (ACE) earmarked for the continent.

This allocation is notably higher than other blended finance funds of its kind, underscoring Africa’s central role in tackling the global climate emergency. The remainder of the fund will be directed towards emerging economies in other regions, supporting projects in renewable power, clean transportation, agriculture, and financial services.

British International Investment (BII), the UK’s impact investor and development finance institution, has announced it will serve as an anchor investor in the ACE fund. The $1 billion blended finance initiative was launched in London and brings together a coalition of public and private institutions.

Development finance institutions, including BII and multilateral development banks (MDBs), will provide $150 million of concessionary capital for the junior tranche of the fund. This structure is designed to reduce volatility and support return expectations for private investors, who are expected to contribute up to $850 million if the fund reaches its $1 billion target.

BII itself will contribute $40 million of the $150 million, alongside Global Affairs Canada, the Inter-American Development Bank Invest (IDB Invest), the Swedish International Development Cooperation Agency, and Impact Fund Denmark (IFDK).

The announcement marks the first close of the fund, which has already secured $690 million in commitments. Allianz SE and GastroSocial Pensionskasse will act as anchor investors for the senior tranche.

ACE is poised to become one of the largest blended finance funds raised to date, signalling renewed appetite for innovative structures that unite investors with varying return and impact expectations.

Baroness Chapman, UK minister for international development and Africa, says: "BII’s participation in the ACE fund demonstrates how we are modernising our approach to international development, by working as partners and investors.

“We are using UK government support to attract more private investment to create a bigger impact – ensuring every pound we invest generates much more funding for countries in the Global South to tackle the climate emergency. This approach helps Britain too, boosting growth, bringing in investment and returns for UK taxpayers and positions us as a key hub for helping emerging economies.”

Leslie Maasdorp, chief executive of BII, emphasised the importance of leveraging private capital: “At BII we recognise that we must use our scarce concessionary capital to unlock the vast pools of private finance that are required to meet the global challenge of the climate emergency and drive sustainable, impact-led growth in some of the least developed countries in the world. Today’s announcement is another milestone for BII in achieving that key objective.”

BII’s investment in ACE is the third under its £100 mobilisation facility, launched by UK Prime Minister Sir Keir Starmer in 2024. Previous announcements included an anchor investment in the Pentagreen Green Investment Partnership in South-East Asia and a partnership with BlueOrchard on a blended finance fund designed to unlock life insurance capital for climate finance.

Edouard Jozan, head of private markets at AllianzGI, highlighted the global scope of the initiative: “Addressing climate change cannot be focused solely on investing in developed markets – launching ACE is a bold step forward in mobilising institutional capital to address global development priorities, including climate.

"This strategy is a great example of the strength and power of collaboration between the public and private sectors and the significant potential for further scale in this asset class. Leveraging our longstanding partnerships with DFIs and MDBs, we aim to deliver investors with both attractive returns and measurable positive outcomes.”

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