The Green Climate Fund, GFC, has made its single largest equity investment in Africa to date with its junior first-loss equity investment into ICRF.
This historic transaction, approved at the 35th meeting of the GCF Board that just ended, is also GCF’s largest commitment to a multi-country program that spans all of Africa. It allows AFC to creatively introduce climate-resilient infrastructure as a new asset class to the African investment landscape.
The ICRF is a cutting-edge financial tool created to climate proof Africa’s infrastructure by incorporating scientific climate-resilient measures in the planning, design, development, construction, and operation of infrastructure assets in accordance with the Paris Agreement on climate change. Its target fund size is $750 million.
Greenfield and brownfield infrastructure that is planned, designed, built, and operated in a way that anticipates, prepares for, and adapts to the continent’s changing climate conditions will be financed by AFC Capital Partners through ICRF. With a focus on climate-resilient transportation and logistics, energy systems, economic zones, and telecommunication and digital infrastructure, ICRF will co-invest with AFC in opportunities that meet the Fund’s climate mandate and investment requirements.
ICRF is a trailblazing initiative that will drive the construction of climate-resilient infrastructure throughout Africa,” said Yannick Glemarec, executive director of the Global Climate Fund. African pension funds and other private investors will be encouraged to participate in climate-resilient infrastructure as a new asset class in Africa as a result of GCF’s first-loss anchor investment in ICRF. It will also act as a role model for regional financial institutions and banks looking to participate in climate finance. I’m thrilled that the GCF and AFC are working together on the GCF’s largest equity investment in Africa to date.
The GCF’s US$240 million equity investment will cover the additional costs associated with incorporating adaptation and climate-resilient measures into infrastructure that is climate-proof, reducing the risk associated with commercial institutional investors’ participation and enabling funding mobilization at scale. GCF has made additional grant financing commitments totaling US$13.7 million.
Concessional money from the GCF will be included into the Fund, attracting commercial capital to climate-resilient infrastructure in Africa. This will increase the availability of private finance for climate-resilient infrastructure investment possibilities. The institutional investors that the ICRF will target include insurance firms, sovereign wealth funds, and pension funds in Africa.
AFC and our valued partners at the Green Climate Fund are opening up an entirely new asset class that will prove transformational in changing how infrastructure is designed, financed, and built in a new climate change scenario,” said Samaila Zubairu, President & CEO of Africa Finance Corporation. We are using the sizable untapped institutional capital pool to provide climate finance at scale, filling the infrastructure gap in Africa, and releasing the continent’s economic potential. A varied investor base of patient commercial capital providers, including African pension funds, with a long-term horizon and familiarity with perceived risk peculiar to Africa would be stimulated by the GCF’s commitment as an anchor investor in the ICRF.
Critical existing and yet-to-be-built infrastructure in Sub-Saharan Africa is in danger due to rising temperatures, irregular precipitation patterns, flooding, and other extreme weather patterns. This region is already struggling with inadequate infrastructure in terms of quantity, quality, and accessibility. Moreover, climate change heightens already high investment barriers, endangering regional economic development.
Few private investors are currently ready to scale the financial mountain of investment barriers that make it difficult to finance climate-resilient infrastructure in sub-Saharan Africa. To remedy this, GCF will provide junior first-loss equity in order to spur further funding from pension funds and investors in the private sector.
The ICRF assists a region that is having trouble securing such finance on its own in the construction of climate-resilient infrastructure projects. GCF’s investment is anticipated to provide up to 50 million people with direct benefits and 144 million people with indirect benefits through constructing reliable infrastructure services.
Benin, Cameroon, Chad, Côte d’Ivoire, Democratic Republic of the Congo, Djibouti, Gabon, Gambia, Ghana, Guinea, Kenya, Mali, Mauritania, Namibia, Nigeria, Rwanda, Sierra Leone, Togo, and Zambia are among the 19 nations that the ICRF will target.