By: ThinkBusiness Africa
British International Investment (BII), the UK’s development finance institution, on Tuesday announced a $40 million anchor commitment to a new $1 billion climate fund. Managed by Allianz Global Investors, the Allianz Credit Emerging Markets (ACE) fund is set to become one of the largest “blended finance” vehicles in history, specifically designed to bridge the trillion-dollar gap in global climate financing.
The fund reached its “first close” this week with $690 million already secured. Its primary mission is to de-risk green investments in the Global South, where private capital has traditionally been hesitant to enter due to perceived economic and political volatility.
The ACE fund utilizes a “blended finance” structure, effectively creating a financial safety net for commercial investors.
- The Junior Tranche ($150 Million): BII, along with partners like Global Affairs Canada, IDB Invest, and Sweden’s Sida, provides “concessional” or “first-loss” capital. This money acts as a buffer; if projects fail, this public money is hit first.
- The Senior Tranche ($850 Million): By absorbing the initial risk, the fund makes the investment attractive to major private players. Allianz SE and the Swiss pension fund GastroSocial Pensionskasse have already signed on as senior investors.
In a departure from typical emerging market funds—which often favor more stable Asian or Latin American markets—the ACE fund has committed to allocating 40% of its disbursements to Africa.
The fund will target Renewable Power infrastructures (solar, wind, and grid stability), Clean Transportation (electric vehicle infrastructure and mass transit), Sustainable Agriculture (climate-resilient farming and supply chains), and Financial Services (Helping local banks provide “green loans” to small businesses).
This investment marks the third major deployment from the £100 million Mobilisation Facility launched by UK Prime Minister Keir Starmer in late 2024. The facility was designed to ensure that every pound of UK taxpayer money “works harder” by acting as a magnet for private dollars.
Despite the scale of the ACE fund, it represents just a fraction of the estimated $2.4 trillion needed annually by 2030 for emerging markets to meet Paris Agreement goals.
