Climate Fund Managers (CFM), a climate-focused blended finance investment manager, closed its second blended finance facility, Climate Investor Two (CI2), at $1.065 billion. The fund blends public and private capital to invest in and co-develop water, waste and oceans infrastructure in emerging markets, including low-income countries, across Africa, Asia and Latin America.
With new commitments of $190 million plus a €205 million EFSD+ guarantee from the European Union, CI2 surpasses its initial $1 billion target and CFM said it is the largest climate adaptation infrastructure fund focused on emerging markets globally.
The United Nations Environment Program estimates the adaptation finance gap in developing countries at $194–366 billion per year. CI2 was formed in 2019 in partnership with the European Commission and the Dutch Fund for Climate and Development (DFCD) to help close this gap through blended finance. By the end of its life, the fund aims to provide safe drinking water and improved sanitation to 16.5 million beneficiaries and to protect or restore 2.2 million hectares of ecosystems.
The close marks the introduction of a Bridge-to-Bond mechanism which includes a bridge loan from strategic partner Sanlam Alternative Investments of South Africa, supported by a guarantee from the European Commission. The bridge loan is envisaged to be taken out by a climate bond within a few years. This mechanism creates a pathway for fixed income markets to access CI2’s underlying asset base, representing a breakthrough for CFM in mobilizing institutional bond investors for its funds.
“While climate mitigation remains critical in the race to end the climate crisis, adaptation must be an equal priority,” said Andrew Johnstone, CEO of CFM. “Closing Climate Investor Two at more than $1 billion in a challenging environment is a major milestone that highlights investor appetite for adaptation and our ability to structure compelling opportunities in this space.”
CI2’s blended finance structure enables investment across the project lifecycle from development to construction. The facility comprises a Development Fund, providing concessional capital and expertise for early-stage project development to reduce risk, and a Construction Equity Fund – a tiered facility accommodating both public and private investors’ risk-return profiles during asset build-out.
CI2 is supported by a diverse investor base including development finance institutions, multilateral finance institutions, public sector banks and institutional investors, including asset managers, pension funds and insurers.
Since its first close in 2021, CI2 has committed $339 million to 25 climate adaptation and mitigation projects across Africa, Asia and Latin America. These include water supply and distribution projects in Vietnam and the Philippines, water desalination projects in Thailand and Kenya, waste-to-energy platforms in Sierra Leone, South Africa and Thailand; and the world’s largest debt-for-nature swap in Ecuador to secure long-term funding for the Hermandad Marine Reserve and the Galápagos Islands.
The fund builds on the success of Climate Investor One (CIO), CFM’s first blended finance fund focused on renewable energy infrastructure. CIO is a $1 billion facility that has financed a portfolio of solar, wind and hydroelectric projects across Africa, Asia and Latin America. In February, CFM launched its third blended finance fund, Climate Investor Three (CI3), a $750 million-1 billion target facility focused on the energy transition and green hydrogen.
