The Green Climate Fund’s equity investment in ICRF is its largest single equity investment in Africa to date. The investment was approved at the GCF Board’s 35th meeting, which just ended. This historic transaction also marks GCF’s largest commitment to an Africa-wide multi-country program, allowing AFC to pioneer the introduction of climate-resilient infrastructure as a new asset class in the African investment landscape.
The ICRF is an innovative finance instrument established to climate proof Africa’s infrastructure by integrating scientific climate-resilient measures in the planning, design, development, construction, and operation of infrastructure assets in accordance with the Paris Agreement on climate change. It has a target fund size of $750 million.
AFC Capital Partners will finance greenfield and brownfield infrastructure through the ICRF in a way that anticipates, prepares for, and adapts to the continent’s changing climate conditions. ICRF will collaborate with AFC to invest in opportunities that meet the Fund’s climate mandate and investment criteria, with a focus on climate-resilient transportation and logistics, energy systems, economic zones, and telecommunications and digital infrastructure.
“ICRF is a pioneering fund that will catalyze the development of climate-resilient infrastructure across Africa,” said Yannick Glemarec, Executive Director of the GCF. The Global Climate Fund’s first-loss anchor investment in ICRF will encourage African pension funds and other private investors to invest in climate-resilient infrastructure as a new asset class in Africa. It will also serve as a model for climate finance engagement by local banks and financial institutions. I’m thrilled that GCF and AFC are collaborating on GCF’s largest equity investment in Africa to date.”
The GCF’s US$240 million equity investment will cover the incremental costs of integrating adaptation and climate-resilient measures into climate-proofing infrastructure, reducing the risk of commercial institutional investors participating in large-scale funding mobilization. GCF has committed an additional $13.7 million in grant funding.
By incorporating concessional capital into the Fund, the ICRF will attract commercial capital to climate-resilient infrastructure projects in Africa, with the GCF’s first-loss position encouraging the flow of private capital to climate-resilient infrastructure investment opportunities. The ICRF will specifically target institutional investors such as African pension funds, sovereign wealth funds, and insurance companies.
“AFC, with our valued partners at the Green Climate Fund, are opening up an entirely new asset class that will prove transformational in changing the way infrastructure is planned, developed, and constructed in a new climate change scenario,” said Samaila Zubairu, President & CEO of Africa Finance Corporation. We are leveraging a massive untapped pool of institutional capital to provide large-scale climate finance to bridge Africa’s infrastructure gap and unleash its economic potential. The GCF’s participation in the ICRF as an anchor investor will catalyze a diverse investor base of patient commercial capital providers, including African pension funds, with a long-term horizon and familiarity with Africa-specific perceived risk.”
Rising temperatures, infrequent precipitation patterns, flooding, and other extreme weather patterns pose a threat to critical existing and yet-to-be-built infrastructure in Sub-Saharan Africa, a region already challenged by a lack of infrastructure in terms of quantity, quality, and accessibility. Climate change also exacerbates pre-existing investment barriers, threatening economic growth and development in key regions.
The issue of financing climate-resilient infrastructure in Sub-Saharan Africa amounts to a financial summit of investment barriers that few private investors are willing to scale at the moment. To address this, GCF will provide junior first-loss equity to stimulate additional financing from private sector investors and pension funds.
The ICRF promotes the development of climate-resilient infrastructure projects in a region that is struggling to secure such funding on its own. The GCF’s investment is expected to benefit up to 50 million people directly and 144 million people indirectly by 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 countries targeted by the ICRF.
