UK invests £110m in IFC climate funds

The UK government has invested £110 million ($157 million) into two new commercial funds, aiming to leverage in at least £3 billion of private capital for green investments in developing countries.

Britain has committed £50 million to the Climate Catalyst Fund, which is a private equity fund of funds managed by the World Bank’s International Finance Corporation (IFC), and £60 million in the CP3 Asia fund, a clean-tech fund of funds developed by the UK Department for International Development (DFID), the Asian Development Bank and the IFC, which will be managed by Credit Suisse.

The two investments are among the first moves by the UK’s Climate Public Private Partnership – an initiative to attract major private investment into efforts to tackle climate change and boost economic growth.

The funds will invest in renewable energy, energy efficiency, clean technology, urban transport and the protection of natural resources such as forestry and fisheries, said Michael Haig, spokesman for DFID.

DFID said that every pound provided by Britain “is expected to bring in at least £30 of private capital at the various levels of sub-funds and projects”.

“The mobilisation of the finance and the energy and carbon savings arise because the funds will invest directly in projects and also in sub-funds, which then in turn invest in projects,” it said. 

Haig declined to comment on return expectations, but DFID said that “the funds will be run on a strict commercial basis” and offer “real opportunities for investors”. 

The UK will recycle any profits into official development aid to developing countries.

Britain will also provide a £20 million technical assistance facility through the Private Infrastructure Development Group – a multi-donor organisation with founding members such as the IFC, DFID, The Netherlands Ministry of Foreign Affairs – to support the development of the project pipeline and facilitate pioneering projects, especially in poorer countries, said DFID.

“Developing countries do not need to sacrifice economic growth in the interests of going green. We will support investments that deliver green growth for those who need it,” said Andrew Mitchell, Britain’s international development secretary.

“Private equity is well suited to jump-start climate-friendly investment in emerging markets,” said Lars Thunell, the IFC’s executive vice-president and CEO.

Alongside the UK investment, the IFC's board has approved an investment of $75 million in its Climate Catalyst Fund.

“We hope that the fund will help make the business case for these kinds of investments and encourage additional private sector investment into innovative climate projects,” Thunell said.

Apart from investing in private equity funds, the Climate Catalyst Fund plans to make direct co-investments in early and growth-stage companies that develop technologies to help address climate change.