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Allianz Global Investors has raised $650 million for a climate-focused blended finance fund, on its way to a $1 billion target.
Allianz Credit Emerging Markets Fund was unveiled at an event at British International Investment’s offices in London on Monday.
About 40 per cent of the disbursements from the fund will be made in Africa, with the remainder split across emerging economies in other regions. Target sectors include renewable power, clean transportation, agriculture and financial services.
Development finance institutions have provided a combined $150 million: Global Affairs Canada, BII and IDB Invest are junior investors, while Impact Fund Demark and the Swedish International Development Cooperation Agency have provided first loss guarantees.
The other $500 million raised so far has been committed by Allianz, AllianzGI’s parent insurer, and Swiss pension fund GastroSocial Pensionskasse.
Scaling challenges
Blended finance is often cited as a vital tool to mobilise capital to solve environmental and social problems in emerging markets. And yet, raising capital at scale has proven difficult: a lack of standardisation means that the time and resources required to develop bespoke structures often prove prohibitive.
BII and consulting firm BCG sought to address this last year, and identified five archetypes of blended finance vehicles, breaking down the structure, type of relevant investor, waterfall and possible variations for each.
Should the ACE fund reach its target, it will be one of very few blended finance vehicles to hit the $1 billion mark. Climate Fund Managers held a final close on $1.06 billion for its Climate Investor II Fund last year. The SDG Loan Fund, a joint venture between AllianzGI and FMO Investment Management, closed on $1.1 billion in 2023.
AllianzGI’s head of sustainable and impact investing, Matt Christensen, encouraged his peers to increase the “speed of vintage formation” in his closing remarks on stage.
“Rather than [raising a new fund every] four years, [raise one] every two years. So let’s say in 18 months, can we be in this room with a $2 billion fund?” he added.