EIB Commits $40m To Accelerate Climate Infrastructure Investment Across Africa

Posted by Eric Ojo Business News, Latest Headlines Monday, July 17th, 2023

(AFRICAN EXAMINER) – The European Investment Bank (EIB) has approved $40 million to accelerate climate infrastructure investment across Africa.

This is aimed at supporting the Acre Impact Capital’s Export Finance Fund, which invests in climate-aligned essential infrastructure by partnering with leading commercial lenders and export credit agencies.

It will address the estimated $100 billion annual infrastructure financing gap in Africa, driving economic growth and providing essential services for underserved populations.

Acre Impact Capital focuses on four thematic areas strongly aligned with the UN Sustainable development Goals: (i) Renewable Power; (ii) Health, Food and Water Scarcity; (iii) Sustainable Cities and (iv) Green Transportation.

By co-investing alongside export credit agency partners, it aims to achieve risk-adjusted market-rate returns for our investors while mobilising 5.6x private sector capital for every dollar invested.

Acre Impact Capital is supported by The Rockefeller Foundation and GuarantCo, a Private Infrastructure Development Group (PIDG) company. PIDG is an innovative finance organisation funded by the governments of the United Kingdom (UK), the Netherlands, Switzerland, Australia, Sweden, Germany and the International Finance Corporation (IFC).

The move by the EIB is the first fund investing in commercial debt of export credit agencies transaction to catalyse climate-infrastructure in Africa. The fund will support renewable power, health, food and water scarcity; sustainable cities; and green transport

In addition, this innovative strategy provides both commercial institutional and impact investor exposure to climate infrastructure in Africa and mitigates market and significant downside risk

Notably, export finance delivers long-term debt financing guaranteed by official export credit agencies (ECAs). It also allows project sponsors to significantly reduce the cost of debt by both obtaining very attractive funding on the ECA backed financing and obtaining long-term financing of up to 22 years.

In doing so, ECAs can significantly enhance project affordability for the project sponsor and crowd-in private capital.

The new fund invests in shorter tenor commercial debt tranches where typically 15 percent or more of the value of the project which need to be in place before ECAs can support the remaining 85 percent.

Whilst commercial banks generally fund the tranche guaranteed by an ECA, the availability of funding on the commercial debt tranche has been increasingly limited with the situation worsening since the COVID-19 pandemic.

By providing specialist funding for this tranche, the Fund will unlock transactions and could mobilise $5.6 of private sector capital for each dollar invested.

Vice President of EIB, Thomas Östros said the bank works with leading financial partners to accelerate climate infrastructure across Africa and around the world.

Östros noted that the EIB is delighted to partner with Acre Impact Capital and back this unique and innovative fund that aims to both help overcome a critical market gap and mobilise institutional capital for sustainable and impact focused African infrastructure and enhance gender equality.

In his remarks, the Chief Executive Officer (CEO) of Acre Impact Capital, Hussein Sefian applauded his organisation’s partnership with the EIB, adding that the current development creates more opportunities for investors.

“We are thrilled to enter into a long-term partnership with the European Investment Bank to advance Acre Impact Capital’s mission to provide access to essential services to underserved communities and contribute to reducing the infrastructure financing gap in Africa, which is estimated to be over $100 billion every year.

“The current credit environment creates attractive opportunities for discerning investors, while addressing the urgent need for funding for essential infrastructure projects”, he stressed.

The Fund will gradually increase its presence on the ground through the opening of regional offices. Moreover, it commits to promote and maintain gender balance at the fund manager and creating a culture that values diversity and inclusion.