At the COP28 climate change conference in Dubai, key asset managers, including BlackRock CEO Larry Fink and TPG Capital founder James Coulter, called for structural reforms that could enhance the flow of funds into the global south and emphasized the importance of private capital for further climate financing.
Private Sector Financing at the Forefront of Climate Financing
In a group discussion including select media, Fink stated that the “catalytic capital pool” provided by Alterra – a $30 billion private investment fund announced at the COP28 climate conference in Dubai on Friday – will allow this private capital to enter developing countries and help them “enhance” their clients.
Establishment of the Alterra Fund
The fund was established by Lunate Capital, a subsidiary of Chimera Investment, which in turn is part of the Royal Abu Dhabi Group, launched and chaired by Sheikh Tahnoun bin Zayed. Lunate Capital was launched in September and oversees $50 billion in assets.
Goals of the Alterra Fund
According to a press release from the organizers, Alterra was described as a “catalytic climate vehicle” when announced by UAE President Sheikh Mohamed bin Zayed on the second day of the UN climate conference. The unique fund aims to improve access to financing for the global south – an informal term used to describe developing or underdeveloped countries in Asia, Africa, and Latin America.
Investments and Partners
The fund’s investments will be directed towards energy transition, decarbonization of industry, sustainable living, and climate technology, according to a joint press release from the organizing partners. Initial partners in the fund include BlackRock, Brookfield Corporation, and TPG.
$30 Billion Commitment
The $30 billion commitment hopes to scale up to $250 billion by 2030 through private sector investors and “close the climate funding gap,” according to the UAE president. Of the total amount, $5 billion is allocated to risk mitigation for those seeking to invest in areas considered high-risk by funders.
Investments in India and Exploring Opportunities in Africa and Latin America
The fund’s latest capital has already been earmarked for investment in clean energy projects in India as part of building a clean energy capacity of 6 gigawatts. The fund and its partners are currently seeking investment opportunities in Africa and Latin America.
Challenges of Investing in Emerging Economies
During the discussion, Fink, who oversees $9.4 trillion in assets, identified rapid changes in governments and policies, defaults, and unstable currencies as some of the biggest concerns in investing in emerging economies.
The Need to Reimagine Financing
Fink stated, “We need to reimagine financing.” Alterra “will transform the skewed structure of parts of the world that have been under-invested,” reiterating his call to governments in 2021 for a stronger financing plan to tackle climate change.
The Role of the Private Sector
ADNOC Group CEO Sultan al-Jaber emphasized that we need to shift from hundreds of billions to trillions of dollars of investment to support mitigation and adaptation efforts to climate change, adding, “We cannot do this without bringing in the private sector.”
Al-Jaber added, “There is a lot of work we need to do to fix the international financial structure to ensure that money flows to these areas. Alterra is the private capital we need to mobilize funds.”
Late on Friday, the UAE pledged $200 million “to support climate resilience in vulnerable countries.” This amount is in addition to the $30 billion Alterra fund and the millions-long damage and loss fund announced on the first day of the climate conference.
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