Open Society invests US$25mn to boost global climate projects

NEW YORK—The Soros Economic Development Fund (SEDF), the impact investment arm of the Open Society Foundations, is committing $25 million to Allied Climate Partners (ACP)—a new and innovative public-private partnership focused on increasing the number of bankable climate projects in emerging markets and developing economies around the world.

ACP aims to address a critical financin gap at the early, risk-oriented stages of the development process. Without this support, many projects and businesses struggle to attract the necessary capital to achieve their climate-related goals. While early-stage project development represents the smallest portion of the overall funding needed for a project (approximately 5 percent), relatively few early-stage projects get financed due to risk. Even though 5 percent of the capital can unlock 95 percent, this early-stage capital is the hardest to raise for critical activities like technical and environmental assessments, modeling, permitting, and land acquisition. 

Using funds from SEDF and other philanthropic investors, ACP will anchor a number of regional funds in Southeast Asia, Africa, Latin America and the Caribbean, and India with $235 million first-loss junior equity. These regional funds will in turn seek to raise an additional $600+ million in senior equity from multilateral development banks (MDBs), development finance institutions (DFIs), and private investors.

ACP has strategic partnerships with a number of leading MDBs and DFIs, including the International Finance Corporation (IFC), a member of the World Bank Group, U.S. International Development Finance Corporation (DFC), British International Investment (BII), the U.K.'s DFI and impact investor, the African Development Bank (AfDB), Proparco, a subsidiary of Agence Française de Développement Group, FMO, the Dutch Entrepreneurial Development Bank, and IDB Invest, a member of the Inter-American Development Bank Group.

Philanthropic investments in ACP are expected to mobilize a significant level of third-party capital into regional investment managers and climate-related projects—potentially as much as $11 billion in additional investment.

SEDF has partnered with the Three Cairns Group, Bezos Earth Fund, Sea Change Foundation International, and several other philanthropic and investment partners in making this commitment.

Georgia Levenson Keohane, CEO of the Soros Economic Development Fund, said: “This innovative SEDF investment builds on Open Society’s broader work to support the mobilization of development finance and commercial capital critical for financing a just climate transition in the Global South.”

ACP recently announced the anchoring of its first regional fund—the Southeast Asia Clean Energy Fund II. Managed by Clime Capital, the fund is targeting at least $135 million to invest in projects in Vietnam, Indonesia, and the Philippines—countries that account for about 75 percent of the region’s population and 60 percent of current regional greenhouse gas emissions.

Mark Malloch-Brown, president of the Open Society Foundations, said, “The scale of investment needed to drive climate transition and adaptation in Global South economies clearly goes far beyond the capacities of private philanthropic funding. We are excited about this model which seeks to use catalytic funding to remove barriers, and help kick start the broader systemic shifts the world urgently needs.”

“We urgently need innovative blended finance solutions that can operate at scale,” said Ahmed Saeed, CEO of Allied Climate Partners. “ACP welcomes SEDF’s commitment to join this exciting endeavor to leverage the power of philanthropic funding.”

Estimates of how much additional capital countries will need to invest annually to address the costs of climate transition and adaptation vary—one recent study puts the need for external capital at $1.1 trillion per annum. However, investment in transition and adaptation projects globally has been overwhelmingly focused on the industrialized economies, where project risks are lower.