British International Investment is the UK’s development finance institution, and it has joined forces with consulting firm Mercer to accelerate the flow of private capital into climate related projects in emerging markets. The partnership will target investment strategies that support the climate goals of these regions.
Addressing the Investment Gap
Excluding China, emerging markets and developing economies face a huge gap to invest in meeting their climate change targets. As reported in 2023 by the Independent High-Level Expert Group on Climate Finance, these countries require a significant amount of about $2.4 trillion (€2.3 trillion) by 2030. Based on risk and uncertainty, four times more investment is expected than the current market levels.
To tackle this gap, BII has launched a £100 million mobilization facility. £50 million is earmarked for innovative climate finance proposals from asset managers with a track record in emerging markets. The goal is to drive private investment to meet these urgent climate needs.
Also read: IFC and HSBC Launch Fund to Boost Sustainable Corporate Bonds in Emerging Markets
The Role of Mercer in Identifying Investment Strategies
Mercer will play a key role in managing the process of engaging asset managers for the initiative. The consulting firm’s role is crucial in identifying the most effective and innovative strategies that can stimulate private capital inflow. A BII spokesperson explained that Mercer’s involvement would help extend their reach and mobilize capital from new asset managers.
BII’s goal is to support proposals that can bring substantial impact, scalability, and sustainability. The proposals will be judged by an expert panel, and between one and three will receive a share of the £50 million funding.
Judging Criteria and Investment Plans
BII aims to use the remaining £50 million of its mobilisation facility for new projects in various sectors and regions. These projects will be explored through BII’s investment channels. Proposals that meet the selection criteria, including potential for significant mobilization and impact, will be prioritized.
In the past two years, BII has already committed more than £1 billion to climate finance, mobilizing nearly £1 billion in private capital into climate projects.
The collaboration between BII and Mercer is a significant step in bridging the financing gap for climate projects in emerging markets. By identifying innovative investment strategies, the initiative has the potential to transform how private capital supports climate goals in developing economies.