The ARM-Harith Cities & Climate Transition Fund (The ACT Fund) is a unique blended-currency fund that will refinance initial USD climate infrastructure investments with local-currency debt after projects are operational. This approach provides stable long-term returns to local institutional investors, expanding the investment pool for critical urban infrastructure projects and unlocking a virtuous cycle by which refinanced initial USD equity can be reinvested in additional projects. A USD 100 million pilot is planned for Nigeria.
Half of Africa’s population is expected to live in urban areas by 2040, and West Africa is more urbanized than other sub-Saharan countries. However, regional investment in sustainable urban energy and infrastructure projects is constrained by currency and demand risk, as well as creditworthiness challenges facing state and local governments.
The ACT Fund is a fund that will blend US dollar equity with local-currency mezzanine debt to enable project planning and construction, and then refinance the USD equity with local-currency senior debt to attract local institutional capital as projects enter operation and the overall risk profile decreases. The initial USD equity investment will be derisked by a guarantee, first-loss agreement, or other credit enhancement mechanism. The aims of this instrument are to develop the climate infrastructure equity asset class for West Africa and to mobilize local-currency institutional capital at scale. The initial project pipeline is focused on urban energy infrastructure, as well as water treatment and potentially clean cooking.
“There is significant untapped local and international capital available for low carbon infrastructure in Africa’s fastest-growing regions if the unique barriers for each investment class can be removed. The Lab will allow us to optimize the financial instrument, strategically plan the pilot and develop the relevant metrics and measurement of climate change mitigation and adaptation,” – Tariye Gbadegesin, ARM-Harith
The proponents note that there is a 61% projected increase in carbon emissions from the sixty-nine largest cities in Sub-Saharan Africa through 2030. Greening those cities through clean transport, energy efficiency, and waste management could reduce urban emissions in those cities by 50% relative to those projections.
News & Events
The Lab selects six new ideas that create climate investment opportunities for a sustainable economic recovery in emerging economiesMarch 2, 2021
Selected ideas will tackle investment barriers in key sectors across Africa, Asia and Latin America Since 2014, the Lab has incubated 49 ideas that have mobilized USD 2.4 billion to date LONDON – The Global Innovation Lab for Climate Finance (the Lab) has selected six new climate finance ideas for its 2021 acceleration program. In the […]