The Hague, Netherlands-based investment firm Climate Fund Managers (CFM) has reached final close on its Climate Investor Two fund, securing $1.065 billion while surpassing its billion-dollar target. The fundraising tally includes fresh capital commitments of $190 million plus an €205 million EFSD+ guarantee from the European Union. Boasting over $2 billion in assets under management and aiming to raise another $6 billion, CFM’s private equity and private credit vehicles are focused on confronting the frontiers of climate change mitigation and adaptation. One pillar in Climate Fund Managers’ mission is for its funds launched by 2030 to “conserve or restore 10 million hectares of ecosystems” while avoiding, reducing or sequestering greenhouse gasses.
Fund Two’s strategy involves directing capital into hard-to-reach markets for water services, sanitation, waste management, and coastal/marine resilience, with a vision to deliver safe drinking water and improved sanitation while protecting or restoring 2.2 million hectares of ecosystems. Through a combination of public and private capital, this emerging markets-focused fund invests in water, waste and oceans infrastructure across Africa, Asia and Latin America. According to CFM, this investment vehicle is now the biggest climate adaptation infrastructure fund focused on emerging markets globally.
Through its hybrid investment model, Fund Two can invest “across the project lifecycle from development to construction,” according to the announcement. This structure includes a Development Fund, which delivers concessional capital and specialized expertise to mitigate risks in early-stage initiatives, alongside a tiered Construction Equity Fund tailored to align with the diverse risk-return preferences of public and private investors during the build-out phase.
This two-pronged approach is designed to de-risk nascent projects while also broadening potential participation to cover a wider swath of investor types. Since its first close in 2021, Climate Investor Two has committed $339 million to over two-dozen adaptation and mitigation projects, including water supply and distribution in Vietnam and the Philippines, desalination in Thailand and Kenya, waste-to-energy platforms in Sierra Leone, South Africa, and Thailand, and a debt-for-nature swap in Ecuador supporting the Hermandad Marine Reserve and the Galápagos Islands.
CFM CEO Andrew Johnstone stated, “While climate mitigation remains critical in the race to end the climate crisis, adaptation must be an equal priority. Closing Climate Investor Two at more than $1 billion in a challenging environment is a major milestone that highlights investor appetite for adaptation and our ability to structure compelling opportunities in this space. With the support of Sanlam Investments and the European Union, we have been able to pioneer the new Bridge-to-Bond mechanism, opening access to climate finance for a much broader group of investors.”
The fund’s closure introduces an innovative Bridge-to-Bond mechanism, spearheaded by CFM partner Sanlam Investments in South Africa. This product features a bridge loan from Sanlam, bolstered by a European Commission guarantee, with plans to refinance it via a climate bond in the coming years. This approach opens doors for fixed-income markets to tap into Fund Two’s asset portfolio, marking a pivot in strategy for CFM in drawing institutional bond investors to its climate-focused funds.
Sanlam Alternative Investments Executive Head Infrastructure Finance Mark Moorhouse said, “As a sustainability-driven asset manager, our purpose is to create long-term sustainability for investors – but also for future generations and our planet. We leverage strategic partnerships to create bespoke opportunities for clients, ensuring that our global reach translates into meaningful, customized investment experiences. Our partnership with CFM since 2017, enables us to respond to the world’s urgent climate crisis, particularly in developing economies. We are proud to have facilitated this innovative and landmark financing model for the close of CI2 and look forward to the impact these funds will have for those who need it most.”
By achieving Pillar Assessed Entity status with the European Commission, an accreditation typically reserved for Europe’s Development Finance Institutions and Multilateral Development Banks, CFM was able to directly manage EU guarantees and further contribute to other EU initiatives. Fund Two follows CFM’s first blended facility, Climate Investor One, and paves the way for Climate Investor Three, a $750 million–$1 billion target fund dedicated to the energy transition and green hydrogen.
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