The investing arm of FSD Africa, FSD Africa Investments (FSDAi), announced a $19.5 million commitment to assist infrastructure projects in Africa that are climate-aligned and climate-adaptive in order to advance the continent’s climate programs.
The new commitment, which includes $12 million in Acre Impact Capital’s Export Finance Fund I, is the first to address the lack of commercial debt financing for sustainable infrastructure projects that are backed by authorized Export Credit Agencies (ECAs), the organisation claims.
It claimed that financing from ECAs lowers the cost of debt and increases the affordability of infrastructure projects.
However, project sponsors must use commercial finance, which is becoming increasingly limited, to pay a down payment of 15% of the project value in order to get ECA support.
Through the mobilization of $ 67 million directly related to FSDAi’s commitment, FSDAi’s investment in Acre would allow the flow of ECA financing for social and green infrastructure, improving access to key services for more than 500,000 people and creating more than 2,000 jobs.
FSDAi invests in ‘new’ financial tools, infrastructure, and middlemen that can hasten the contribution of finance to Africa’s green economic growth. The Foreign, Commonwealth & Development Office (FCDO) of the United Kingdom provides funding for it.
Its mandate to assume considerable investment risk is one of FSDAi’s distinguishing characteristics. By taking on the commercial risk of innovative financial solutions that neither development finance institutions nor private investors are willing to assume, FSDAi fills a critical funding vacuum.
Speaking on the situation at the just finished Africa Climate Week Summit in Nairobi, Kenya, Anne-Marie Chidzero, the Chief Investment Officer of FSD Africa Investments, said: “For Africa to achieve a green economic growth pathway, access to green finance needs to be scaled up. Our mission is to enable investments to flow by taking more risks and working with local intermediaries to bridge the gaps in the current financing structures. We are backing these three funds, which provide innovative ways to finance businesses that will make a big contribution to Africa’s green economy.”
UK Minister for Development Andrew Mitchell also spoke about the investments, saying: “The climate finance projects we announced demonstrate the strength of our commitment to Africa’s green future. UK leadership is determined to unlock the funding needed internationally to drive forward the green agenda. Our ambitions can only be realized through partnership and cooperation, with Africa and the international community.”