The UN-convened Net-Zero Asset Owner Alliance has issued a call to asset managers to collaborate in driving the development of blended finance vehicles, with the aim of drastically ramping up investment in climate solutions.
One working area of the Alliance is focused on financing transition of the real economy, which focuses on identifying priority investment segments to scale-up climate solution investments and technologies for tomorrow. Blended finance de-risks investments in climate solutions and market segments that for now do not have the appropriate risk-return profile to attract large-scale institutional capital. They allow public financiers and other donors to use a small amount of their own resources as a first loss to mobilize large amount of private capital to reach large number of underlying climate projects needed.
Alliance members will work with a number of select asset managers to design vehicles that meet certain core criteria and support them in refining their strategy to fit institutional investors’ needs.
Capital flows to required climate projects and respective investment vehicles must be aligned with the net-zero transition and asset owners’ fiduciary duty with regards to attractive risk-return profiles. The Alliance is looking for blended finance vehicles at least in the range of $300-500 million and open to both its members and non-members.
All vehicles must also: focus on climate solution investments; invest in financially viable and sustainable underlying business models; have strong risk (downside) mitigation mechanism for private investors; be suitable for large institutional investors in their set up; be managed and executed by experienced and established fund managers; and not hamper other SDG goals and/or follow high ESG standards.
While engagement is crucial to the process of moving away from a carbon-intensive economy, so too is Financing Transition of the real, as laid out in the 2025 Target Setting Protocol published in January.
Guenther Thallinger, Alliance Chair and Member of the Board of Management Allianz SE said:
“We need to ensure asset managers are supporting us in achieving our climate-related targets. Asset management must change and fully incorporate these climate-related targets. Our interactions from the Request for Proposal (RFP), to mandate definition and then to performance dialogues will cover climate impact.”
UNEP FI Head Eric Usher said:
“The accelerating climate crisis and the need to support developing countries overcome the challenges of investing in climate solutions means it is now even more imperative that blended capital is delivered in a climate-smart and net-zero-compatible manner. Through the work of the Alliance’s Financing Transition workstream, and through this call to action, the Alliance is helping ensure this happens at the required scale and pace.”
Fiona Reynolds, CEO PRI, said:
“We will not achieve the target of net zero by 2050 without investments in climate solutions and in the new technologies that will power the green economy of the future. The finance sector has an essential role to play in scaling up investment opportunities. Asset owners are looking for investment solutions and wanting to work with innovative fund managers to design the investment vehicles of the future. Without the investment community, the transition to a zero-carbon future, will not happen with scale or the urgency that is required.”
Follow this link for more information and to submit your proposal.
Members of the UN-convened Net Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years; and iii) to regularly reporting on progress.
Oliver Wagg, Communications Lead, Net-Zero Asset Owner Alliance