British International Investment (BII), the UK’s impact investor and development finance institution, has announced that it will be an anchor investor for the Allianz Credit Emerging Markets (ACE) fund.

The blended finance fund, which was launched on January 19 at BII, in London, brings together a number of public and private institutions.

Development finance institutions (DFIs), such as BII, and multilateral development banks (MDBs), will provide $150-million of concessionary capital for the junior tranche of the fund.

In a media statement, BII says this will significantly reduce volatility and support the return expectations for private investors, who will provide up to a further $850-million if the expected final close target of $1-billion is reached.

BII says it will provide $40-million of the $150-million and will be joined by Global Affairs Canada – the development agency of Canada; the Inter-American Development Bank Invest; the Swedish International Development Cooperation Agency; and Impact Fund Denmark.

BII says the announcement marks the first close of the fund, which has, so far, secured $690-million in commitments. Allianz and GastroSocial Pensionskasse will be the anchor investors for the senior tranche of the fund.

BII notes that the ACE fund is set to become one of the largest blended finance funds raised to date, signalling a renewed appetite for structures which bring together a range of investors with different return and impact expectations.

"BII’s participation in the ACE fund demonstrates how we are modernising our approach to international development, by working as partners and investors.

“We are using UK government support to attract more private investment to create a bigger impact – ensuring every pound we invest generates much more funding for countries in the Global South to tackle the climate emergency.

“This approach helps Britain too, boosting growth, bringing in investment and returns for UK taxpayers and positioning us as a key hub for helping emerging economies,” says UK Minister for International Development and Africa Baroness Jennifer Chapman.

“At BII, we recognise that we must use our scarce concessionary capital to unlock the vast pools of private finance that is required to meet the global challenge of the climate emergency and drive sustainable, impact-led growth in some of the least developed countries in the world. Today’s announcement is another milestone for BII in achieving that key objective,” adds BII CE Leslie Maasdorp.

BII’s investment in the ACE fund is the third to be announced through its £100 mobilisation facility, launched by UK Prime Minister Sir Keir Starmer in 2024.

The first announcement was for an anchor investment in the Pentagreen Green Investment Partnership, to support green and sustainable infrastructure projects in South-East Asia.

The second was a partnership with BlueOrchard on a blended finance fund designed to unlock life insurance capital for climate finance.

“Addressing climate change cannot be focused solely on investing in developed markets – launching ACE is a bold step forward in mobilising institutional capital to address global development priorities including climate.

“This strategy is a great example of the strength and power of collaboration between the public and private sectors and the significant potential for further scale in this asset class. Leveraging our longstanding partnerships with DFIs and MDBs, we aim to deliver investors with both attractive returns and measurable positive outcomes,” says AllianzGI head of private markets Edouard Jozan.

About 40% of the disbursements from the ACE fund are intended to be made in Africa, a figure that is notably higher than other blended finance funds of this type.

BII notes that the remainder will be split across emerging economies in other regions. Investments will be made across a range of sectors including renewable power, clean transportation, agriculture and financial services.