The European Investment Bank (EIB) has pledged $40-million to support Acre Impact Capital's private debt fund, aimed at accelerating climate infrastructure investment throughout Africa. 

The funding will be allocated to Acre's Export Finance Fund I, which is the first of its kind to invest in the commercial debt of export credit agencies. This investment aims to stimulate climate-infrastructure projects across Africa. 

The fund's primary focus is to promote various sectors, including renewable energy, healthcare, food and water scarcity solutions, sustainable cities and green transportation. By investing in these areas, the fund aims to address climate change and promote sustainable development in Africa. 

The strategy employed by Acre is aimed at providing an opportunity for both commercial institutional investors and impact investors to participate in climate infrastructure projects in Africa.  

Additionally, this approach will help mitigate market risks and potential significant losses associated with such investments. 

Export finance delivers long-term debt financing guaranteed by official export credit agencies (ECAs). It allows project sponsors to significantly reduce the cost of debt by both obtaining very attractive funding on the ECA-backed financing and obtaining long-term financing of up to 22 years.  

In doing so, ECAs can significantly enhance project affordability for the project sponsor and crowd in private capital, Acre says. 

The new fund invests in shorter-tenor commercial debt tranches, where typically 15% or more of the value of the project needs to be in place before ECAs can support the remaining 85%. 

While commercial banks generally fund the tranche guaranteed by an ECA, the availability of funding on the commercial debt tranche has been increasingly limited, with the situation having worsened since the Covid-19 pandemic. By providing specialist funding for this tranche, Acre’s fund will unlock transactions and could mobilise $5.60 of private sector capital for each dollar invested.  

“The EIB is delighted to partner with Acre Impact Capital and back this unique and innovative fund that aims to both help overcome a critical market gap and mobilise institutional capital for sustainable and impact-focused African infrastructure and enhance gender equality,” EIB VP Thomas Östros says. 

According to Acre CEO Hussein Sefian, the fund will “... advance Acre Impact Capital’s mission to provide access to essential services to underserved communities and contribute to reducing the infrastructure financing gap in Africa, which is estimated to be over $100-billion every year.” 

He adds that the current credit environment creates attractive opportunities for discerning investors, while addressing the urgent need for funding for essential infrastructure projects. 

Acre will gradually increase its presence on the ground through the opening of regional offices.