NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

$40 million EIB backing for Acre Impact Capital’s innovative private debt fund to accelerate climate infrastructure investment across Africa

• EIB commits up to $40 million to Acre Impact Capital’s Export Finance Fund I
• First fund investing in commercial debt of export credit agencies transaction to catalyse climate-infrastructure in Africa
• Fund to support renewable power, health, food and water scarcity; sustainable cities; and green transport
• Innovative strategy provides both commercial institutional and impact investor exposure to climate infrastructure in Africa and mitigates market and significant downside risk

Addressing the urgent need for climate infrastructure investment

Export finance delivers long-term debt financing guaranteed by official export credit agencies (“ECAs”). Export finance 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.

The new fund invests in shorter tenor commercial debt tranches where typically 15% or more of the value of the project which need to be in place before ECAs can support the remaining 85%. Whilst 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 worsening since the COVID-19 pandemic. By providing specialist funding for this tranche, the Fund will unlock transactions and could mobilise $5.6 of private sector capital for each dollar invested.

Thomas Östros, Vice President of the European Investment Bank said: “The European Investment Bank works with leading financial partners to accelerate climate infrastructure across Africa and around the world. 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.”

“We are thrilled to enter into a long-term partnership with the European Investment Bank to 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.” said Hussein Sefian, CEO of Acre Impact Capital. “The current credit environment creates attractive opportunities for discerning investors, while addressing the urgent need for funding for essential infrastructure projects.”

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

Commitment to 2X Challenge

The fund is committed to gender smart investing and seeks to ensure at least 30% of its portfolio of projects meet the 2X Criteria, increasing the number of women represented across its investment portfolio. In addition, Acre Impact Capital commits to promote and maintain gender balance at the fund manager and creating a culture that values diversity and inclusion.

Acre Impact Capital is a recipient of Technical Assistance from United States Agency for International Development (USAID)‘s Scaling-Up Renewable Energy (SURE) programme to support the integration of the 2X Criteria in its investment processes.

Photo courtesy of Karsten Würth.