The United Arab Emirates this week unveiled a $30 billion commitment to a newly launched catalytic climate vehicle, ALTERRA, which is focused on climate change actions and aims to mobilize $250 billion globally by 2030.
The launch of the vehicle was described by COP28 President Dr. Sultan Al Jaber as a “defining moment” in the creation of a new era of international climate finance. Al Jaber will be serving on the ALTERRA board.
COP28 Director-General Ambassador Majid Al Suwaidi will serve as ALTERRA’s Chief Executive Officer. ALTERRA will have a team of specialist climate investment professionals who bring a strong track record of investing. ALTERRA was established by Lunate, an independent global investment manager. Based in Abu Dhabi, the firm invests across the entire private market spectrum including buyouts, growth equity, early and late-stage venture capital, private credit, real assets, and public equities and public credit.
At COP28, ALTERRA introduced BlackRock, Brookfield and TPG as its inaugural launch partners, committing $6.5 billion to climate-dedicated funds offered by the firms.
BlackRock eyes debt, infrastructure investments
BlackRock will invest $1 billion in a private debt strategy and another $1 billion via its infrastructure strategy.
“The launch of ALTERRA will itself not only help mobilize much needed capital to support the transition in the Global South, it can also serve as a blueprint for other sovereigns and private sector actors to replicate, partnering to help unleash the trillions of dollars needed in developed and emerging markets,” said BlackRock Chairman and CEO Larry Fink. “We look forward to bringing our expertise in mobilizing private sector capital to enable its success.”
ALTERRA ACCELERATION, a $5 billion initiative of ALTERRA structured to enhance the risk-adjusted returns available to commercially oriented investors, is committing $1 billion to BlackRock’s Climate Transition-Oriented Private Debt Strategy, an offering launched in October focused on the low-carbon transition that uses a climate transition ratings framework to evaluate and finance a range of middle market companies primarily in Europe and the U.S. that demonstrate climate transition characteristics and are committed to reducing carbon emissions.
Another $1 billion is from ALTERRA ACCELERATION and ALTERRA TRANSFORMATION, the $25 billion component of ALTERRA that is structured to steer institutional capital towards climate investments at scale that have the greatest potential to accelerate the transition to a net-zero and climate resilient economy. This includes a $650 million commitment from ALTERRA Acceleration committed to the BlackRock Global Infrastructure Fund IV and related infrastructure co-investments. Infra IV invests in a diversified portfolio of essential infrastructure assets globally. This commitment to Infra IV reflects the fund’s track record of investing in decarbonization-related businesses globally.
Within that original $1 billion commitment is a $350 million investment in infrastructure in the Global South. ALTERRA ACCELERATION has committed to co-invest $100 million of that alongside BlackRock’s Climate Finance Partnership (CFP), a public-private finance vehicle focused on investing in climate-related infrastructure in emerging markets. BlackRock announced the final close of CFP at COP26 in Glasgow. Its blended finance structure utilized catalytic capital, including from governments and philanthropies, to mobilize institutional capital into climate infrastructure projects in emerging markets. ALTERRA TRANSFORMATION, meanwhile, has committed the remaining $250 million in catalytic capital to a forthcoming BlackRock-managed strategy.
BlackRock already has more than $110 billion transition investing platform offers clients choice across index, active and private markets. It is powered by the firm’s proprietary research, technology and analytics, corporate network, and sourcing capabilities.
Brookfield focuses on energy transition
At Brookfield, a $2 billion commitment was announced for the second Brookfield Global Transition Fund (BGTF II). The fund is Brookfield’s flagship focused on energy transition. The commitment comes from ALTERRA ACCELERATION.
Another mandate is for Brookfield’s Catalytic Transition Fund (CTF), which will have a differentiated and focused mandate. Namely, it will raise and then deploy capital exclusively for emerging and developed markets, with dedicated focus on supporting the four key pillars of COP28’s agenda: Energy Transitions, Industrial Decarbonization, Sustainable Living and Climate Technologies.
The fund will also receive up to $1 billion in catalytic capital from ALTERRA TRANSFORMATION.
CTF will focus on decarbonization initiatives, with an innovative structure that leverages ALTERRA’s financial commitment to attract private sector investment at scale. The fund seeks to mobilize climate finance for markets that are critical to achieving Net-Zero, but which have to date been chronically underinvested. The catalytic investments will be made in South and Southeast Asia, Asia-Pacific, Central Asia, Eastern Europe, Latin America and the Middle East.
Canada’s CDPQ and Singapore’s Temasek have also expressed interest in contributing commercial capital to the fund, subject to their customary approval requirements, officials announced. Brookfield will make up 10% of the fund’s investments.
“The UAE is demonstrating bold leadership in tackling the challenge of raising transition finance for emerging markets and developing economies,” said Mark Carney, chair and head of transition investing at Brookfield Asset Management, in a statement. “The Catalytic Transition Fund is an innovative private sector solution to this imperative which combines institutional capital and Brookfield’s decades of experience in renewable power and transition investing. The UAE’s substantial commitments to our transition investing platform will greatly accelerate progress towards Brookfield’s Net Zero emissions target while supporting vital clean growth initiatives across the globe.”
TPG sees climate opportunity in PE
ALTERRA also announced today a $1.5 billion commitment to the TPG Rise Climate private equity funds, including its new Global South Initiative. TPG is managing the Global South Initiative by encouraging private equity investments in high-growth climate opportunities in the Global South.
ALTERRA TRANSFORMATION will fund a $500 million commitment to innovative catalytic capital. In addition, TPG Rise Climate will channel approximately $1 billion from its TPG Rise Climate II fund to co-invest alongside the initiative. TPG will also raise additional commitments for the Global South Initiative from its broader network of limited partners.
TPG boasts decades of experience investing in such initiatives. In the climate sector alone, TPG has driven over $4 billion of investment in over 20 climate solutions companies across nearly 20 countries in the Global South.
In addition to the Global South Initiative, ALTERRA will commit approximately $1 billion to TPG Rise Climate II from ALTERRA ACCELERATION. Rise Climate’s core climate sector themes are energy transition, green mobility, sustainable fuels, sustainable products and materials, and carbon solutions.
Rise Climate II will build on the initial TPG Rise Climate fund that closed at $7.3 billion in 2022. TPG said it is targeting $10 billion in aggregate commitments across its Global South Initiative and TPG Rise Climate II.
“The combination of the UAE’s substantial commitments and TPG Rise Climate’s extensive experience scaling climate solutions globally has the potential to drive much-needed capital and expertise to the decarbonization challenge,” said TPG Founding Partner and Executive Chairman Jim Coulter, who is also TPG Rise Climate managing partner. “The size and innovative structure of this new initiative will allow us to support a broader opportunity set of ready-to-scale climate companies and projects in the Global South. Working together, we can bring capital at scale to accelerate the transition to a low-carbon economy in the Global South and around the world.”