The Gaia Africa Climate Fund has been selected as one of five funds to be accelerated by the International Climate Finance Accelerator in Luxembourg (ICFA).
Being selected by the ICFA entails that the Gaia Africa Climate Fund – which was launched in July 2021 – will benefit from a financial award, training, access to a range of investor platforms and guidance on best practice.
According to Renier de Wit, Managing Director of Gaia Fund Managers: “Gaia is absolutely thrilled to be selected as an ICFA cohort winner in 2021. The award accelerates the establishment of Gaia Africa Climate Fund in Luxembourg, ensuring this dream becomes a reality for the Gaia team. Gaia has significant value to bring to the African sustainable infrastructure market and to investors from developed markets seeking to invest on the African continent. With this award, we are a number of steps closer.”
Gaia’s Africa Climate Fund seeks to raise $200 million with a target return of 15% per year over a 10-year period, explains De Wit. The first round of funding aims to raise $50 million by the end of June 2022 or earlier. “The fund addresses both a structural sector need, in filling a secondary financing funding gap, and provides investors with access to African infrastructure as an asset class,” says De Wit.
A strong pipeline of projects exists that require exits in order for developmental capital to be recycled. The Gaia Africa Climate Fund has identified 116 projects with a clean electricity-generation capacity of 4.4 GW in sub-Saharan Africa. Of these, the fund has identified 68 priority projects in 12 countries with a generation capacity of about 2.2 GW. These countries include Kenya, Botswana, Tanzania, Ghana, Senegal and Cameroon among others.
Contrary to developing a robust greenfield African infrastructure portfolio that can take many years before it pays regular dividends and requires both significant patience and conviction in the strategy, the secondary market offers the ability to fast track a diversified portfolio with immediate or near-term dividend payments.
De Wit adds: “In addition to timing, the secondary African infrastructure market allows for improved risk-adjusted returns by enabling the manager to invest in prior vintage years, select assets with a proven track record across geographies and technologies with the added benefit of manager value-add through the optimisation of the project’s balance sheet and operational functions.”
Says Stephan Peters, Managing Director of the ICFA Luxembourg: “Secondary market funds are an essential part of the project finance cycle, providing exits for primary investors and project developers, as well as recycling capital for risk-averse institutional players. By investing in the creation of this much-needed secondary market, we believe the Gaia Africa Climate Fund has the potential to play an important role in enhancing the access to clean energy in Africa.”
The ICFA Luxembourg is a public-private partnership set up by 10 private entities from the Luxembourg financial sector together with the duchy’s Ministry of Finance and Ministry of the Environment, Climate and Sustainable Development. The ICFA Luxembourg receives support from the European Investment Bank.
“The ICFA is an exceptional initiative generating verifiable impact and catalysing capital towards environmental as well as social change,” reveals Peters. “Over the past three years, the programme has supported 18 first-time or second-time climate fund managers, which are expected to raise well over €1 billion in assets under management. The programme remains at the cutting edge of innovative climate finance and corresponds well to the needs of aspiring climate fund managers.”
