The EU plans to mobilise €20bn in private capital for sustainable infrastructure in emerging markets and developing economies (EMDE), through a new blended finance vehicle.
The European Commission has partnered with development banks on the Global Green Bond Initiative (GGBI) Fund — one of the biggest public-private partnerships in the space to date.
It will be seeded by €1bn in catalytic capital from banks including KfW, European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), which will be invested on a first-loss basis, but in turn be protected by guarantees from the EU.
That €1bn will then be invested into bonds that finance sustainable infrastructure in EMDEs, which the Commission hopes will also encourage pension funds and other institutional investors to participate in those deals too.
Additionally, the new fund will issue its own notes to private investors – to the tune of €2bn — serviced by the coupon payments from its underlying portfolio of bonds.
The intention is therefore to have €3bn of assets in the fund, alongside leveraging private capital into third-party EMDE deals, which the Commission estimates will result in combined investments of €20bn into sustainable infrastructure.
It will also provide technical assistance to potential issuers, to bolster the flow of credible deals.
The concept of the fund comes from a recommendation to European policymakers from an advisory group including experts from Nordea, AP2, Allianz and Amundi.
In 2024, they told the Commission to set up a blended finance vehicle focused on green bonds in lower-income countries.
It now sits under the EU’s Global Gateway Initiative – Europe’s version of China’s Belt & Road Initiative – which is focused on investing in strategic overseas infrastructure.
Amundi has been appointed to run the fund.
