British International Investment (BII), the United Kingdom’s development finance institution, has officially stepped in as an anchor investor in a groundbreaking blended finance initiative linked to Allianz Global Investors. The fund, known as the Allianz Credit Emerging Markets (ACE) Fund, is targeting a total of $1 billion in capital to support climate-related and sustainable investment in emerging economies.
Blended finance uses public and concessionary capital to de-risk investments, thereby attracting private investors into areas they may otherwise avoid due to perceived risks. It has become an increasingly important tool for mobilising private capital toward development and infrastructure finance, particularly in markets where traditional investment flows are limited.
The structure of the ACE Fund is designed to bring together a range of public and private investors. Development finance institutions like BII and others will provide $150 million of concessional capital for the junior tranche, which absorbs some of the initial risk for other investors. Private investors are expected to provide up to $850 million if the fund reaches its full $1 billion target.
At the fund’s first close, a total of $690 million in commitments has already been secured, with Allianz and Swiss pension fund GastroSocial Pensionskasse serving as anchor investors for the senior tranche. Around 40% of the fund’s disbursements is planned for Africa, with the remaining capital spread across other emerging economies, including investments in renewable energy, clean transport, agriculture, and financial services.
UK Minister for International Development and Africa, Baroness Chapman, said:
“BII’s participation in the ACE fund demonstrates how we are modernising our approach to international development, by working as partners and investors.”
She added that this collaborative method is designed to draw more private investment into projects that tackle the climate crisis, amplify impact, and generate returns that benefit both emerging economies and UK taxpayers.
Leslie Maasdorp, Chief Executive of BII, stated:
“At BII we recognise that we must use our scarce concessionary capital to unlock the vast pools of private finance that is required to meet the global challenge of the climate emergency and drive sustainable, impact-led growth in some of the least developed countries in the world.”
For its part, AllianzGI’s Head of Private Markets, Edouard Jozan, emphasised the fund’s wider purpose:
“Addressing climate change cannot be focused solely on investing in developed markets, launching ACE is a bold step forward in mobilising institutional capital to address global development priorities including climate.”
By using public funds to absorb initial risk, blended finance vehicles like ACE aim to encourage private capital flows into emerging markets, a key requirement for meeting global climate goals and addressing infrastructure gaps. Experts estimate that trillions of dollars are needed annually to achieve the United Nations Sustainable Development Goals, and blended finance is seen as a way to help close that gap by improving risk-adjusted returns for investors.
The ACE Fund’s blended finance model reflects a growing trend where development institutions and private investors work together to catalyse investment in sectors that contribute both to climate solutions and to broader economic growth. Projects in clean energy, sustainable agriculture, and responsible financial services can help stimulate job creation, increase productivity, and build resiliency in emerging economies over the long term.
Blended finance is also intended to help change perceptions about investing in emerging markets, which many investors traditionally view as too risky. By offering structures that include first-loss protection and other risk mitigation tools, funds such as ACE can deliver competitive expected returns while aligning with environmental and social outcomes.
