London-based investment manager Acre Impact Capital, which focuses on infrastructure in emerging markets, has secured fresh investment as it looks to narrow a daunting US$100B financing gap in Africa.
The company announced in early May it had secured catalytic investment from The Rockefeller Foundation and GuarantCo, which is part of the Private Infrastructure Development Group (PIDG) and is funded by the governments of the UK, Switzerland, Australia and Sweden.
Acre Impact Capital partners with both commercial lenders and export credit agencies (ECAs) to support growth-stage infrastructure projects in Africa and give underserved communities access to essential services.
The involvement of ECAs helps minimise the risks associated with infrastructure projects in emerging markets while delivering risk-adjusted market-rate returns to private sector backers, it says.
The value of the investment has not been disclosed, but the company says it will be used to bolster its growth plans and support the launch of multiple private debt impact funds focused on the export finance market.
Target sectors include healthcare, education, transport, renewable energy and digital infrastructure, as well as water, sanitation and waste management.
“Our funds invest in a commercial loan tranche of approximately 15% of each transaction, which needs to be in place before an ECA can provide a guarantee on the remaining 85% of the debt,” says Acre Impact Capital founding partner Hussein Sefian.
“Lack of bank funding on this commercial tranche – which has worsened since the beginning of the Covid-19 pandemic – prevents the completion of many otherwise bankable transactions.
“By providing funding for this tranche, our funds will unlock transactions, mobilise up to US$5.6 of private sector capital for each dollar invested, and provide institutional and impact investors with exposure to a new asset class: export finance loans.”
In a paper published in June last year, Acre Impact Capital says that “remarkable” capital mobilisation ratio far outstrips that of multilateral development banks’ private sector operations, which it says deliver an average of US$2 for every US$1 invested.
By broadening its activities, the company hopes to narrow an infrastructure financing gap in Africa it estimates to stand at over US$100B a year, Sefian adds.
GuarantCo chief executive Lasitha Perera says the investment shows the strength of public and private investment working towards a common goal.
“Blended finance can mobilise commercial sources of finance” in support of the UN sustainable development goals, he says.
Maria Kozloski, senior vice-president of innovative finance at The Rockefeller Foundation, adds that leveraging the ECA market helps “mobilise large-scale capital and address the huge financing gap for emerging market infrastructure”.