Carbon Footprint
IFC Backs Brookfield’s $5B Climate Fund with $100M Investment
The International Finance Corporation (IFC), a World Bank Group member, is making a $100 million investment in Brookfield Asset Management’s Catalytic Transition Fund. This fund focuses on climate solutions in emerging markets. It aims to help developing economies shift to cleaner power, reduce emissions, and support long-term sustainable growth.
The IFC is committed to increasing climate finance. This is important for countries that often find it hard to get large funding for green projects.
The investment is part of IFC’s broader effort to expand private capital flows into climate-related industries. Many emerging markets need new infrastructure, updated technologies, and access to clean energy. The Catalytic Transition Fund aims to meet these needs. It directs capital to companies and projects that provide both environmental and economic benefits.
What the Catalytic Transition Fund Aims to Do
Brookfield started the Catalytic Transition Fund to boost investments in areas with little climate finance. The fund targets up to $5 billion in total capital. It focuses on activities that support the energy transition, industrial decarbonization, sustainable living, and new climate technologies.
The $5 billion capital is in line with the scale of investment needed to target clean transition sectors in emerging markets. This is compared to the current annual global clean energy investment of about $1 trillion.
The fund operates across several regions, including South and Southeast Asia, Latin America, Eastern Europe, and the Middle East. These regions represent a large share of global energy demand and industrial activity. However, many countries in these areas face challenges.
They deal with aging infrastructure, limited access to clean power, and rising climate impacts. By investing in these markets, the fund aims to reduce emissions while supporting economic development.
Brookfield has committed at least 10% of the fund’s total capital. This commitment shows that it shares interests with other investors. It also signals confidence in the fund’s long-term potential. The Catalytic Transition Fund had its first close at $2.4 billion in 2024. This shows strong early backing from institutional investors.
The fund’s core strategy is to support projects that can scale quickly and deliver measurable results. It focuses on clean power generation, industrial upgrades, and systems that support energy efficiency. These investments are designed to help companies reduce their emissions and operate more sustainably. They also help improve energy reliability and reduce long-term costs.
Why IFC’s Investment Is Important
IFC’s $100 million investment plays a significant role in strengthening the fund’s ability to reach its targets. IFC is part of the World Bank Group and specializes in supporting private-sector development in emerging markets. When IFC invests in a fund or project, it sends a signal to global investors that the opportunity is sound and that risks can be managed.
Connor Teskey, President of Brookfield Asset Management, commented:
“IFC’s investment in the Fund accelerates our ability to deploy capital at scale into investments that support economic growth, energy security and decarbonization in emerging markets. Combined with Brookfield’s decades of experience in renewable power and transition investing, IFC’s investment and global knowledge will help deliver meaningful impact for emerging markets, investors and the energy transition at large.”
IFC’s participation also helps attract additional private capital. Many investors like climate projects. But they often worry about regulatory stability, currency risks, and short track records. IFC’s involvement reduces these concerns. It shows that experts in development finance have reviewed the fund’s strategy and view it as a credible opportunity.
The fund also uses a blended-finance model. This means it includes capital with different levels of risk and return expectations. One of the anchor investors, ALTÉRRA, has committed around $1 billion to the fund, but with capped returns. This model improves risk-adjusted returns for the other investors, making the fund more attractive.
Blended finance helps fund climate projects in developing countries. It lowers early-stage risk, making investments safer. This financing structure can reduce perceived investment risks by up to 30-50%. Thus, it significantly attracts private capital that might otherwise avoid emerging markets.
Since 2016, IFC has committed over $18 billion in own-account climate-related investments, reflecting its growing focus on sustainable development.
Closing the Climate Investment Gap in Emerging Markets
Emerging markets need far more climate investment than they currently receive. These regions represent ~60% of global emissions but receive around 40% of global climate finance.
Many developing economies still depend heavily on coal, oil, and other fossil fuels. They also face growing energy demand as populations expand and economies grow.
The United Nations estimates that developing countries require $1.3 trillion annually in climate finance through 2030 to meet Paris Agreement goals. This underlines the urgency behind funds like Brookfield’s Catalytic Transition Fund.
Without major investments in clean energy, these countries may struggle to reduce emissions. The lack of investment also limits economic opportunities. Clean power systems, efficient factories, and low-carbon technologies can create new industries and jobs.
The Catalytic Transition Fund seeks to close part of this investment gap. It sends funds to key areas like renewable energy, tech upgrades for industries, and sustainable infrastructure. These projects can lower emissions and increase energy access.
The fund highlights several priority areas, including:
- Renewable power sources, such as solar, wind, and hydro.
- Industrial systems that reduce energy waste.
- Technologies that improve energy storage and grid reliability.
These projects support both climate goals and long-term economic development. Clean energy can lower energy costs over time, reduce pollution, and support new business opportunities.
The IFC estimates that these markets could attract as much as $23 trillion in climate-related investments by 2030. These investments can lower environmental impacts while creating major growth opportunities.
SEE MORE: Goldman Sachs Launches Green Bonds ETF for Emerging Markets
Risks and Challenges That Investors Face
Investing in emerging markets involves risks, including these ones:.
- Political and regulatory shifts: Policy changes can affect power prices, incentives, and project timelines.
- Currency risk: Exchange-rate swings impact returns when revenues are in local currency but costs or debt are in foreign currency.
- Technology risk: New or fast-evolving climate technologies may underperform at scale; require strong technical capacity and supply chains.
- Exit risk: Smaller capital markets and fewer buyers in some emerging markets make exits harder.
- Mitigation measures: Strong governance, portfolio diversification, and IFC’s oversight help reduce overall risk.
Strong governance practices and diversified portfolios can help lower risks. IFC’s participation also adds reassurance that the fund has strong risk management systems in place.
A Path Forward for Scalable, High-Impact Climate Projects
IFC’s $100 million investment in Brookfield’s Catalytic Transition Fund is a major step in expanding climate finance in emerging markets. The fund supports clean energy, decarbonizing industries, and climate tech in various areas.
The fund also lowers risks by mixing private capital with catalytic finance. This approach invites more investors to join in.
Moreover, the initiative supports long-term global climate goals while also promoting economic development. Emerging markets need significant investment to transition to cleaner energy and more sustainable industries. More than 700 million people in these regions still lack access to reliable electricity. Funds like this play a key role in closing that gap.
The Catalytic Transition Fund will succeed with strong project selection, good risk management, and clear results. If it performs well, it may serve as a model for future climate finance efforts in developing economies.
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