The Net-Zero Asset Owner Alliance, a UN-convened, international coalition of institutional asset owners, representing nearly $5 trillion in AUM, announced today a call on asset managers to help facilitate a drastic increase in investment in climate solutions, through the development of blended finance vehicles.

According to the OECD, blended finance attracts commercial capital towards projects that contribute to sustainable development, while providing financial returns to investors. Blended finance vehicles are de-risking instruments that enable investors to invest in certain types of investments that have high perceived risk profiles, such as new climate mitigation-related technologies. The instruments are designed to attract large-scale institutional capital, allowing public financiers and other donors to use a small amount of their own resources as a first loss to mobilize large amount of private capital to reach large number of underlying climate projects needed.

UNEP FI Head Eric Usher said:

“The accelerating climate crisis and the need to support developing countries overcome the challenges of investing in climate solutions means it is now even more imperative that blended capital is delivered in a climate-smart and net-zero-compatible manner. Through the work of the Alliance’s Financing Transition workstream, and through this call to action, the Alliance is helping ensure this happens at the required scale and pace.”

The alliance stated that its members will work with a number of select well-designed vehicles that meet the certain criteria and support them in refining their strategy to fit institutional investors’ criteria, possibly by raising public capital and providing own capital. Criteria for the vehicles include a focus on climate solution investments, investing in financially viable and sustainable underlying business models,  a strong risk mitigation mechanism for private investors, suitability for large institutional investors, management by experienced and established fund managers; not hampering other SDG goals and following high ESG standards.

Fiona Reynolds, CEO PRI, said:

“We will not achieve the target of net zero by 2050 without investments in climate solutions and in the new technologies that will power the green economy of the future. The finance sector has an essential role to play in scaling up investment opportunities. Asset owners are looking for investment solutions and wanting to work with innovative fund managers to design the investment vehicles of the future. Without the investment community, the transition to a zero-carbon future, will not happen with scale or the urgency that is required.”