Sign in
GGC launches to unlock climate financing for EMs: The UK’s GreenGuarantee Company (GGC) — which officially launched last Friday — is leveraging USD 100 mn in seed investments to provide assurances that it hopes will eventually unlock up to USD 1 bn of climate financing for developing countries including Egypt, according to a statement.
What we know: The assurances — which will reduce risk for global investors looking to tap the clean energy sector in emerging markets — will be underpinned by an investment grade rating of BBB/Stable from Fitch Ratings, the statement notes, adding that they “will be provided for institutional investors buying green bonds issued and listed on the London Stock Exchange (LSE) and green loans issued in the private credit market.” The UN’s Green Climate Fund (GCF) was amongst the investors who put money into the fund.
Why does this matter: What GGC does enables emerging markets to access long-term, hard currency climate financing to combat climate change, the statement explains. By helping emerging markets improve the credit ratings of assets to above investment grade, guarantees enable borrowers in developing countries to access a far bigger pool of capital at a lower cost, the company added. In our neck of the woods, Lebanon and Egypt are grappling with an FX crisis, potentially threatening their pipeline of renewables projects. Last week, Egypt saw its currency slip back to record lows against the USD.
GGC’s investors: Alongside GCF, The UK’s Foreign Commonwealth & Development Office through its MOBILIST programme, the Nigeria Sovereign Investment Authority, USAID, Prosper Africa, and Norfund, have contributed to the initial USD 100 mn seed capital.
A step towards just climate financing: The assurances will be offered to companies whose countries’ sovereign ratings typically “trap them” in an-investor repellant bubble that sees them fail to secure long-term debt needed for development projects, GGC co-founder Lasitha Perera told Bloomberg. The GGC will initially prioritize private credit and ensure debt capital for green infrastructure, renewable resources, alternative energy, and clean transportation across countries eligible for official development assistance in Africa, Asia and Latin America, including Egypt, Vietnam, and Kenya, the statement notes.
There’s more: GGC will also support emerging markets in issuing green bonds in the global debt markets, working with borrowers on climate impact disclosures for targeted sustainability-linked listings and loans, the company says.
Eying global debt markets: The GGC will initially focus on private credit and guaranteeing debt capital on LSE’s green bond market, before seeking out private sector funding as a part of a target to shore up a USD 5 bn capacity by 2035 at least, the statement notes. The company is planning to expand beyond LSE to other international stock exchanges as part of its 2035 target.
