Development finance institutions are backing a private credit climate finance fund managed by Darby International Capital to help the region’s mid-sized companies to develop low-carbon and climate resilient businesses.
Momentum is building behind the Darby International Capital (DIC) Latin American Fund IV climate-focused fund, targeting a total size of $400m (€368m), with commitments confirmed by a number of development finance institutions (DFIs).
In February, FinDev Canada said it had made a $50m commitment to the fund, while the Development Bank of Latin America and the Caribbean (CAF) said it was contributing $15m. Separately, the Swiss Investment Fund for Emerging Markets (SIFEM), another DFI, said recently it had made a $15m commitment to the fund.
These add to a $50m anchor commitment to the fund by IDB Invest, an arm of the Inter-American Development Bank, first announced in March 2023.
Darby IV is a 10-year, climate-focused debt fund, managed by Washington DC-based DIC, a company founded in 2020 as a spin-out of the Latin American private debt investment team of asset manager Franklin Templeton.
The fund will direct at least 40% of invested capital to climate finance transactions, as well as providing advice to portfolio clients on capacity building to how to mitigate climate risks. It is said to be the first private credit climate finance fund in the Latin America region.
It seeks to mobilise both development finance and private institutional capital to underpin long-term growth financing to enable underserved mid-sized enterprises to develop low carbon and climate-resilient operations across Latin America, while fostering economic growth, job creation and sustainable development.
Jorge Arbache, private sector vice president at CAF, said the investment would “consolidate Latin America and the Caribbean as a region that contributes substantially to reverse climate change and its effects, through greener and more sustainable investments in our countries”.
Access to finance
Darby’s existing regional presence and track record in creating impact would benefit the fund, according to FinDev Canada. This would help support market development and bolster access to financing for mid-sized companies facing difficulties in attracting affordable long-term expansion capital, as well as promoting growth and creating jobs in the region, the DFI said.
SIFEM said the fund would play a pivotal role in providing long-term, senior secured loans to mid-cap companies in Latin America, focusing on infrastructure and logistics, agribusiness, manufacturing, and renewable energy investments.
SIFEM’s portfolio is managed by Zurich-based responsAbility, which recently announced impact investments of its own, in Asia.
