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First close announced for BlueOrchard/Luxembourg blended finance fund   

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Published on: April 20 2023

The Green Earth Impact Fund is seeking to attract up to $250m of investment in fund aiming to close the public-private financing gap for sustainable investments. 

The fund of funds strategy designed to increase the flow of capital to private equity, sustainable real assets and private debt funds| Photo by metamorworks on iStock

Impact investor BlueOrchard has announced the first close of the $250m Green Earth Impact Fund (GEIF), a blended finance initiative, alongside Schroders, and Luxembourg’s Ministry of Finance, which has provided a $25m commitment.  

BlueOrchard, which is part of the Schroders Group, will be the investment manager. Schroders will act as alternative investment fund manager providing risk and other services for the fund. GEIF, which was initiated by Luxembourg’s finance ministry, is following a fund of funds strategy designed to increase the flow of capital to private equity, sustainable real assets and private debt funds.  

The GEIF is seeking investments from institutional investors in a portfolio of funds targeting sustainable and impact investments in climate mitigation, climate adaptation, and the protection of water and biodiversity. It provides de-risking mechanisms, including first-loss protection. In doing so, the partners hope to strengthen the sustainable finance ecosystem by closing the public-private financing gap by attracting capital from both public and private sectors. 

“GEIF investors will have the opportunity to benefit from the fund’s risk-mitigating blended finance structure, a diversified portfolio of fund investments, and a thorough investment selection and impact assessment process,” Philipp Mueller,  BlueOrchard’s chief executive, said. 

Yuriko Backes, Luxembourg Minister of Finance, said the blended finance partnership was a good  example of how public and private sectors could work together to drive meaningful impact. 

“By setting up the GEIF and providing a first-loss investment, Luxembourg underlines its commitment to mobilise private and public capital to help finance a more sustainable future”, she said.  

The fund aims to make investments contributing to its impact goals across diverse geographic regions and asset classes, while making “competitive returns” for investors. The 12-year fund is targeting an internal rate of return of 10-12% net of fees. 

GEIF qualifies as an Article 9 fund, the greenest category under the EU’s Sustainable Finance Disclosure Regulation (SFDR), according to BlueOrchard. To achieve that classification, the fund is expected to invest at least 90% of its net asset value in investments considered as sustainable under the SFDR. 

The partners say their focus will now move on to capital raising in Luxembourg, the rest of Europe and other international markets. 

BlueOrchard says it has invested in over 105 emerging and frontier markets through a network of over 720 financial institutions over its two decades-plus existence.  

GEIF is the latest in a number of sustainable investment initiatives managed by BlueOrchard since the company was acquired by Schroders in 2019, a move that allowed the boutique investor to benefit from Schroders’ market heft and technology.   

In September 2022, BlueOrchard and German development bank KfW launched their second blended finance fund targeting improved access to affordable climate risk insurance for vulnerable farming communities in the developing world – InsuResilience Investment Fund Private Equity II, which has a target size of $100m.