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FSDAi Commits $19.5m to Three Funds

Staff writer
Sept. 5, 2023, 9:46 p.m.
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FSD Africa Investments (FSDAi), the investing arm of FSD Africa, has announced investments totalling $19.5m in Acre Impact Capital’s Export Finance Fund I, Catalyst Fund and Camco’s Spark Energy Services. 

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FSD Africa Investments (FSDAi), the investing arm of FSD Africa, has announced investments totalling $19.5m in Acre Impact Capital’s Export Finance Fund I, Catalyst Fund and Camco’s Spark Energy Services. 

The investments will support climate adaptation and climate-aligned infrastructure projects in Africa and to promote the continent’s resilience to climate change.

Anne-Marie Chidzero, CIO, FSD Africa Investments, said:“For Africa to achieve a green economic growth pathway, access to green finance needs to be scaled up. Our mission is to enable investments to flow by taking more risk and working with local intermediaries to bridge the gaps in the current financing structures.  We are backing these three funds, which provide innovative ways to finance businesses which will make a big contribution to Africa’s green economy.”

FSDAi has invested $12m in Acre Impact Capital’s Export Finance Fund I, the first to address the lack of commercial debt financing for sustainable infrastructure projects guaranteed by official Export Credit Agencies (ECAs). 

Financing from ECAs reduces the cost of debt and makes infrastructure projects more affordable. However, in order to access ECA support, project sponsors have to make a down payment of ~15% of the project value using commercial debt which is increasingly scarce. 

FSDAi’s investment in Acre will facilitate the flow of ECA finance for social and green infrastructure, mobilising $67m directly related to FSDAi’s investment, providing improved access to essential services for over 500,000 people and generating over 2,000 jobs.

FSDAi has committed $4.5m in Catalyst Fund, a pre-seed venture capital fund and accelerator that will invest in and provide hands-on venture building support to tech start-ups that aim to improve the resilience of climate-vulnerable communities across Africa. 

The investment will help demonstrate venture building as an investible model that can accelerate the growth of climate-smart businesses in Africa with a target of creating or accelerating 40 businesses and helping 5m individuals and households to adapt to the effects of climate change.

In addition, FSDAi has allocated $3m into Spark Energy Services (Spark), which is designed and managed by climate and impact fund manager Camco to provide financing to captive solar and energy efficiency developers in Sub-Saharan Africa. 

The platform seeks to address the lack of financing available to developers of smaller scale projects by innovatively aggregating small projects to reduce transaction costs and diversify risk. 

FSDAi’s investment in Spark will support a just transition and achieve local development benefits by facilitating a 0.61m MtCO2e (million metric tons of carbon dioxide equivalent) net reduction in greenhouse gas emissions, working in partnership with local developers, creating 1,400 jobs and providing a lower cost, reliable and clean power supply to commercial and industrial SMEs.

FSDAi makes investments in support of ‘innovative’ financial instruments, facilities and intermediaries that can accelerate the role of finance in Africa’s green economic growth. 

It is funded through UK International Development from the Foreign, Commonwealth & Development Office (FCDO).

One of FSDAi’s distinctive features is its mandate to take significant investment risk. FSDAi fills an important funding gap by assuming the commercial risk of novel financial solutions that neither development finance institutions nor private investors are prepared to take.

Andrew Mitchell, UK Minister for Development, said: “The climate finance projects we announced demonstrate the strength of our commitment to Africa’s green future. UK leadership is determined to unlock the funding needed internationally to drive forward the green agenda. Our ambitions can only be realised through partnership and cooperation, with Africa and the international community. We are stronger together – and we go far when we go.”

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