In a first-of-its-kind private credit fund financing, the Asian Infrastructure Investment Bank (AIIB) has approved a US$100 million investment into the ADM Capital Elkhorn Emerging Asia Renewable Energy Fund targeting small and medium-sized enterprises (SMEs) and projects operating in the renewable energy and energy efficiency sectors across emerging economies in Asia.

According to AIIB, smaller companies and projects in the renewables industry face a financing gap because larger banks and financial institutions do not traditionally provide them loans due to their size, complex risk profile and their need for a structured financing solution.

“Our participation in this fund demonstrates to potential institutional investors the compelling opportunities in financing smaller companies working in the renewables sector in emerging Asian countries,” says AIIB director general for banking Dongik Lee.  

Given the fund’s focus, the investment is also in line with AIIB’s target of investing 50% of its annual direct financing into projects linked to climate change mitigation by 2025, Lee adds.

The fund, which has a target size of US$500 million, is expected to improve electricity access and security, promote energy efficiency and help reduce the carbon intensity of electricity supply of AIIB’s regional members.

Climate finance accounted for 39% of total financing approved by AIIB in 2019, up from 35% over the previous three years combined.