Global investment firm Schroders’ impact investment management arm BlueOrchard announced today that it has raised $250 million at the first close of the BlueOrchard Climate Action Mobilisation Fund (BOCAMF), its blended finance fund focused on backing climate mitigation and adaptation in emerging and frontier markets.

According to BlueOrchard, the close comes as available capital remains only a fraction of what is required to meet global climate finance needs, with the new fund designed to help bridge this financing gap by directing long-term institutional capital into climate-related investments, primarily through senior loans to banks, microfinance providers and other financial institutions that provide climate finance to SMEs, complemented by an allocation to direct corporate lending.

Blended finance brings together public or philanthropic capital and private funding through a common investment structure, enabling investors to invest in certain types of investments that have high perceived risk profiles, such as new climate mitigation-related technologies.

BlueOrchard’s BOCAMF strategy focuses on senior loans to banks, microfinance providers and other financial institutions that channel climate finance to SMEs, complemented by an allocation to direct corporate lending. The firm said that the diversified approach enables the fund to target attractive risk-adjusted returns while supporting climate mitigation and adaptation in emerging and frontier markets.

BlueOrchard also announced that the strategy has also received an investment-grade rating from Moody’s Ratings, making it the first blended finance fund in emerging markets to issue notes carrying an investment-grade rating from a leading international credit rating agency.

Michael Wehrle, CEO of BlueOrchard, said:

“By combining BlueOrchard’s 25-year track record in emerging markets private credit with an innovative blended finance structure, including direct corporate lending, we have delivered an investment solution that broadens institutional access to climate finance while meeting the investment and regulatory requirements of insurers and other long-term investors.”

The first close included senior financing in the form of investment-grade notes provided by private-sector institutional investors Aviva Investors and Daido Life Insurance Company, as well as commitments from Schroders, British International Investment (BII) and FinDev Canada.

Lori Kerr, CEO, FinDev Canada, said:

“By creating an investment grade pathway into emerging market climate finance, together, we are supporting climate solutions today while demonstrating a model that can unlock larger flows of capital in the future. That is the promise of blended finance – to turn investor interest into action and expand what the market can achieve.”