The government on Wednesday confirmed it made a $25m (€22.6m) contribution to the climate finance vehicle.
The Green Earth Impact Fund was first and has a target size of $250m. The fund is financed by the Luxembourg state and other public bodies with the purpose of generating investment inflows from the private sector. Global investment manager Schroders and impact investment specialist BlueOrchard manage the fund.
Luxembourg’s minister of finance, (DP), described the first fund closure as “a significant milestone in our efforts to achieve sustainable growth and build carbon-neutral and resilient economies in emerging markets”.
The fund benefits from a de-risking mechanism, called a first-loss investment, which seeks to attract investment from private sector actors that would otherwise deem the fund too risky to invest in.
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Backes added: “By setting up the Green Earth Impact Fund and providing a first-loss investment, Luxembourg underlines its commitment to mobilise private and public capital to help finance a more sustainable future.”
The Green Earth Impact Fund is the latest initiative led by the grand duchy that use both public and private money to bolster private sector investment to combat climate change. The Luxembourg International Climate Finance Accelerator and Luxembourg-EIB Climate Finance Platform are examples of other strategic public investments made by the Luxembourg government to crowd in private sector money.