British International Investment (BII), the UK's development finance institution, has announced a landmark anchor investment in the Allianz Credit Emerging Markets (ACE) fund, a $1 billion blended finance vehicle aimed at accelerating climate-focused investments across emerging economies.
The fund, launched on Monday at BII's London offices, is designed to support the goals of the Paris Agreement by mobilising private capital for climate and sustainable development projects, particularly in the Global South.
Under the structure, development finance institutions (DFIs) and multilateral development banks (MDBs) will provide $150 million in concessionary capital to the junior tranche of the fund.
This first-loss capital is expected to reduce volatility and de-risk investments, enabling private investors to contribute up to an additional $850 million, subject to the fund reaching its $1 billion final close target.
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BII will contribute $40 million of the concessionary capital and is joined by Global Affairs Canada, Inter-American Development Bank Invest (IDB Invest), the Swedish International Development Cooperation Agency, and Impact Fund Denmark (IFDK).
The announcement marks the fund's first close, with total commitments currently standing at $690 million. Allianz SE and GastroSocial Pensionskasse are serving as anchor investors in the senior tranche.
Once fully raised, ACE is expected to become one of the largest blended finance funds globally, reflecting renewed investor interest in structures that align varying risk, return and impact expectations across public and private capital.
UK Minister for International Development and Africa, Baroness Chapman, said the investment reflects a shift in how the UK approaches international development.
"BII's participation in the ACE fund shows how we are modernising development finance by working as partners and investors," she said, adding, "By using government support to crowd in private capital, we are ensuring that every pound invested delivers greater impact for countries tackling the climate emergency, while also generating returns for UK taxpayers."
BII Chief Executive Leslie Maasdorp said the initiative underscores the institution's commitment to using limited public capital strategically.
"We must deploy our scarce concessionary capital to unlock the vast pools of private finance required to address the climate crisis and drive sustainable growth in some of the world's least developed countries," he said.
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The ACE investment is BII's third under its £100 million mobilisation facility launched in 2024. Previous commitments include an anchor investment in the Pentagreen Green Investment Partnership for sustainable infrastructure in Southeast Asia, and a blended finance partnership with BlueOrchard aimed at unlocking life insurance capital for climate finance.
Edouard Jozan, Head of Private Markets at Allianz Global Investors, said the fund demonstrates the power of public-private collaboration.
"Addressing climate change cannot be limited to developed markets," he said. "ACE is a bold step in mobilising institutional capital to deliver both competitive returns and measurable positive impact in emerging economies."
Approximately 40 per cent of ACE's disbursements will be directed to Africa--significantly higher than comparable blended finance funds--while the remainder will be invested across other emerging regions. Target sectors include renewable energy, clean transportation, agriculture and financial services.
