Shell, IFC back clean energy debt fund’s $30m first close

The fund, which will continue to raise more capital, will finance off-grid energy projects mainly in Africa and Asia.

The Shell Foundation and the International Finance Corporation (IFC), the investment arm of the World Bank, are anchor investors in a new clean energy debt fund managed by Switzerland’s responsAbility Investments, PDI sister title, low carbon energy investor, reported. 

The fund, which has just reached a first close on $30 million, is also being backed by Skopos Impact Fund and the Adolf H. Lundin Charitable Foundation. The Shell Foundation is providing a $2 million first loss piece for it, while the IFC is investing $10 million in the senior debt portion of the fund.

The Swiss asset manager says it plans to raise more money for the vehicle, but a spokeswoman declined to comment on its final target.

Primarily targeting Africa and Asia, the new debt fund aims to help develop off-grid energy solutions, mainly using solar technology, in emerging markets. It will do so by providing loans of between $500,000 and $3 million to companies and manufacturers that want to commercialise these off-grid solutions, but have difficulty securing “debt financing as they usually lack the track-record and collateral required by local lenders,” responsAbility said in a statement.

The majority of the loans will have tenors of between 9 to 24 months and target 8 percent to 10 percent returns. The fund will also be complemented by a technical assistance facility supported by the Swiss State Secretariat for Economic Affairs.

“Energy costs are a heavy burden for low-income people who do not have access to the electricity grid,” commented Alzbeta Klein, IFC global director of manufacturing, agribusiness and services.

In Africa, for example, households are currently spending between $50 and $150 annually on energy sources such as kerosene or disposable batteries for torches. However, the market for portable solar lights has been growing at some 90 percent annually over the last four years, as the cost of solar technology continues to decline sharply.

“This fund is not only serving a critical need in the market, but […] we also look forward to the fund providing validation to the wider investor community that this market segment is indeed creditworthy,” added Simon Desjardins, portfolio director for the Shell Foundation.