A new fund specifically designed to unlock insurance capital to combat the climate emergency in emerging markets has been launched with a view to allowing the UK’s life insurance assets to be utilised.

The fund is a partnership between British International Investment (BII), the UK’s development finance institution and impact investor, British International Investment (BII), and ), global impact investment manager BlueOrchard Finance Ltd.

BlueOrchard is one of the winners of a flagship BII mobilisation initiative, launched earlier this year, that called on the private investment community to help design products to increase the level of investment into climate-related projects in emerging markets.

BII ringfenced at least half of a £100 million mobilisation facility announced by Sir Keir Starmer, the UK Prime Minister at the UN General Assembly last year, for the innovative initiative. As part of the initiative, five organisations were shortlisted following a rigorous evaluation process led by a panel of industry experts. Winners were selected to receive more than £50 million in total.

BII added it is looking to provide a substantial anchor investment to the BlueOrchard Climate Action Mobilisation Fund (BOCAMF), which has a unique capital structure optimised to mobilise insurance investors at scale.

It includes junior and senior equity tranches (both anchored by BII) that enable the Senior Notes tranche to achieve an investment-grade rating and deliver fixed cash flows to insurance company investors.

Leslie Maasdorp, the Chief Executive of BII, said: “The only chance we have of meeting the monumental funding demands of the climate emergency is to mobilise private capital at scale.

“Today’s announcement demonstrates how British development finance, working in partnership with a leading private institution, can forge a new path in getting capital to where it is needed most.”

BOCAMF will primarily aim to provide senior loans to banks, microfinance providers and other financial intermediaries that provide climate finance to SMEs in emerging markets.

BlueOrchard said it is working to secure investments from insurance providers in the Senior Notes tranche and other commercially and impact-minded investors in the senior and junior equity tranches with the aim of a final close targeting more than $250 million.

Michael Wehrle, CEO of BlueOrchard, added: “With an almost 25-year track record, BlueOrchard is a pioneer in impact investing across emerging markets. Meeting investors’ needs and enabling them to participate in impactful investments is one of our top priorities.

“We are pleased to launch this innovative mandate, specifically designed to address the requirements of insurers and other institutional investors internationally. With the award of this exciting mandate, we have a unique opportunity to unlock new sources of private capital for emerging markets through innovative blended finance structures.”

The deal is subject to final BII legal and policy requirements being met.