• Climate Investor Two surpasses $1 billion target to become the largest adaptation infrastructure fund in emerging markets.
• Backed by $190 million in new commitments and a €205 million EU guarantee under the EFSD+ program.
• New Bridge-to-Bond model enables bond investors to access adaptation infrastructure assets for the first time.
The Hague-Based Climate Fund Managers Closes Landmark Adaptation Fund
Climate Fund Managers (CFM) has closed its second blended finance facility, Climate Investor Two (CI2), at $1.065 billion, making it the largest climate adaptation infrastructure fund dedicated to emerging markets. The fund exceeded its original $1 billion target following $190 million in new investor commitments and a €205 million ($223 million) guarantee from the European Union’s European Fund for Sustainable Development Plus (EFSD+).
The close establishes CFM as a central player in the climate adaptation finance landscape, a field still dramatically underfunded despite rising physical climate risks. CI2 targets water, waste, and oceans infrastructure projects across Africa, Asia, and Latin America—regions most vulnerable to climate change yet least served by capital flows.
Addressing the Adaptation Finance Gap
The United Nations Environment Programme estimates that developing countries face an annual adaptation financing gap of between $194 billion and $366 billion. CI2, created in 2019 with support from the European Commission and the Dutch Fund for Climate and Development (DFCD), seeks to narrow this divide by using blended finance to mobilize institutional and private investment into hard-to-reach markets.
By the end of its investment horizon, CI2 aims to provide safe water and sanitation services to 16.5 million people and restore or protect 2.2 million hectares of ecosystems. Projects already in the portfolio include water distribution systems in Vietnam and the Philippines, desalination facilities in Thailand and Kenya, and waste-to-energy plants in Sierra Leone, South Africa, and Thailand.
The fund also participated in Ecuador’s $1.6 billion debt-for-nature swap—the world’s largest—helping secure long-term conservation finance for the Hermandad Marine Reserve and the Galápagos Islands.
Innovation in Climate Finance
A defining feature of CI2 is its Bridge-to-Bond mechanism, developed with strategic partner Sanlam Investments of South Africa. The structure involves a bridge loan from Sanlam Alternative Investments, backed by an EU guarantee, that will later be refinanced through a climate bond issuance. This approach effectively opens the fund’s asset base to fixed-income markets, inviting institutional bond investors into the adaptation space.
Andrew Johnstone, CEO of Climate Fund Managers, said the new model “demonstrates investor appetite for adaptation and our ability to structure compelling opportunities in this space.” He added that climate adaptation must “stand on equal footing with mitigation in the global response to the climate crisis.”
Mark Moorhouse, Executive Head of Infrastructure Finance at Sanlam Alternative Investments, called the partnership a step toward “creating bespoke opportunities that deliver sustainability for investors, communities, and the planet.”
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Institutional Strength and EU Backing
The EU guarantee was enabled by CFM’s attainment of “Pillar Assessed Entity” status with the European Commission—a distinction previously limited to European development finance institutions and multilateral development banks. This recognition allows CFM to manage EU guarantees directly and positions the firm to play a larger role in implementing the EU’s Global Gateway and Team Europe initiatives.
The fund’s governance and operational standards were key to securing participation from a broad mix of investors, including DFIs, multilateral banks, pension funds, insurers, and asset managers.
Expanding the Blended Finance Model
CI2 operates through two linked vehicles: a Development Fund that provides concessional capital and technical assistance for early-stage project preparation, and a Construction Equity Fund that deploys commercial capital during the build phase. The structure allows risk-tiering and crowding-in of private capital while maintaining developmental impact.
Since its first close in 2021, CI2 has already committed $339 million to 25 projects. Its blended model builds on CFM’s first facility, Climate Investor One, which financed renewable energy projects worth roughly $1 billion across Africa, Asia, and Latin America.
In February, CFM launched Climate Investor Three, targeting $750 million to $1 billion for energy transition and green hydrogen investments. Together, the three vehicles demonstrate a maturing pipeline of climate finance instruments designed to align private capital with adaptation and mitigation outcomes.
Global Context
The CI2 close arrives amid growing recognition that adaptation finance remains the weakest link in global climate funding. While mitigation efforts dominate investment flows, the physical impacts of climate change—from water scarcity to waste management crises—are accelerating in developing regions.
By blending concessional and commercial finance, CFM’s approach provides a replicable model for addressing systemic market barriers. For policymakers and institutional investors alike, CI2’s success signals an emerging asset class in climate adaptation infrastructure—one that could be scaled through further partnerships with multilateral institutions and sovereign investors.
As capital markets continue to search for climate-aligned yield, CI2’s Bridge-to-Bond structure may offer a blueprint for integrating resilience projects into mainstream portfolios—an essential step toward bridging the global adaptation gap.
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