Explained: what is Alterra, the $30 billion fund launched at COP28?

The UAE on Friday announced the launch of Alterra, a groundbreaking US $30 billion investment fund for transformative climate partnerships at COP28, providing a major impetus to finance the energy transition on the second day of the UN climate summit.

The launch of the investment vehicle is a “defining moment” in the history of global climate finance, said COP28 President Dr Sultan Al Jaber – who will also be the Board Chairman of Alterra.

When was the fund announced?

The creation of Alterra was announced at the opening of the World Climate Action Summit on the second day of COP28 on Friday. “I am pleased to announce the establishment of a $30 billion fund for global climate solutions. This fund is designed to bridge climate finance gap,” President His Highness Sheikh Mohamed Bin Zayed Al Nahyan said in his address to the Summit.

“When we committed to hosting COP28, we pledged to bring the world together to unite, build and to deliver,” he added.

What is the concept of Alterra?

As the largest of its kind investment vehicle, Alterra seeks to bridge the climate financing gap by raising and investing a corpus of up to $250 billion of institutional and private capital by 2030.

In collaboration with BlackRock, Brookfield and TPG as the inaugural launch partners, Alterra has already committed $6.5 billion to climate-dedicated funds for global investments, including in the Global South, according to a COP28 statement. Alterra will work with an increasing number of global partners to mobilise capital from other institutional investors and global entities.

What will be the main focus of Alterra?

Alterra’s main goal will be to focus on climate investments in emerging markets and developing economies, where studies have shown an ever increasing funding deficit. The World Bank estimates that the growing gap to fund the climate transition equates to the difference between the $100 billion annually committed by donor countries and the more than $2.4 trillion needed per year by 2030.

In a separate report, Deloitte said that without concessional finance in developing economies, especially in the Global South, achieving net-zero would cost around $200 trillion in total by 2050. About 70 per cent of those investments would need to be in low and middle-income economies, it said.

How will Alterra be structured?

Against that backdrop, Alterra’s ambition is to become the world's largest private investment vehicle for climate action. The fund will have a two-part structure to support “new ideas, incentivise policy and regulatory frameworks, and identify solutions to deploy capital across the entire value chain of the new climate economy,” it said.

Alterra Acceleration, a $25 billion fund, will provide institutional capital to climate investments at scale, serving as the anchor investor for climate strategies. The $5 billion Alterra Transformation fund meanwhile will help with risk mitigation capital and encourage investment flows into the Global South.

What are the immediate investment priorities for the fund?

The fund noted that its initial capital investment involve more than six gigawatts of new clean energy capacity in India. It is also exploring investment opportunities in Africa with a pipeline of more than five gigawatts of onshore wind and solar PV energy projects, as well as a rural electrification platform in Latin America.

Who will manage the fund?

Alterra will be managed by Lunate Capital, a $50 billion global investment manager, and will be located in the Abu Dhabi Global Market. Managed by a team of climate investment specialists, Alterra will have Dr Sultan Al Jaber as the Board Chairman and COP28 Director General Majid Al Suwaidi as Chief Executive Officer.

“Alterra provides a transformational solution for attracting private capital. Its scale and structure will create a multiplier effect in climate focused investment, making it a vehicle like no other,” Dr Sultan said in his address at the World Climate Action Summit. “Its launch reflects the COP Presidency’s action agenda and the UAE’s efforts to make climate finance available, accessible and affordable.”