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UAE caps its returns from Alterra: The UAE has struck an agreement with BlackRock and alternative asset firm TPG to retain a lower percentage of the proceeds from the USD 30 bn climate fund Alterra with the aim of drawing in more investors to the ESG investment vehicle, Bloomberg reported, citing a person familiar with the terms of the agreement. With the UAE capping its own returns from the fund, other investors will receive about 5% of additional returns, raising their overall return rate from the fund.
What’s going to be affected? While this arrangement will reportedly only apply to the USD 5 bn catalytic investment fund Alterra Transformation, the UAE’s cap on its own returns will also apply to some funds under Alterra and will see the UAE receive returns that make up about 5% of each fund’s total capital. Moreover, the USD 25 bn fund earmarked for “climate investments at scale” — also under Alterra — will not be subject to any cap on the returns.
The arrangement is a “return enhancement” to attract more investor money to climate finance, TPG Chairman Jim Coulter said, describing Alterra’s financing structure as “pretty revolutionary.” However, Coulter did not disclose TPG’s own return percentage from its Alterra funds. The goal of Alterra’s finance and return structure is to “achieve capital mobilization at scale and in a way that is replicable,” the Alterra spokesperson told Bloomberg, explaining that this design requires “private sector market model that targets climate impact as well as positive returns, and can leverage a wide funnel of deployment channels.”
About Alterra: The UAE launched Alterra, a USD 30 bn blended finance vehicle during COP28 to improve access to climate funding for the Global South. The venture — backed by Chimera Investment-backed Lunate Capital — aims to mobilize USD 250 bn in green investments by 2030. Alterra — along with BlackRock, Brookfield, and TPG — have committed USD 6.5 bn to climate-dedicated funds, some of which are earmarked for 6 GW worth of renewables in India, 1.2 GW of which will start operation in 2025.
