It would be safe to say that the geopolitical tremors sparked by the change in administration in the US are being felt internationally and across all sectors, none more so than in climate-focused investment.

Last year, for the first time since 2019, investors pulled out more – US$30 billion – than they put into climate-focused mutual funds, according to reporting by the Financial Times in January. Clean energy and tech funds, in particular, lost 5.35% in 2024.

Despite the investment potential offered by the clean energy market – according to one study, the sub-Saharan region needs US$193 billion in renewable energy investment by 2031, with internal rates of return for newly built utility-scale assets potentially reaching 21% – investing in renewable energy is viewed as especially risky because of its reliance on government policy and its high capital costs.

With this in mind and to counter some of the Global North’s misperceptions about investing in African renewables projects, fund managers are looking for alternative investment models.

One possible solution is the yieldco. The yieldco has been compared to Reits (real estate investment trusts), but instead of pooling real estate resources in a listed company, yieldcos acquire and pool fully operational assets such as solar PV or wind farms, and often deploy them on global markets to attract investment.

In an interview with Impact Investor, Dave Portmann, partner at UK investment consultancy Eighteen East Capital, explained their value. ‘By creating these products that institutions like pension funds can invest in, you are dramatically increasing the multiplier effect of that capital.

‘When it goes into government paper, it’s helping the government fund its own budget, but it’s not creating economic activity directly on the ground. If it goes into infrastructure, it’s creating jobs, it’s lowering costs and improving services, and it’s facilitating the growth and diversification of local markets.’

One renewables-based yieldco that is beginning to show green shoots is South Africa-based Revego Fund Managers’ Revego Africa Energy Fund. While the fund’s initial bid to list on the JSE in 2021 fell short of liquidity and scaling expectations, Revego has now teamed up with UK government-backed programme Mobilist to promote the yieldco.

Short for Mobilising Institutional Capital Through Listed Product Structures, Mobilist helps develop and list climate change-related investment products, primarily yieldcos, in emerging markets that have sizeable stock markets such as South Africa, Nigeria and Kenya.

The Revego fund has attracted private investment, including from Macquarie, Investec and Eskom’s pension fund, and has made 10 investments in clean energy projects so far, all of them in South Africa. They include the utility-scale Springbok solar plant in Virginia, in the Free State, which will sell electricity to multiple private buyers, including miner Sibanye-Stillwater and global brewer Anheuser-Busch InBev. The plant is scheduled to come on line in 2025.

Revego chief investment officer Ziyaad Sarang told Engineering News last year that Revego will consider listing the fund when it has about US$500 million of assets under management. It has some way to go as it holds only a fraction of that (about ZAR2 billion), but Sarang indicated the fund has a pipeline of about ZAR10 billion in potential investments.

The value of the fund is that its yields investors a return while freeing up capital for development. ‘What we are focusing on is the recycling of capital from developers,’ said Sarang.

Another fund that is leveraging the yieldco model is the US$200 million Gaia Africa Climate Fund (GACF). While domiciled in Luxembourg to provide investors in Europe and the UK direct access, the fund’s originator – Gaia Fund Managers – is based in South Africa. Gaia, which is aiming for the fund to be fully capitalised by the end of 2025, is focused on acquiring secondary equity interests in fully operational infrastructure, thus releasing early-stage investors.

‘We are seeing the beginnings of a new trend. Against a backdrop of continuing inflationary pressures and a weak bond market, secondaries are getting more attention from international investors who see the market as a more cash-flow stable investment, especially as they avoid the development risk that exists in the greenfield phase of infrastructure projects,’ says Jon Marius Hønsi, Gaia’s partnership manager.

The GACF is also aiming to list on the bourses in Kenya, Botswana and Ghana to mobilise African private capital into climate-related infrastructure projects.

Meanwhile, at COP29, in Azerbaijan in November last year, several parties – the Green Climate Fund and Climate Fund Managers (CFM) among them – signed an MoU to establish the Gaia Platform (no relation to the GACF), a US$1.48 billion blended finance platform for climate projects in emerging markets.

According to CFM, the platform will allocate 70% of its portfolio to climate adaptation and 30% to mitigation, focusing on water and sanitation, renewable energy, low-carbon transport and green buildings.

At continent level, but on a smaller scale, the AfDB-managed multi-donor Sustainable Energy Fund for Africa (Sefa) is providing catalytic finance to unlock private-sector investment in renewable energy and energy efficiency, with the development of green mini-grids one of its focal points.

The fund saw US$108 million approved for 14 projects in 2024. It now has a portfolio of more than US$300 million in impactful investments and technical assistance programmes that, Sefa says, are expected to deliver about 12 million new electricity connections.

The AfDB itself has approved a US$170 million loan for Egypt’s 1.1 GW Suez Wind Project, which has an overall price tag of US$1.1 billion. The project is sourcing the rest of the financing from a consortium of development finance institutions, banks and financial institutions, recently scoring a US$30 million investment from the Opec Fund.

The AfDB is also partnering with the World Bank on Mission 300, an initiative to provide access to electricity to an additional 300 million Africans by 2030. As a result, the Dar es Salaam Energy Declaration was signed by 30 countries at a Mission 300 Energy Summit in January 2025, and was submitted to the African Union Summit in February for adoption.

At the Mission 300 summit, World Bank president Ajay Banga made an impassioned plea to the private sector. ‘We need your innovation, efficiency and capacity to scale. To facilitate your investment, we’ve identified regulatory and policy barriers and worked to eliminate them. Our plans create an environment where your investments can generate returns while driving meaningful impact,’ he said.

At the summit, partners pledged more than US$50 billion to support Mission 300, including US$48 billion from the AfDB and World Bank; US$1 billion to US$1.5 billion from the Asian Infrastructure Investment Bank; US$2.65 billion from the Islamic Development Bank Group; and US$1 billion from the Opec Fund.

The World Bank and AfDB have also launched an investment company – Zafiri – to support private sector-led solutions, such as renewable mini-grids and solar home systems. They say Zafiri’s anchor partners will invest up to US$300 million in the first phase and mobilise up to US$1 billion to address the persistent equity gap in Africa.

While climate financing from the US has hit a Trump-shaped wall, Europe has indicated it is going nowhere.

A week after the US withdrew its support for the Just Energy Transition Plan, European Commission president Ursula von der Leyen unveiled a EUR4.7 billion injection for South Africa. Announced on the sidelines of the EU-Africa summit in Cape Town in March, the funding is part of the EUR150 billion EU-Africa: Global Gateway Investment Package, which was set up four years ago to aid Africa in the just energy transition (JET).

While the latest package is also intended to support vaccine manufacturing and digital and physical connectivity, the lion’s share will go towards JET projects in South Africa.

‘We know others are withdrawing,’ said Von der Leyen. ‘We want to be very clear with our message. We are here to stay.’

By Robyn Leary
Images: Unsplash, Gallo/Getty Images