Allianz, Zurich and KfW and FinDev Canada back new blended finance firm
Allianz, Zurich are among the major investors backing a new blended finance investment firm that aims to mobilise private capital to fund sustainable development in emerging markets and developing economies
The new firm has been launched on the back of the SCALED Initiative, which was established last year and brings together the governments of Germany, Canada, Denmark, France, the United Kingdom and South Africa with major institutional investors in a bid to streamline blended finance projects.
NZI Transition and Climate Investment Conference | 22 October | London | Register here
The collaboration has now resulted in the launch of Scaled Development, a limited company under German company law, with the German development bank KfW, FinDev Canada, Zurich Insurance and Allianz Investment Management SE emerging as initial shareholders. The move is backed by €130m in commitments from the German and Canadian governments.
"SCALED marks a breakthrough for development finance," said Germany's Federal Minister for Economic Cooperation and Development, Reem Alabali Radovan. "It is clear that public finance alone will never be sufficient to tackle the major challenges and crises of our time. We need additional structures that are capable of mobilising private capital at scale, which is exactly what SCALED is designed to do."
The new firm has been set up to support the creation of standardised blended finance investment vehicles. These will most likely be Luxembourg-based structures, with external managers overseeing their respective strategies in sub-compartments, Udo Riese, global head of Sustainable Investing at Allianz Investment Management (AIM) SE, told Net Zero Investor.
The initiative aims to promote standardisation, reduce complexity and shorten set-up times for blended finance initiatives.
The first blended finance vehicle under the SCALED banner is set to launch in Q1 2027, with further vehicles aiming to build on the existing process, Riese explained. "One important measure of success will be the extent to which we can replicate the legal, administrative and reporting framework of the first vehicle. If we can reuse around 80% of the structure, that would significantly reduce implementation effort and be a strong outcome."
Allianz SE has been investing in blended finance initiatives for the best part of a decade but has, to date, struggled with long deployment cycles and difficulties expanding its commitments. "As an asset owner, we would like to see more investable opportunities and increase our allocation to blended finance over time," Riese said, adding that volumes had so far been too small to become truly impactful, both from a balance sheet perspective and in terms of mobilising capital at scale.
By backing the initiative, Allianz hopes to speed up the process of deploying capital through blended finance projects. "These vehicles are often very labour-intensive. Usually, it takes between three and five years to set up such vehicles. During that period, no one is earning fees. If we can materially reduce that timeframe, it would make blended finance more attractive and economically viable for asset managers, helping to scale the market more effectively."
