MUFG climate fund secures $600 million

The GAIA Climate Loan Fund, established through a collaboration between MUFG Bank, FinDev Canada, and the Green Climate Fund, has announced securing $600 million in commitments at its initial close. This funding will primarily facilitate loans for climate adaptation projects within climate-vulnerable markets.

Administered by Climate Fund Managers (CFM), a specialist in climate-focused blended finance, and backed by advisory firm Pollination, the fund is set to benefit 19 million individuals, support 11,000 jobs, avert 30 million tonnes of CO₂ emissions annually, and enhance the climate resilience of 5,000 km² of natural resources.

The GAIA fund employs a blended finance model, merging public and private investments, with public funds strategically deployed to mitigate risk and attract private capital. It will extend long-term loans to sovereign, sub-sovereign, quasi-sovereign, and state-owned entities, including municipalities, development banks, and state-owned utilities. A minimum of 70% of the capital will be allocated to climate adaptation, focusing on sustainable agriculture, water management, ecosystem resilience, and climate-smart infrastructure. The remaining funds will support mitigation projects such as renewable energy and low-carbon transport.

The fund’s launch coincides with the increasing impact of climate change on developing and emerging economies, which often lack the infrastructure and resources to withstand natural disasters, such as floods, droughts, and extreme heat. Public funding for building climate resilience is frequently limited by budget constraints and competing priorities. The fund aims to address these challenges by leveraging a blended finance model to unlock institutional capital and tackle the deficiency in financing for climate-risk-exposed infrastructure.

At least 25% of the fund’s resources will be directed towards Least Developed Countries (LDCs) and Small Island Developing States (SIDS), where the need for financing is most acute. The fund targets a total size of $1.48 billion, with final closure expected by 2027. Cornerstone investments have been secured from MUFG, FinDev Canada, and the Green Climate Fund, with MUFG acting as the origination partner.

Christopher Marks, Head of Growth Markets, Innovative Finance & Portfolio Solutions, EMEA, at MUFG, stated: “Achieving first close of GAIA is a major milestone in our ambition to help bridge the climate finance gap through an innovative public-private platform. As origination partner, MUFG will leverage its global network to source high-impact projects that improve lives and livelihoods in developing and emerging economies.”