UAE’s $30 Billion Fund Drives Next Wave of Climate Investments

The United Arab Emirates is gearing up for a new phase of climate investments through its $30 billion fund, Alterra. Following last year’s $6.5 billion deals with financial giants BlackRock Inc., TPG Inc., and Brookfield Asset Management Ltd., Alterra is set to allocate more funds, although specific details remain undisclosed.

Alterra, introduced at the COP28 climate summit in Dubai, operates as a fund of funds. Its primary aim is to support the green-energy transition by directing money to investment managers focusing on climate initiatives. The UAE envisions this model mobilizing up to $250 billion for climate finance by 2030, primarily benefiting developing markets.

Despite initial skepticism over the UAE hosting COP28, the summit attracted significant interest from the private finance sector. Notably, BlackRock CEO Larry Fink and hedge fund magnate Ray Dalio praised Alterra’s structure, with Dalio deeming it a “wonderful template” for future initiatives.

To entice private finance, Alterra offers a unique setup where the UAE retains a smaller portion of profits, thereby reducing risk for investors. This approach is designed to channel funds into high-risk developing markets, addressing a major barrier to global climate finance.

Emerging economies face challenges such as political instability and weak financial systems, complicating the transition from fossil fuels. Ensuring a steady flow of capital to these regions is crucial for limiting global warming to 1.5°C. Consequently, climate finance for the Global South was a major focus at COP28 and is expected to be a key topic at COP29 in Azerbaijan.

Majid Al Suwaidi, Alterra’s CEO and former UAE climate negotiator, emphasized the need for climate investment in emerging markets. He highlighted the ongoing debate on reshaping international financial systems to support a just climate transition. Alterra aims to lead this transformation by becoming the top global climate investment fund.

Alterra’s structure includes two parts: the $25 billion Alterra Acceleration, acting as an anchor investor in climate strategies, and the $5 billion Alterra Transformation, which aims to attract investments to the Global South. The fund also plans to make direct and co-investments in the future, fostering a robust climate finance ecosystem in Abu Dhabi. Al Suwaidi envisions the UAE as a hub for climate finance, akin to Silicon Valley’s innovation-driven environment.