AIIB backs ADM's renewable energy debt fund

Elkhorn Emerging Asia Renewable Energy Fund is ADM’s 10th direct lending private credit fund and is targeting a final close of $500 million in 2021. ADM said it was in discussion with a range of investors seeking to scale up investment in Asia’s renewable energy sector.

The fund will focus on small to medium-sized enterprises (SME) and projects in both renewable energy production and energy efficiency in emerging economies. Smaller companies and projects in these areas face a financing gap because larger banks and financial institutions do not traditionally provide them loans due to their size, complex risk profile, and their need for structured financing.

ADM reinforced its capacity in this space in July with the hire of Nicolas Le Clerc as a managing partner with responsibility for renewables. Le Clerc has 18 years of experience in energy banking in Asia, including various roles with Nomura, ANZ Bank, Sumitomo Mitsui Banking Corporation, and Credit Suisse.

“Demand for electricity in Southeast Asia is expected to more than double by 2040, with solar, wind, and hydroelectric power expected to account for the bulk of the increase in capacity,” Le Clerc said in a statement.

“ADM Capital’s private lending expertise is uniquely suited to working with renewable energy entrepreneurs. By focusing on an underbanked segment of the market, the fund can generate returns exceeding those available from traditional infrastructure debt instruments such as bank loans or bonds.”

This is AIIB’s first investment in a private debt fund and represents an extension of a strategic pivot designed to support economies and SMEs struggling with the effects of the pandemic. The multilateral development bank has launched a crisis recovery program for its member countries facilitating non-infrastructure financial support during an 18-month period ending in October 2021.

AIIB also aims to allocate 50% of its annual direct financing by 2025 to projects that support climate change mitigation or adaptation. Climate finance accounted for 39% of total financing approved by AIIB in 2019, up from 35% over the previous three years combined. Recent activity in this space includes a $125 million commitment shared across two renewable energy-focused funds targeting Southeast Asia, and Eurasia, respectively.

ADM raised $630 million in April for a credit fund targeting Asian SMEs impacted by COVID-19. This followed the recruiting of Neil Harvey in November last year as an executive chairman focused on private credit expansion. Harvey previously served as Credit Suisse’s Hong Kong and Greater China CEO and head of Asia Pacific asset management.

“We will continue to communicate the long-term operational and strategic benefits of improved governance and sustainability to our borrowers,” Harvey said. “The [Elkhorn Emerging Asia Renewable Energy Fund] will ensure we continue to focus the potential of the region towards a more sustainable, inclusive future for Asia’s people and its biodiversity,” 

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• Topics
• Greater China
• Credit/Special Situations
• Fundraising
• Cleantech
• Infrastructure
• Hong Kong (China)
• ADM Capital
• Asian Infrastructure Investment Bank
• renewable energy
• energy
• SME