Climate Fund Managers (CFM), MUFG Bank Ltd (MUFG), FinDev Canada, and the Green Climate Fund (GCF) announced the $600 million first close of the GAIA Climate Loan Fund.
The fund targets a final size of $1.48 billion by 2027 and aims to close the estimated $300 billion annual adaptation finance gap in the markets least equipped to respond to climate change.
GAIA will primarily provide long-term loans to public and quasi-public entities—such as municipalities and state-owned utilities—across 19 emerging and developing countries, with a minimum of 25% of commitments dedicated to least developed countries (LDCs) and small island developing states (SIDS). At least 70% of the capital is dedicated to climate adaptation projects, including sustainable agriculture and climate-smart infrastructure.
Innovative blended finance structure:
The fund utilizes a blended finance structure to strategically deploy public funding to reduce risk and mobilize private capital. This includes a junior tranche from concessional partners (like GCF and FinDev Canada) and a senior tranche
for commercial investors (like MUFG), alongside dedicated facilities for local currency lending (FX) and technical
assistance (TA).
Lori Kerr, Chief Executive Officer of FinDev Canada, said, “GAIA demonstrates the power of partnership in advancing climate action and inclusion in emerging markets and developing economies. By combining commercial and concessional capital, alongside grant funding for technical assistance and FX facilities, FinDev Canada is accelerating the mobilization of critical investment and enabling local-currency lending where it is needed most, maximizing the impact of every development dollar.”
Christopher Marks, Head, Growth Markets, Innovative Finance & Portfolio Solutions, EMEA, MUFG, emphasized the ambition of the initiative. “Achieving the 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.”
Proving adaptation investment viable:
The GAIA model is designed to tackle a critical barrier in the adaptation space: the shortage of financing for public infrastructure most exposed to climate risk, a sector traditionally overlooked by commercial investors.
The Executive Director of the Green Climate Fund, Mafalda Duarte, highlighted the potential for market transformation.
“GAIA stands to show that adaptation in the world’s most climate-vulnerable regions can yield returns for global investors and communities facing the harshest impacts of the climate crisis. GCF is committing up to $150 million as a first-loss investor to anchor a platform set to mobilize nearly ten times that amount for resilience across Africa, Asia, and Latin America.”
Andrew Johnstone, CEO, Climate Fund Managers, noted the strategic expansion of their investment model.
“GAIA marks an important step in CFM’s evolution—extending our blended finance model beyond private equity into private credit for the first time, enabling us to provide long-term funding for adaptation projects that build the resilience of climate-vulnerable communities.”
Upon full deployment, GAIA aims for substantial impact, including benefiting an estimated 19 million people, creating over 11,000 permanent jobs, and avoiding approximately 30 million tonnes of CO₂ equivalent emissions annually.
