In a landmark achievement for global climate finance, Climate Fund Managers (CFM) has closed its second blended finance facility, Climate Investor Two (CI2), at $1.065 billion, making it the largest climate adaptation infrastructure fund dedicated to emerging markets. Backed by new investor commitments of $190 million and a €205 million ($223 million) guarantee from the European Union’s European Fund for Sustainable Development Plus (EFSD+), the fund marks a major step in mobilizing capital for resilience-focused infrastructure in developing economies. With the adaptation finance gap widening amid escalating climate risks, CI2’s success demonstrates growing investor confidence in scalable, impact-driven solutions.

Building Resilience Where It’s Needed Most

The closing of CI2 positions The Hague-based Climate Fund Managers as a central player in climate adaptation finance, an area long overshadowed by mitigation investments. The fund focuses on water, waste, and ocean infrastructure across Africa, Asia, and Latin America, regions disproportionately affected by rising sea levels, droughts, and extreme weather events. According to the United Nations Environment Programme (UNEP), developing countries face an annual adaptation financing shortfall estimated between $194 billion and $366 billion. CI2, established in 2019 with support from the European Commission and the Dutch Fund for Climate and Development (DFCD), aims to bridge this divide through blended finance combining concessional capital with private-sector funding to unlock high-impact projects in underserved markets. By the end of its investment cycle, CI2 expects to deliver safe water and sanitation to 16.5 million people and restore or protect 2.2 million hectares of ecosystems. Its current portfolio includes water distribution projects in Vietnam and the Philippines, desalination plants in Thailand and Kenya, and waste-to-energy facilities in Sierra Leone, South Africa, and Thailand. The fund also played a key role in Ecuador’s $1.6 billion debt-for-nature swap, the world’s largest, which secured long-term financing for the Hermandad Marine Reserve and the Galápagos Islands.

Innovation Through Finance: The Bridge-to-Bond Model

At the heart of CI2’s success is its innovative Bridge-to-Bond mechanism, developed in partnership with Sanlam Investments of South Africa. The structure provides a bridge loan from Sanlam Alternative Investments backed by the EU guarantee that will later be refinanced through a climate bond issuance, effectively opening adaptation infrastructure to institutional bond investors for the first time.

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Andrew Johnstone, CEO of Climate Fund Managers, described the model as a “proof of concept for integrating adaptation into mainstream capital markets.” He emphasized that adaptation must “stand on equal footing with mitigation in the global response to the climate crisis.”

The Bridge-to-Bond approach not only expands access to liquidity but also builds a new asset class, one that links financial performance directly to measurable resilience outcomes.

Institutional Strength and European Backing

The EU’s guarantee was made possible by CFM’s designation as a Pillar Assessed Entity, a distinction previously limited to European development finance institutions and multilateral banks. This status allows CFM to directly manage EU guarantees and aligns it with flagship initiatives such as the EU Global Gateway and Team Europe programs, which aim to mobilize sustainable investments in emerging markets. The fund’s strong governance and operational rigor attracted a diverse pool of investors, including development finance institutions (DFIs), multilateral banks, pension funds, insurers, and asset managers. The inclusion of both public and private capital highlights CFM’s ability to structure blended finance vehicles that balance impact with risk-adjusted returns.

Scaling Blended Finance for Climate Impact

CI2 operates through two complementary vehicles: a Development Fund, which offers concessional funding and technical assistance for early-stage project preparation, and a Construction Equity Fund, which deploys commercial capital during project implementation. This dual-structure model reduces perceived investment risk, accelerates project delivery, and attracts private-sector participation in frontier markets. Since its first close in 2021, CI2 has committed $339 million across 25 projects, leveraging the blueprint established by Climate Investor One, CFM’s inaugural $1 billion renewable energy fund. Building on this momentum, the firm has launched Climate Investor Three, targeting $750 million to $1 billion for clean energy transition and green hydrogen investments expanding its role in aligning private finance with both adaptation and mitigation goals.

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Closing the Global Adaptation Gap

The success of Climate Investor Two arrives at a pivotal moment for climate finance. Despite global pledges to scale resilience funding, adaptation projects account for less than 10 percent of total climate investment flows. CFM’s blended finance model demonstrates how structured, risk-tiered instruments can mobilize capital where it is most needed enabling infrastructure that safeguards both livelihoods and ecosystems. For policymakers and investors alike, CI2 offers a replicable framework: by integrating EU-backed guarantees, private-sector engagement, and bond market access, adaptation financing can finally move from pilot scale to mainstream adoption. As global markets seek credible, climate-aligned yield opportunities, Climate Investor Two stands as a blueprint for resilient infrastructure investment proof that with the right incentives and partnerships, financial innovation can be as critical to climate action as technological change.

In the words of Andrew Johnstone, “Adaptation is not a peripheral concern, it is the frontline of our collective response to a changing planet.”

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