Invesco Climate Adaptation Action Fund (ICAAF)

ICAAF is an innovative blended finance fund that can help unlock climate adaptation and climate mitigation investment opportunities in developing countries while mobilizing institutional capital at scale. 

ICAAF is an actively managed fixed income fund. It targets climate adaptation projects in developing markets. These include small islands, developing states and African states.

The fund is closed-ended with a 12-year life (seven-year investment period, five-year run-off period). It is subject to three one-year extension options. The fund will be launched after the end of an offer period which is due to end on 31.12.2024. The target fund size is up to USD 500 million. ICAAF will be available to investors qualifying as “professional clients” within the meaning of MiFID II only.

The fund has a layered capital structure with junior and senior units, representing different levels of risk.

This capital structure aims to give private-sector institutional capital (e.g. corporate pension funds) access to the fund via senior units. Meanwhile, Development Finance Institutions (DFIs) and public-sector investors will have access to the (relatively riskier) junior units, which aim to provide a higher level of income, while acting as a ‘loss buffer’ for the senior units.

We believe that adaptation projects can provide a triple dividend. They help countries avoid economic losses, bring potential positive gains, and deliver additional social and environmental benefits. 

We believe we can achieve those benefits by focusing on the key systems affected by climate change. This includes systems that produce food; protect and manage water and the natural environment; plan and build cities and infrastructure; protect people from disasters; and provide financing for a more resilient future.

Any investment decision should take into account all the characteristics of the fund as described in the legal documents. For sustainability related aspects, please refer to

The fund is not managed in reference to a benchmark. The investment concerns the acquisition of units in an actively managed fund and not in a given underlying asset.


Investment risks

  • The Fund is intended for long-term investment and for investors who can accept the risks associated with making investment in illiquid investments in privately negotiated transactions.

    The Fund may be adversely affected by a decrease in market liquidity for the securities in which it invests which may impair its ability to execute transactions. Investment in debt instrument may also be exposed to risks in the event of sudden asset price shocks. Especially for private placement bonds, any buy or sell trade on these markets may lead to significant market variations/fluctuations. Debt instruments are subject to the risk that issuers do not make payments on such securities.

    An issuer suffering from an adverse change in its financial condition could lower the quality of a security leading to greater price volatility on that security. A lowering of the credit rating of a security may also offset the security’s liquidity, making it more difficult to sell. Private Placement instruments are more susceptible to these problems and their value may be more volatile. Debt securities may fall in value if the interest rates change. The prices of the investment rise when interest rates fall, while the prices fall when interest rates rise. Longer term investments are usually more sensitive to interest rate changes. The value of the investments and any income will be subject to various degree of capital risk.

    In event of defaults or Credit Events (as defined in the Fund’s offering documents), junior class investors will absorb the capital loss before the senior class. Investment in private placement will from time to time rely upon projections, forecasts or estimates developed by the Fund or a company in which the Fund is invested or is considering making an investment concerning the company’s future performance and cash flow.

    Projections, forecasts and estimates are forward-looking statements and are based upon certain assumptions. Actual events are difficult to predict and beyond the Fund’s control. Actual events may differ from those assumed.

    The Fund may use derivatives for investment purposes. It may be exposed to additional leverage risk, which may result in significant fluctuations of the NAV of the Sub-Fund and/or extreme losses where the Investment Manager is not successful in predicting market movements. Investments in emerging markets may be more volatile than investments in more developed markets. Some of these markets may have relatively unstable governments, economies based on only a few industries and securities markets that trade only a limited number of securities.

    Applying ESG criteria to the investment process may exclude securities of certain issuers for non-financial reasons and, therefore, may forgo some market opportunities available to funds that do not use ESG or sustainability criteria. For private placement instruments, there exists a risk of incorrectly assessing a security or issuer, resulting in the incorrect inclusion or exclusion of a security. Operational risk is embedded in operating the Fund, which is mainly linked potential valuation issues and handling restructuring or legal process related to its investments.

Fund facts

Climate change will challenge the way we live

Judging by global temperature rises over the years, it’s clear climate change will challenge the way we live. Find out how a 2-4°C increase will disrupt communities and why investment in mitigation and adaptation strategies is crucial. 

Video about income and Invesco’s mixed assets



Our climate is changing the way we live. Investment in climate mitigation, adaptation and transition is essential to reduce the challenges the world faces. 

1.       Climate mitigation focuses on the reduction of greenhouse gas emissions (GHG).

By investing in green bonds, renewable energy, ecofriendly technologies, and infrastructure we can help manage the transition from fossil fuels and dilute their impact on the climate.

2.       Climate adaptation centres on supporting ecosystems to adapt to climate risks.

For example, with investments in social and sustainability (GSS) bonds, communities can more easily adjust to climate challenges through measures including early warning systems, reforestation, the restoration of wetlands or the building of seawalls.  

3.       Climate transition plans outline how a company will transform their operations, existing assets and business models to achieve net zero by 2050.


Why is climate investment needed?

The world is getting warmer.

Extreme weather events are becoming more frequent putting pressure on our infrastructure, supply chains, coastal areas, food, and water supplies.

The Paris Agreement aimed at limiting warming to 1.5° Celsius, has already been breached.

Our analysis suggests the gains will quite likely be in the 2-4° Celsius range.


How much investment is needed for society to adapt?

According to the Global Landscape of Climate Finance’s research, to avoid the worst effects of climate change, $9 trillion US dollars will be needed annually from now until 2030, rising to over $10 trillion US dollars annually between 2031 and 2050.

Find out more about why investing in a sustainable future could make long-term financial sense.  

Visit to find out more.

Frequently asked questions

Climate adaptation refers to actions taken by governments, non-governmental organisations (NGOs) and companies to adjust and adapt to the current and future impact of climate risks.

The goal of climate adaptation is to render communities and ecosystems more resilient to the detrimental effects of climate impacts.

Climate transition refers to the steps that organisations and governments are taking to reduce emissions and move towards a low carbon economy.

Investing in climate resilience today will help mitigate future climate-related liabilities and costs, both direct (such as physical damage to assets) and indirect (such as higher insurance costs).

The junior tranche acts as a de-risking mechanism and represents a higher level of risk in the fund relative to the senior tranche, since in the event of defaults or Credit Events (as defined in the fund’s offering document), junior class investors will absorb the capital loss before the senior class. In addition, the junior tranche has a lower repayment priority relative to the senior tranche. For ICAAF, Invesco targets a relative size of at least 25% (and max 50%) for the junior units. The targeted split is aligned to market practice with respect to typical blended finance leverage ratios. We believe it represents a fair balance between the interests of junior and senior class investors.

The senior tranche benefits from the level of risk protection provided by the junior tranche and represents a lower level of risk in the fund relative to the junior tranche, since in the event of defaults or Credit Events (as defined in the fund’s offering document), junior class investors will absorb the capital loss before the senior class. In addition, the senior tranche has a higher repayment priority relative to the junior tranche. For ICAAF, Invesco targets a relative size of no more than 75% (but at least 50%) for the senior class. As introduced previously, the targeted split is aligned to market practice with respect to typical blended finance leverage ratios. We believe it represents a fair balance between the interests of junior and senior class investors.

ICAAF will only be available to investors qualifying as “professional clients” within the meaning of MiFID II. The fund will not be marketed to, and therefore cannot be invested in by, retail investors. We envisage Development Finance Institutions (DFIs) and public-sector investors to provide the capital for the junior class units. Meanwhile we anticipate interest from “private-sector” institutional investors with a specific interest in impact investing (e.g. corporate pension funds, insurance companies) for the senior class units.

The portfolio run-off period means that assets with a finite term are not replaced as they mature. When the proceeds from matured bonds are not reinvested, a portfolio can be said to be in run-off. ICAAF is designed to have a seven-year investment period and a five-year run-off period.  As investments reach maturity during the run-off period, proceeds are returned to clients of the fund in order of seniority.

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Important Information

  • This marketing communication is exclusively for use by professional investors in Continental Europe as defined below and Professional Clients in Ireland and the UK. It is not intended for and should not be distributed to the public. For the distribution of this communication, Continental Europe is defined as Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxemburg, the Netherlands, Norway, Sweden and Switzerland. Data as at 31 March 2024, unless otherwise stated. By accepting this material, you consent to communicate with us in English, unless you inform us otherwise. This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change. Telephone calls may be recorded. For more information on our funds and the relevant risks, please refer to the Offering Document, the Annual or Interim Reports, and constituent documents (all available in English). These documents are available from your local Invesco office. A summary of investor rights is available in English from The management company may terminate marketing arrangements. The fund, as a Reserved Alternative Investment Fund domiciled in Luxembourg, is eligible for Well-Informed Investors (as defined in the Luxembourg Law dated 28 July 2023). The fund is a dedicated Luxembourg open-ended unregulated fund. It qualifies as an alternative investment fund (AIF) managed by Invesco Management S.A. as external alternative investment fund manager (AIFM).