Nestled in a grandiose building with a splendid view of the Dutch Prime Minister’s residence in The Hague, Climate Fund Managers (CFM) takes on the noble mission of saving the planet—one wind turbine in Tanzania and one solar panel in Vietnam at a time. And let’s not forget their efforts to protect the delicate ecosystem of the Galapagos Islands, ensuring that the iguanas don’t take too many selfies.
Founded in 2015, this green fund manager has become something of a celebrity for its “blended financing.” Yes, that’s a fancy term for a public-private partnership designed to coax fundraising out of reluctant investors, especially those timid souls in developing countries who shudder at the thought of emerging from their investment cocoons.
With nearly 3 billion euros under management and ambitions to bump that up to 5 billion, CFM is on a roll! This figure includes hefty contributions from governments like the Netherlands, the U.S., and Canada, along with backing from the European Union and the notoriously frugal United Nations’ Green Climate Fund. And, of course, there’s secret sauce in the form of private funding. Who knew saving the world could be so monetarily lucrative?
Dutch Prime Minister Mark Rutte has been CFM’s biggest fan, even declaring it a breakthrough at a climate conference in Copenhagen. He believes private investors should jump on the bandwagon—after all, climate-smart economic growth is just a few zeroes away!
“The fund’s payouts were bizarrely high.”
Yet, behind the scenes, records show that FMO, the fund’s co-owner and the Netherlands’ main development bank, has developed a nagging itch regarding the tens of millions rolling in as yearly fees. Meanwhile, the directors of CFM have been raking in millions, with bonuses that could make a lottery winner blush. Recent reports reveal that they’ve been pocketing, on average, three times what Prime Minister Rutte earns—now that’s some top-notch financial acrobatics!
From Policy to Profits—What a Transition!
The inception of CFM as part of FMO’s climate policy investment program sounds inspiring. The initial premise was to raise capital from public investors, like governments and international organizations, lighting the way for private investors to consider co-investing in projects they’d otherwise avoid like a bad blind date.
With guaranteed first dibs on payouts if something goes awry, it’s rather fitting that public institutions shoulder most of the risk. All while the Dutch government’s insurance arm winks approvingly from behind the curtains.
Amongst those involved in the 2015 proposal were some individuals who’d soon leap from FMO to CFM’s director seats. Talk about a strategic game of musical chairs—everyone wants to sit at the table filled with green cash!
Cash Cow Extravaganza
In a turn of events fit for a financial drama, Andrew Johnstone’s investment firm, Phoenix Infraworks, co-founded CFM with FMO. One year later, Brahma and Beukering made a clean break from FMO to join the growing financial party. Two years down the line, Johnstone struck gold; his firm pocketed a cool 7 million euros from a stake transfer while keeping ownership of a fifth of CFM. Talk about cashing in!
It seems Johnstone has been milking this cash cow ever since. For his role as CEO, CFM generously hands his company 24,000 euros monthly. On top of that, financial documents indicate that CFM has poured 3.5 million euros in dividends to Phoenix in the last three years alone. A true testament to the recycling of green funds!
Just to spice things up, over the past few years, CFM’s key players have collectively raked in over 6 million euros with their salaries and bonuses, including a jaw-dropping 2.3 million euros in 2022 alone. Johnstone defends the lavish payouts, insisting they’re “in line with the market,” as if market norms should include yacht money!
The Dutch foreign ministry agreed, suggesting that these compensation levels aren’t excessively ludicrous—because why would a struggling planet’s saviors be treated like mere mortals?
‘Bizarrely High’ or Run-of-the-Mill?
However, careful scrutiny reveals that for an organization supposedly working for the greater good, CFM executives are generously padding their wallets. Comparisons with other blended finance funds show that CFM’s executives are enjoying salaries that are 60% higher than their counterparts. Amazing how saving the planet comes with some peculiar side effects!
Defending their golden parachutes, Johnstone argues that competitive salaries are necessary to lure talent. After all, who wouldn’t want to be lured into a domain where “bizarrely high” payouts are the norm?
Even savvy investors like Aegon Asset Management and Triodos Asset Management echoed similar sentiments—because when money flows like water, who cares about the puddles? But a prominent expert on developmental finance, Marilou van Golstein Brouwers, raises an eyebrow and inquires whether such high salaries are justified in light of the actual social impact. Spoiler alert: she finds them lacking!
High Fees and ‘Oops’ Moments
Criticism isn’t limited to armchair analysts; even CFM’s fund investors seem skeptical about the eyebrow-raising fees, which reportedly drive up the directors’ bonuses. An internal evaluation unearthed by the Dutch foreign ministry suggested these fees are “on the high end,” making them about as desirable as a sunburn on a tropical vacation.
Johnstone claims their management fees—which are only about 1 to 2 percent— translate to a staggering 20 to 30 million euros annually. It’s almost like they’ve found a way to monetize hope! And assuming favorable investment returns, the potential fee profits could balloon up to 620 million euros. Who knew that helping developing countries could also fund a fabulously luxurious lifestyle?
It seems FMO is having a “we didn’t see that coming” moment, realizing that their projections for CFM’s earnings were as accurate as a weather forecast. Plans for future contracts will include income restrictions, but considering the current arrangement allows for hefty performance fees, CFM’s directors remain firmly seated on the throne of profits.
A Financial Wonderland, But at What Cost?
Somewhere in Djibouti, CFM is contributing to a project that has doubled the nation’s energy production. Yes, doubling! But with four out of ten residents still lacking basic access to electricity, one might wonder if they’re just charging the iPads of the wealthy.
While the concept of blended financing receives applause at conferences and is deemed potentially lifesaving for vulnerable nations, it appears the pot of gold might just be filling the pockets of the financial elite. As Rens van Tilburg aptly put it, “mixed finance is the next gold mine for the financial sector,” and it’s all fun and games until the complexity of it all leaves the rest of us scratching our heads.
