Danish pension funds PFA, PKA, P+ and PenSam have entered into an agreement with the Investment Fund for Developing Countries (Investeringsfonden for Udviklingslande) to establish the Danish SDG Investment Fund II, the IFU announced Wednesday.
The public-private partnership, which aims to make sustainable investments in developing countries, is targeting 5 billion Danish kroner ($705.8 million) in commitments, with $2.7 billion kroner already committed. The remainder is expected to be realized in 2025.
The investments also aim to meet the United Nations’ 17 sustainable development goals, whose principles call for no poverty, no hunger, quality education, affordable and clean energy, and sustainable cities and communities.
“Through commercial investments, the Fund will contribute to the realization of the UN Sustainable Development Goals, with particular focus on the green transition, as well as just and inclusive development in developing economies in Africa, Asia and Latin America,” a fact sheet about the fund stated.
The four pension funds will combine to commit 60% of the capital—400 million kroner each—with the IFU contributing 1.066 billion kroner.
Capital from the SDG II fund will be allocated across Africa, Asia and Latin America, but specifically in 13 countries: Colombia, Egypt, Kenya, India, Indonesia, Mexico, Morocco, Nigeria, Peru, Senegal, South Africa and Vietnam.
The fund aims to achieve a net annual return ranging from 12% to 15%, with individual investments in individual companies varying from 150 million kroner to 300 million kroner; the fund expects to make investments in 20 companies overall.
“Private investors are often reluctant to invest in developing countries due to the high risk involved, and this [is] a huge challenge,” said Lars Bo Bertram, CEO of the IFU, in a statement. “This task cannot be carried out with public funds alone, and we therefore need to remove part of the risk to attract private risk capital. With the Danish SDG Investment Fund II, we are showing a path to public-private partnerships that can make a significant difference in places in the world that need it most.”
PFA (640 billion kroner), PKA (440 billion kroner), P+ (170 billion kroner) and PenSam (180 billion kroner) manage a combined $201.8 billion worth of assets. The IFU manages about $2.2 billion and expects that to increase to about $4.9 billion by 2030.
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Tags: Emerging Markets, IFU, investing, P+, PenSam, Pensions, PFA, PKA