Background

    Danish SDG Investment Fund will contribute to fulfilling the 17 UN Sustainable Development Goals

    The Danish SDG Investment Fund is a public-private partnership, which will contribute to fulfilling the 17 UN Sustainable Development Goals (SDG) through private sector investments.

    The fund offers advice and risk capital for projects supporting the development in strategic sectors in developing countries. This includes climate, agribusiness and food, the financial sector, water as well as production and infrastructure.

    The Danish SDG Investment Fund is thus supporting SDG 1, 2, 6, 7 and 9 in particular, which focus on poverty alleviation, ending hunger, ensuring clean water and renewable energy as well as industry, innovation and infrastructure.

    At the same time the Danish SDG Investment Fund also requires companies to live up to their social responsibilities, which means that the investments will also contribute across a number of the remaining SDGs to economic growth, decent work conditions, education and health.

    Five billion in capital commitments

    The total capital commitment to the Danish SDG Investment Fund is close to DKK 5bn. Nearly DKK 3bn was committed by Danish pension funds and private investors. The remaining DKK 2bn was committed by IFU, including DKK 100m from the state development aid and a DKK 800m loan from the Nationalbank, guaranteed by the Danish state.

    The DKK 5bn will contribute to the mobilisation of additional capital for specific investments in developing countries, and total investments are thus expected to amount to DKK 30bn once the fund is fully invested.

    IFU is responsible

    IFU is fund manager of the Danish SDG Investment Fund and is responsible for all matters, including investments, monitoring and questions. The investments must comply with IFU’s overall policies, guidelines, etc.

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    What we offer

    Advice and equity to commercially viable companies

    The Danish SDG Investment Fund offers advice and share capital to investments in developing countries in Africa, Asia, Latin America and parts of Europe. To qualify for an investment, companies must be commercially viable, and the activity must support the fulfilment of the UN Sustainable Development Goals.

    The fund can invest across most sectors, but has a specific strategic focus on renewable energy and climate, agribusiness and food, the financial sector, water as well as industry and infrastructure.

    The fund can participate in the establishment of new companies, joint ventures as well as acquisitions and expansions of existing companies.

    The Danish SDG Investment Fund invests directly in individual companies in developing countries, and the financial contribution can be made in the form of:

    Equity:

    Long-term equity financing, usually 5-7 years
    Minority investor
    Agreed exit
    Board representation

    Mezzanine financing:

    Long-term, usually 5-7 years
    Subordinated other loan financing
    Option to convert to shares or other result-related yield

    The Danish SDG Investment Fund’s share of a single investment will typically be between DKK 25 and 250 million, and the fund will always be a minority investor. Therefore, additional equity or loan financing is required for a project to be realised.

    Based on experience

    IFU, which is fund manager of the Danish SDG Investment  Fund, has invested in nearly 1,300 companies in more than 100 different developing countries. Experience and insights are used directly in the Danish SDG Investment Fund’s advisory services by using IFU’s investment teams as well as its geographic representation and network.

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    The investment process

    Investments in the Danish SDG Investment Fund are made in line with IFU investments

    As the Danish SDG Investment  Fund invests in many different types of projects, the collaboration between the fund and the individual companies may vary. There are a number of common factors in the collaboration, which can be divided into five phases from the first contact, over due diligence to approval, monitoring and finally exit through e.g. sale of shares. The process is the same whether the investment is made in IFU or the Danish SDG Investment  Fund.

    Read more about the process here or see below:

    FAQ

    Here you can read the answers to some of the frequently asked questions about the Danish SDG Investment Fund

    What is the purpose of the fund?

    The Danish SDG Investment Fund will contribute to fulfilling the 17 UN Sustainable Development Goals through commercial private sector investments in developing countries in Africa, Asia, Latin America and parts of Europe. The investments will support the development in strategic sectors in the developing countries.

    Where can the fund invest?

    The Danish SDG Investment Fund can invest in most developing countries in Africa, Asia and Latin America as well as a small number of countries in eastern Europe.

    In which sectors can the fund invest?

    The Danish SDG Investment Fund can invest in most business sectors, except for e.g. weapon and tobacco. From 2020 the fund will no longer invest in fossil fuel plants. The Danish SDG Investment Fund focuses primarily on a number of strategic sectors such as renewable energy, agribusiness, infrastructure, water and sanitation as well as production, service and the financial sector. Thereby the fund’s investments contribute to the fulfilment of several of the central SDGs.

    Can the Danish SDG Investment Fund only invest with Danish companies?

    No. Like IFU the Danish SDG Investment Fund is untied and can therefore invest in all projects regardless of whether Danish financing or other commercial interests are involved or not.

    Often, however, Danish companies have strong competences, knowledge and technology within a number of the strategic sectors supporting the fulfilment of the SDGs. Therefore, the fund will focus on the possibility of using Danish business competences in the project companies and thereby contribute to promoting the sale of Danish technology and know-how.

    How much can the fund invest in each project?

    The Danish SDG Investment Fund invests equity directly in the individual project companies in the investment countries. The investment size varies from minimum DKK 25m to maximum DKK 250m in each project.

    What does it take to obtain financing?

    The overall condition to be fulfilled is that the company must be commercially viable, and that the activity supports the fulfilment of the UN Sustainable Development Goals.

    However, before an investment can be approved, a thorough due diligence must be performed to check if the company complies with rules of good corporate governance and social responsibility, including IFU’s tax and climate policies, among other things, and if the necessary financing and approvals have been obtained.

    How is the fund organised?

    The Danish SDG Investment Fund is constructed as a capital fund. The investment period is four years with the possibility of a 2-year extension. Subsequently, the fund will sell its investments to other investors. The expected duration of the fund is 11 years.

    Where does the money come from?

    The total capital commitment to the Danish SDG Investment Fund is close to DKK 5bn. Nearly DKK 3bn was committed by Danish pension funds and private investors. The remaining DKK 2bn was committed by IFU, including DKK 100m from the state development aid and a DKK 800m loan from the Nationalbank, guaranteed by the Danish state.

    Investment team

    IFU’s investment teams also work with the investments in the Danish SDG Investment Fund and can draw on IFU’s network of advisers around the world.

    Investors

    Institutional and private investors of the Danish SDG Investment Fund

    PKA manages the pensions of pension companies within the social services and health area. Members’ pension schemes are secured through collective agreements.

    PensionDanmark manages collective and company based pensions, health service schemes and education funds for members in private and public companies.

    PFA is the largest commercial pension fund in Denmark. In addition to pensions and insurance PFA offers savings accounts for private customers and a number of solutions within health and housing, among other things.

    ATP is a mandatory pension scheme which all salary earners contribute to. ATP is paid out together with the old-age pension.

    JØP and DIP are member-owned pension funds for lawyers, economists and engineers. Members are secured through collective agreements and company agreements. Since 2015, JØP and DIP have been part of the management community P+.

    PenSam manages labour pensions for salary earners in the Danish public sector, primarily in the municipalities within the social and health sector.

    Navest is a management company handling the administration of a limited number of investment companies.

    Skandinaviska Enskilda Banken (SEB) is a Swedish bank serving business clients, institutions and private customers. The bank has its headquarter in Stockholm.

    Secure Capital is an investment service company, managing investments for a number of wealthy private customers.

    Chr. Augustinus Fabrikker Akts. is a 100 % fund-owned company focusing on ownership of Danish companies. Chr. Augustinus Fabrikker Akts. is the parent company of the Augustinus group and owned by Augustinus Foundation.