Today, the Investment Fund for Developing Countries (IFU) and the pension funds PFA, PKA, P+ and PenSam have entered into an agreement to establish the Danish SDG Investment Fund II with a capital commitment in the first closing of DKK 2.7bn. The fund will make private sector investments in Africa, Asia and Latin America contributing to the green transition, improved living conditions, as well as creating positive returns to the investors.
The new fund builds on the experience of the first Danish SDG Investment Fund. Both funds are part of the Danish contribution to realising the 17 Sustainable Development Goals and is a unique public-private partnership, where public capital is used as a lever to mobilise private risk capital to be invested in developing countries.
The first Danish SDG Investment Fund was launch by the Danish Minister for Foreign Affairs, Lars Løkke Rasmussen, back in 2018.
”IFU’s first SDG Investment Fund has proved its purpose and increased the Danish pension savings for a good cause. As a small open economy, we need to focus on the parts of the world that are showing growth, such as Asia, Latin America and Africa. In IFU’s Danish SDG Investment Fund we have an investment model that reduces risk and creates return and results. It is good for the Danish pension savers and for the climate, when we create more investments in sustainable energy sources, for example.”
Lars Løkke Rasmussen, Minister for Foreign Affairs.
Will inspire new large-scale solutions
Investments in developing countries and climate finance were at the top of the agenda at the COP29 climate conference, and the Danish model behind the Danish SDG Investment Fund II is part of the solution to securing the financial means required.
“This is a great day, where we together with four forward-looking pension funds are launching the Danish SDG Investment Fund II, which can help inspire new solutions to complex challenges. Private investors are often reluctant to invest in developing countries due to the high risk involved, and this a huge challenge, if we are to realise the Sustainable Development Goals. 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.”
Lars Bo Bertram, CEO of IFU.
Pension funds take on the responsibility
The Danish SDG Investment Fund is now fully invested in 27 private companies in developing countries, and for every one Danish kroner of public development funds invested by IFU, more than five kroner of private capital has been mobilised. The expected annual net return was 10-12 %, however this can only be established when the last investment has been sold, and the fund is closed. For the Danish SDG Investment Fund II an annual net return of 12-15 % is expected.
End of October 2024, a new EU guarantee was signed, providing downside risk protection for the private investors in the Danish SDG Investment Fund II of up to DKK 535m. Furthermore, the private investors will have a preferred return of up to 6 %.
These are some of the elements of the Danish SDG Investment Fund II, which will reduce the risk and thereby increase the incentive to invest in developing countries in Africa, Asia and Latin America, where both the demand for private capital and the growth potential are significant.
The pension funds PFA, PKA, P+ and PenSam are excited about the new partnership.
“Basically, we are created to provide a solid return to our members, but they also expect us to make investments that create a safer and more sustainable future, in which to pay out the pensions. It is not without risk to invest in sustainable businesses in developing countries, however, with the fund’s different protective measures there is a basis for creating positive returns to our members and push the green transition to ensure better living conditions for people in the developing countries.”
PFA, PKA, P+ and PenSam.
The goal is a capital commitment to the Danish SDG Investment Fund II of DKK 5bn, with the remaining commitment to be raised in a so-called second closing in 2025.
The agreement about the Danish SDG Investment Fund II will be signed officially at a launch event at the Odd Fellow Palace today with the participation of Lars Løkke Rasmussen, among others.
For further information, please contact:
IFU, Rune Nørgaard, Communication Director, mobile +45 22 68 75 60
PKA, Nicholas Rindahl, Head of Press, mobile +45 30 16 11 24
PFA, Rikke Gredsted Seidenfaden, Head of Press, mobile +45 27 58 95 88
PenSam, Camilla Woergaard, Head of Communication, mobile +45 27 79 28 76
P+, Pia Lykke, Head of Communication, mobile +45 81 88 22 36
Ministry of Foreign Affairs, Kristoffer Jonsson, acting Head of Press, mobile +45 30 43 67 49