Danish Teachers' Pension invests in Sustainable Development Goals (SDG) fund domestically
The Danish SDG Investment Fund II, a public-private partnership managed by Impact Fund Denmark, is targeting an Internal Rate of Return (IRR) of between 12-15%. The fund, which reached a first close in November 2020 with just under DKK2.7bn in capital commitments, is designed to reduce investment risk while ensuring the achievement of the United Nations Sustainable Development Goals (SDGs) through long-term investments in growth markets.
The Article 9 fund employs a matching strategy, with private investors contributing 60% of the total capital commitment. After a 6% preferential return, the return goes to Impact Fund Denmark until it reaches another 6%, beyond which private investors and Impact Fund Denmark will split any return. Notably, the EU provides a loss guarantee for private investors' losses on individual portfolio investments of up to DKK535m, offering further downside protection.
The fund focuses on contributing to the realization of the UN SDGs, particularly SDG 5 - Gender equality, SDG 8 - Decent work and economic growth, SDG 10 - Reduced inequalities, and SDG13 - Good health and wellbeing. Investments will be distributed across four sectors, with green energy and infrastructure accounting for around 40% of the portfolio, and the remaining 60% split between the health, sustainable food systems, and financial services sectors.
Lars Bo Bertram, CEO of Impact Fund Denmark, believes that the SDG Fund II model addresses private investors' reluctance to invest in developing countries due to high risk. The fund aims to make 20 investments across Africa, Asia, and Latin America to support the green transition and improve social conditions.
Among the initial capital committers to the fund are pension companies PFA, PKA, P+, and PenSam, along with Impact Fund Denmark. One of the anticipated investments is in Imperium, a tea packaging company in Morocco, which is expected to double its production capacity with the investment, resulting in an additional 800 employees while transitioning to net zero. A portion of the investment in Imperium will only be released upon the business fulfilling pre-defined social and environmental objectives.
As of the latest updates, the fund has made additional investments in Redcliffe (a mobile diagnostics company in India), Sturdee Energy (a South African renewable energy firm), and Imperium. The fund aims to reach a final close of DKK5bn by the end of 2025.
The Danish SDG Investment Fund II's strategy aligns with broader SDG objectives by focusing on sustainable development in emerging markets. While specific investments in Africa, Asia, or Latin America are not specified, the fund's general approach includes investing in sectors that typically align with several SDGs, such as poverty alleviation, zero hunger, affordable and clean energy, decent work and economic growth, and industry, innovation, and infrastructure.
For detailed information on specific investments and their impact, further updates or direct reports from the fund would be necessary.
Venture capital and development finance are expected to contribute towards the Danish SDG Investment Fund II's goal of supporting the energy transition, particularly in the green energy and infrastructure sector. Moreover, this sports-unrelated fund also invests in the health, sustainable food systems, and financial services sectors, with a focus on achieving the United Nations Sustainable Development Goals in emerging markets, such as gender equality, decent work and economic growth, reduced inequalities, and good health and wellbeing.
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