A group of institutional investors has provided capital for high-impact, UN SDG-aligned loans to local companies and projects across Latin America, Asia, Africa and Eastern Europe
Allianz Global Investors (GI) has announced the close of a blended finance fund to support the UN Sustainable Development Goals, after raising $1.1bn.
The fund will finance loans in emerging and frontier markets, originated by Dutch development bank FMO.
Allianz GI will manage the fund and have veto rights on asset allocation, it said in a joint press release. FMO’s investment management arm will be in charge of the underlying portfolio of loans. Skandia is the only other institution to be named in the statement. The MacArthur Foundation will provide an unfunded $25mn guarantee for credit enhancement, allowing FMO to take a first-loss position in the fund.
“For every dollar that FMO has put in the fund, we have raised $9 of commercial capital. For every dollar that the MacArthur Foundation has committed as a guarantor, we have raised $40 commercial investor dollars,” said Nadia Nikolova, lead portfolio manager for sustainable private credit at Allianz GI, during a press briefing.
European insurers
Nikolova described all the institutional investors in the fund as “European insurance companies that are sustainability shapers in their respective countries”.
The UN has 17 Sustainable Development Goals, but the new fund will focus on three, dedicated to decent work and economic growth, reduced inequalities, and climate action.
Regionally, the loans will be dispersed across Latin America, Asia, Africa and Eastern Europe.
‘Not from your Bloomberg screen’
When asked about ensuring the credibility of the loan book, Nic Wessemius, managing director of FMO Investment Management, said: “In essence, it’s all part of the loan documentation.”
“So if we finance a local bank to on-lend to small and medium enterprises, they need to report on it. If we finance an agri company, and they work with smallholder farmers, they need to report on it… And if they fail to do so it can be an event for default, so you’re really at the table.”
The same goes for borrowers with whom FMO has agreed ESG-related improvements as part of the loan documentation, he said, adding : “Of course, you also need to visit the clients, so this isn’t been done from your Bloomberg screen”.
“We want to have clients that are serious about this, and if they’re not, then we can actually call the loan.”
The SDG Loan Fund is now closed to new investors.
