The money will be used to help solve funding gaps in transformational infrastructure projects in emerging markets, such as clean and renewable energy, sustainable mobility, health, water and sanitation.
ImpactA Global, a UK-based private credit firm for global emerging markets, has raised $200m from public and private investors.
The funds will be used to provide catalytic financing for the clean and renewable energy, sustainable mobility, health, water and sanitation sectors, with a strong focus on climate challenges and the reduction of social inequalities, ImpactA Global said.
The $200m includes a $100m investment, in 2023, from Legal & General (L&G), a multinational financial services and asset management company headquartered in London. ImpactA Global attracted new investments from UK government programme MOBILIST.
It also attracted funding from IDB Invest, the private sector arm of the Inter-American Development Bank Group, a multilateral development bank committed to promoting the economic development in Latin America and the Caribbean through the private sector, as well as other private investors.
The commitments are a sign of what ImpactA Global said was a “growing appetite” among investors to contribute to the development of sustainable infrastructure in the Global South, while at the same time taking advantage of assets that can deliver attractive financial returns.
“Channelling capital into private debt financing for emerging markets is crucial to closing the $4trn (€3.6trn) annual funding gap and achieve the UN Sustainable Development Goals. We believe this investment shortfall also offers investors the opportunity to benefit from the potential for strong returns and diversification to their portfolios that exposure to emerging markets can provide,” said Hannah Gore-Randall, managing director of alternative finance, asset management at L&G.
Dual challenge
As previously reported by Impact Investor, L&G last month committed an extra $235m to nature conservation and sustainable development, taking its total commitment to the sector to more than $1bn. L&G managed £1.1trn (€1.31trn) in total assets last year.
Returns on infrastructure debt in emerging markets were double that of developed markets (8% vs 4%) over a 10-year period, according to research by the Global Infrastructure Hub.
The dual challenges of climate change and inequalities in underserved emerging markets can only be solved by mobilising large pools of private institutional capital, according to Victoria Miles, co-founder and co-CEO at ImpactA Global.
“Working with partners such as the UK Government and our blended finance partners will enable ImpactA Global to accelerate this mobilisation and implement its strategy,” Miles said.
In order to reach net-zero emissions by 2050, emerging markets require clean energy investments of between $2.2trn and $2.8trn annually by the early 2030s, according to the International Environment Agency.
Consultancy firm McKinsey estimates some $1.1trn of this investment will need to come from international capital sources.
ImpactA Global said it would be investing alongside the official sector and multilateral agencies, whose provision of revenue guarantees, insurance, and other credit enhancement support helps to de-risk investments.
First-loss protection
“Closing infrastructure gaps in key sectors like energy, health, and transportation is essential not only for driving economic growth but also for building more resilient economies and enhancing social well-being in Latin America and the Caribbean,” said Marisela Alvarenga, managing director, financial sector at IDB Invest.
IDB Invest’s commitment included $5m in first-loss protection for projects in Central America and the Caribbean, which Alvarenga said will be paid for by the United Kingdom Sustainable Infrastructure Programme.
“This is a great example of how the government is partnering with the private sector to harness the UK’s financial expertise and maximise impact. We are modernising our approach to international development to seize opportunities for growth and sustainable development like this one, while delivering value for money for taxpayers,” said Jenny Chapman, the UK’s minister of state for international development, Latin America and the Caribbean.
