The Danish early years teachers’ pension fund has invested into Danish SDG Investment Fund II, which aims to make 20 investments across Africa, Asia and Latin America in support of the green transition and improving social conditions.
Pædagogernes Pension, the Danish early years teachers’ pension fund, has made a DKK200m (€26.8m) investment into Danish SDG Investment Fund II, which has been topped up with a further DKK133.3m by development finance institution Impact Fund Denmark, formerly IFU.
The Article 9 fund, managed by Impact Fund Denmark, is a public-private partnership, which employs a matching strategy in which private investors contribute 60% of the total capital commitment, and Impact Fund Denmark contributes 40%.
The fund reached first close in November last year with just under DKK2.7bn in capital commitments from Impact Fund Denmark and pension companies PFA, PKA, P+ and PenSam.
This latest investment brings total capital commitments to DKK3bn with the objective of reaching a final close of DKK5bn by the end of 2025.
Commenting on the investment Sune Schackenfeldt, CEO of Pædagogernes Pension, said: “SDG Fund II is an investment that not only delivers solid returns, but also contributes to a more just and sustainable world.” He added: “For our members, it is important that through our investments we actively work for gender equality and improved social conditions – both in Denmark and globally.”
Investment focus
The fund aims to contribute to the realisation of the UN Sustainable Development Goals, in particular SDG 5 – Gender equality, SDG 8 – Decent work and economic growth, SDG 10 – Reduced inequalities, and SDG1 3 -Good health and wellbeing, through private investments in Africa, Asia and Latin America, with positive impacts expected across a wider range of SDGs.
The fund will focus on 13 countries where most of the investments will be made. These are India, Indonesia, Vietnam, Egypt, Kenya, Morocco, Nigeria, Senegal, South Africa, Brazil, Colombia, Mexico and Peru.
The investments ranging between DKK150m to DKK300m, 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.
Kristoffer Nilaus Tarp, head of investor relations for Impact Fund Denmark, told Impact Investor that Impact Fund Denmark has made three investments, which it is in the process of transferring to the fund. These include Redcliffe, a mobile diagnostics company in India, South African renewable energy firm Sturdee Energy and Imperium, a tea packaging family business in Morocco.
“The tea packaging company is an incredible business. Their main product is the hand-stitched premium tea bag, which requires significant manual and skilled labour. Ninety per cent of the workforce is made up of women, and we expect our investment to double their production capacity, which will result in another 800 employees while helping to transition the business to net zero,” said Nilaus Tarp, explaining that a portion of the investment will only be released upon the business fulfilling pre-defined social and environmental objectives.
Preferential return and loss guarantee
The fund, which is targeting an IRR of between 12-15%, has a built-in preferential return for private investors, which means they will have first right of return of 6%. After this, the return goes to Impact Fund Denmark until it reaches a further 6%. Beyond this threshold, private investors and Impact Fund Denmark will split any return.
There is also a loss guarantee provided by the EU which will cover private investors’ loss on individual portfolio investments of up to DKK535m providing further downside protection.
Impact Fund Denmark said this structure is designed to reduce investment risk while ensuring that the SDGs can be achieved through long-term investments.
Lars Bo Bertram, CEO of Impact Fund Denmark, said: “Private investors are often reluctant to invest in developing countries because of the high risk, but with SDG Fund II we have developed a model that creates attractive large-scale investment opportunities. We primarily invest in growth markets, have a well-thought-out distribution of risk and return, and an EU loss guarantee that makes the fund particularly attractive to private investors.”
