On the 24th of September, ILX, alongside NorNAB, Norfund, and Norsif, hosted an event in Oslo to discuss sustainable, climate and development-focused investment opportunities in Emerging Markets for institutional investors, in particular Nordic-based pension funds.
At a time when sustainable development and climate finance investments are more important than ever, ILX, alongside NorNAB, Norfund, and Norsif hosted a seminar in Oslo to discuss Sustainable, Climate and Development-focused investment opportunities in emerging markets (“EMs”). The event aimed to inform pension funds, particularly Nordic-based pension funds, how EMs can provide a great opportunity for investments with direct climate and social impact and market equivalent risk-adjusted returns.
Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) play a significant role in developing investment opportunities, due to their unique position as experienced co-investing partners. These institutions, including EBRD, IFC, IFU, and Norfund came together to highlight the tools at their disposal to mitigate investors’ concerns when allocating to EMs. Vehicles such as ILX, Abler Nordic, or Norfund Climate Investment Fund work closely with MDBs and DFIs to provide institutional investors such as APG with a reliable way to no trade impact for returns when investing in EMs.
The afternoon was filled with engaging conversations with over 50 senior representatives from Nordic-based pension funds, investment-focused professionals, leading asset managers, academics, consultants and development finance experts from MDBs and DFIs.
The agenda included:
Introductory remarks by Mette Lindabaek and Karl Olav Sorensen, the general manager of Norsif and the CEO of NorNAB, respectively.
Samantha Attridge, Senior Research Fellow at the Overseas Development Institute (ODI), opened the discussion by highlighting the path forward: the need to align financial performance with positive social and environmental outcomes. While sustainable investing faces challenges, particularly in Emerging Markets, the urgency to address these issues is increasing. EMs present pension funds with opportunities for growth, portfolio diversification, and closing the financing gap for development mobilisation.
Ylva Lindberg, EVP Strategy and Communications at Norfund; Olimpia Gjino, Head of IFC Syndications EMEA, IFC; Christian Kleboth, Head of Debt Mobilisation at the EBRD; and Lars Krogsgaard, CIO at IFU, joined moderator Samantha Attridge in a discussion about how Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) are ideal partners for sourcing investment opportunities in Emerging Markets (EMs).
They highlighted the multifaceted nature of MDBs and DFIs, emphasising their ability to tailor their products to different investors’ classes and their flexibility in terms of commercial appetite. They are aiming to educate the market in their capacities.
Additionally, MDBs and DFIs are able to mitigate risks when investing in EMs thanks to their resources on the ground, knowledge of the different jurisdictions, and the credibility they bring through established channels to manage risk effectively.
Despite the multiple challenges of investing in EMs, MDBs and DFIs consistently deliver solid returns, with low losses and high recovery rates for EM risk. Their fiduciary duty and commitment to safeguarding peoples’ capital make them ideal partners for increasing impact in these markets.
Three investment vehicles were subsequently introduced: the ILX Fund, presented by Manfred Schepers, CEO and Founder; Abler Nordic, introduced by Arthur Sletteberg, Managing Director; and the Norfund Climate Investment Fund, presented by Bjørnar Baugerud, Senior Vice President. This was followed by a panel discussion moderated by Mats Boesen, Policy Director at Norad.
These vehicles exemplified various strategies that enable investors to capitalise on opportunities in EMs, generating both stable returns and measurable impact.
The panellists discussed the challenges involved in developing these vehicles. Issues such as unlocking data, securing the right mandate allocations, and identifying bankable projects remain obstacles to increasing investment mobilisation in EMs.
Norwegian economist, Chair of the Supervisory Board of APG AM, and former head of Norway’s Oil Fund, Knut Kjaer addressed the audience to discuss the significance of EMs for Norwegian pension funds. He highlighted how EMs lag behind developed markets in terms of income and GDP, despite the fact that the future of work and growth prospects lie in these regions.
Kjaer emphasised that EMs not only deliver impactful results from current efforts but also provide much sought-after portfolio diversification. He stressed that in order to achieve a successful green transition, the financing challenges faced by EMs must first be resolved and geographical limitations have to be overcome. The need for the funds, and in particular Norway’s Oil Fund, to have the mandate to invest in renewable energy projects outside the US and Europe is imperative.
Christian Rosenholm, Director for Institutional Engagement at the GIIN, dived into the gap between perceived and actual investment risks, often misaligned in investors’ view. He emphasised that to achieve the scale required for meaningful change, pension funds and their beneficiaries must focus on three key pillars: risk mitigation, financial returns, and generating positive social and environmental impact.
He then invited three pension fund representatives to the stage for a panel discussion, which he moderated: Gjermund Grimsby, Chief Advisor on Climate Change at KLP; Marcus Svedberg, Chief Economist at Folksam; and Shahzad Memon, Portfolio Manager for Responsible Investments at APG AM.
The panellists agreed that investing in EMs requires a shift in strategic asset allocation, but without sacrificing returns. From a pension fund perspective, a strong investment in EMs must include a market-based risk-return profile, opportunities to invest in large, scalable deals, and key partnerships with reputable actors such as MDBs and DFIs.
Ylva Lindberg concluded the seminar with an insightful summary, emphasising that investing in EMs is not only a growth opportunity but also an impact opportunity. She stressed that there is the will, the means, and the interest to invest in a more sustainable future.