- The SDG Loan Fund has successfully mobilized USD 1.1 billion of investor capital to advance the United Nations Sustainable Development Goals (SDGs) in emerging and frontier markets, using an innovative “blended finance” model.
- Investors in the fund, including Allianz, FMO and Skandia, are providing capital for high-impact, SDG-aligned loans to local companies and projects across Latin America, Asia, Africa and Eastern Europe.
- Allianz Global Investors is managing the SDG Loan Fund and FMO Investment Management is originating and managing the loan portfolio. The John D. and Catherine T. MacArthur Foundation (MacArthur), has committed a USD 25 million guarantee for credit enhancement.
- The SDG Loan Fund’s large-scale and multi-sector reach are enabled by a first-loss investment from FMO, coupled with MacArthur’s guarantee. Together, these catalytic investments are unlocking USD 1 billion in private capital for affordable energy, financial inclusion and sustainable agriculture in emerging and frontier markets.
Allianz Global Investors (AllianzGI), FMO Investment Management (FMO IM), and the John D. and Catherine T. MacArthur Foundation (MacArthur) announced today that the SDG Loan Fund (the Fund) has successfully mobilized over USD 1.1 billion in private capital to advance the United Nations Sustainable Development Goals (SDGs) in emerging and frontier markets. The Fund’s capital is provided by a group of institutional investors, including Allianz, the Dutch development bank FMO, and Skandia.
The Fund’s “blended finance” structure enables leading institutional investors to co-invest in a portfolio of loan participations that support financial institutions and intermediaries serving small and medium-sized businesses in low- and moderate-income countries across Latin America, Asia, Africa, and Eastern Europe in three target sectors: energy sector, financial institutions, and agribusiness.
Initially conceived by AllianzGI, the Fund’s manager, and FMO IM, the portfolio manager, the Fund’s structure includes a “first-loss” investment from FMO and a partial, unfunded guarantee from MacArthur. Together, these credit enhancements are mobilizing capital from institutional investors who would not customarily be able to finance high-impact loans in emerging and frontier markets.
The SDG Loan Fund is designed to address the urgent need for capital to reach the SDGs in developing countries. Totaling USD 3.9 trillion in 2020, this critical annual funding gap increased by 56 percent after the outbreak of COVID-19 . The Fund builds on a growing range of efforts to mobilize capital from private sector investors for investments in emerging and frontier markets towards the SDGs. Overall, capital deployed by the SDG Loan Fund will focus on economic growth (Sustainable Development Goal 8), equality (Sustainable Development Goal 10) and climate (Sustainable Development Goal 13).
Once fully invested in approximately 100 high-impact loan participations, the Fund aims that its investments support close to 60,000 jobs and to avoid approximately 450,000 tCO2 eq of greenhouse gases per annum according to FMO’s historical experience and analysis. The Fund is expected to have a running start, with FMO warehousing approximately USD 100 million of eligible loans for the Fund.
“At Allianz Global Investors, we understand that blended finance has a crucial role to play in unlocking the private capital needed to spur development in emerging and frontier markets. Our partnership approach with FMO and the MacArthur Foundation has led to the creation of a compelling example of a concrete, innovative, market-led approach to mobilizing that capital at scale, helping ensure high-impact projects vital to the green transition receive the financing they need. We firmly believe the SDG Loan Fund will act as a blueprint for successful multi-stakeholder collaboration, which we hope to see many more examples of in the future” says Deborah Zurkow, Global Head of Investments at Allianz Global Investors.
“We are excited to partner with Allianz Global Investors and the MacArthur Foundation in our joint SDG Loan Fund. The capital pooled together through this blended finance structure is a demonstration that a shared vision to address the SDGs can result in finding solutions for very different types of investors. The Fund will allow FMO to provide more capital to its customers, supporting our shared mission to enhance local prosperity in developing countries globally. We are confident that together with Allianz Global Investors, we will ensure the Fund’s success in selecting and managing an impactful portfolio” says Nic Wessemius, Managing Director at FMO Investment Management.
“The MacArthur Foundation is proud to harness our long experience with impact investing and guarantees in support of the SDG Loan Fund. By filling critical funding gaps and fueling economic, environmental, and social benefits for tens of thousands of small businesses, families and communities, the Fund will demonstrate the power of catalytic capital to unlock investment and impact that would not otherwise be possible,” says Debra Schwartz, Managing Director of Impact Investments at the MacArthur Foundation.
Allianz Global Investors is a leading active asset manager, managing EUR 516 billion* in assets for individuals, families and institutions worldwide. By being active and investing for the long term, our goal is to elevate the investment experience for our clients and generate value every step of the way.
*Data as at 30 September 2023. Total assets under management are assets or securities portfolios, valued at current market value, for which Allianz Asset Management companies are responsible vis-á-vis clients for providing discretionary investment management decisions and portfolio management, either directly or via a sub-advisor. This excludes assets for which Allianz Asset Management companies are primarily responsible for administrative services only. Assets under management are managed on behalf of third parties as well as on behalf of the Allianz Group.
The Allianz Group is one of the world's leading insurers and asset managers with more than 122 million* private and corporate customers in more than 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 706 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.7 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2022, over 159,000 employees achieved total revenues of 152.7 billion euros and an operating profit of 14.2 billion euros for the group***.
* Including non-consolidated entities with Allianz customers.
** As of September 30, 2023.
*** As reported – not adjusted to reflect the application of IFRS 9 and IFRS 17.
FMO is the Dutch entrepreneurial development bank. As a leading impact investor, FMO supports sustainable private sector growth in developing countries and emerging markets by investing in ambitious projects and entrepreneurs. FMO believes that a strong private sector leads to economic and social development and has a 50+ year proven track-record in empowering entrepreneurs to make local economies more inclusive, productive, resilient, and sustainable. FMO focuses on three sectors that have high development impact: Agribusiness, Food & Water, Energy, and Financial Institutions. With a total committed portfolio of EUR ~13 billion spanning over 85 countries, FMO is one of the larger bilateral private sector development banks globally.
Through FMO Investment Management, FMO’s wholly owned investment firm, investors can obtain access to FMO’s deal flow in sustainable emerging market investments. By joining forces, we scale up our contribution to the UN Sustainable Development Goals.
For more information, please visit www.fmo.nl / www.fmo-im.nl
About the John D. and Catherine T. MacArthur Foundation
The John D. and Catherine T. MacArthur Foundation – a global philanthropy with offices in Chicago, Nigeria, and India – supports creative people, effective institutions, and influential networks building a more just, verdant, and peaceful world. MacArthur’s Impact Investment program is working to build the field of impact investing and provide catalytic capital to address social and environmental challenges around the world. In 2019, the Foundation and its partners, The Rockefeller Foundation and the Omidyar Network, launched the Catalytic Capital Consortium to help the fast-growing field of impact investing realize its full potential.
I am an expert in sustainable finance and impact investing, and I can confidently provide insights into the SDG Loan Fund and its innovative approach to advancing the United Nations Sustainable Development Goals (SDGs) in emerging and frontier markets. My knowledge is rooted in the intricacies of sustainable finance, blended finance models, and the broader landscape of impact investing.
Now, let's delve into the concepts used in the provided article:
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SDG Loan Fund Overview:
- The SDG Loan Fund has successfully mobilized over USD 1.1 billion of investor capital.
- It focuses on advancing the UN Sustainable Development Goals in emerging and frontier markets.
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Blended Finance Model:
- The Fund employs a "blended finance" model, a strategic combination of public and private funds to address sustainable development challenges.
- This model involves institutional investors, including Allianz, FMO, and Skandia, co-investing in a portfolio of loan participations.
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Investors and Fund Management:
- Allianz Global Investors manages the SDG Loan Fund.
- FMO Investment Management originates and manages the loan portfolio.
- The John D. and Catherine T. MacArthur Foundation provides a USD 25 million guarantee for credit enhancement.
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Fund's Reach and Sectors:
- The Fund's reach spans Latin America, Asia, Africa, and Eastern Europe.
- It targets three sectors: energy, financial institutions, and agribusiness.
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Structural Components:
- The Fund includes a "first-loss" investment from FMO and a partial, unfunded guarantee from MacArthur.
- These credit enhancements aim to mobilize capital from institutional investors who may not typically invest in emerging and frontier markets.
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Addressing Funding Gaps:
- The SDG Loan Fund is designed to address the urgent funding gap for SDGs in developing countries, especially exacerbated by a 56% increase after the COVID-19 outbreak in 2020.
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Impact and Goals:
- The Fund's deployment is focused on Sustainable Development Goals 8 (economic growth), 10 (equality), and 13 (climate).
- It aims to create a portfolio supporting close to 60,000 jobs and avoiding approximately 450,000 tCO2 eq of greenhouse gases per annum.
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Partnership Statements:
- Statements from key partners, including Deborah Zurkow (Allianz Global Investors), Nic Wessemius (FMO Investment Management), and Debra Schwartz (MacArthur Foundation), highlight the collaborative efforts and shared vision.
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Allianz Global Investors and Allianz Group:
- Allianz Global Investors is a leading active asset manager within the Allianz Group.
- The Allianz Group is one of the world's leading insurers and asset managers.
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FMO - Dutch Entrepreneurial Development Bank:
- FMO is described as the Dutch entrepreneurial development bank, focusing on impact investing in sectors such as agribusiness, energy, and financial institutions.
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MacArthur Foundation:
- The John D. and Catherine T. MacArthur Foundation, a global philanthropy, supports impact investing through its Impact Investment program.
In summary, the SDG Loan Fund represents a pioneering effort in leveraging blended finance to address critical funding gaps and drive sustainable development in developing countries, with a focus on specific sectors aligned with the UN SDGs. The collaboration of key institutional investors and strategic partnerships underscores the importance of multi-stakeholder approaches in achieving impactful outcomes.
