JOHANNESBURG - Finland’s biggest mortgage lender has teamed up with financier Finnfund to launch a new investment vehicle focused on climate-friendly and social development projects in Africa.
The OP Finnfund Global Impact Fund I is holding its first closing on Wednesday, having amassed 76 million euros ($86 million) from investors including pension providers, family offices and charitable foundations.
Targeting 8% to 12% risk-adjusted returns a year on a net basis, the so-called impact fund will invest in a handful of projects vetted by state-owned Finnfund, a specialist lender focused on sustainable investments in the poorest parts of the world.
“We combine returns with impact -- that’s the added value this fund brings relative to other funds out there,” Markus Pietikainen, chief investment officer at Finnfund, said in an interview. “The market for impact funds is growing rapidly, because investors are no longer satisfied with just returns, they want to have an impact on society.”
The bulk of the investments will be in Africa, with target industries including renewable energy, agribusiness and financial institutions. Measured by enterprise value, the projects range in size from about 50 million euros to 150 million euros, with the fund’s slice worth roughly 10 million euros per project, and investments can take the form of senior debt or equity.
“This is the only long-term way to organize financing to resolve sustainability challenges,” Tuomas Virtala, head of asset management for corporate and institutional customers, at OP Corporate Bank, said in a press release.
A second closing is slated for the autumn, which may be open for investors from outside Finland, and likely to bring the fund to about 100 million euros, with a hard cap set at 150 million euros.
The impact it expects to make ranges from helping the climate to boosting gender equality and improving food security, and Pietikainen says Finnfund has seen a “strong correlation” between impact and returns.
“A commercially profitable and growing enterprise tends to have more impact,” he said. “We’re among the first, but we won’t be the last.”