PensionDanmark A/S and other Danish pension investors backed a state fund to finance emission-reduction projects in developing countries as the Scandinavian nation seeks to export its climate know-how abroad.
The Danish Climate Investment Fund received 1.2 billion kroner ($220 million) in commitments from private investors and the government, according to PensionDanmark, which contributed 200 million kroner. The fund will invest on commercial terms in projects that tackle climate change in emerging economies from Africa to Asia, PensionDanmark said in an e-mailed statement.
The initiative follows a United Nations pledge in 2009 to raise capital in richer countries for environmental projects in developing nations. Delegates at UN talks that year agreed to ramp up climate aid to an annual US$100 billion by 2020, including private-sector cash. Danish companies have long invested in clean-power projects at home, where the share of wind power in the energy mix is set to almost double by the end of the decade.
“This fund we have announced today is a JV between the Danish authorities and the pension funds and will be targeting climate-related investment opportunities in emerging markets,” PensionDanmark Chief Executive Officer Torben Moger Pedersen said by phone. “We in all cases will make sure that there is a substantial Danish content, technology or otherwise, in each project.”
The fund must invest in emission-reduction projects with a Danish financial interest such as a co-investor or technology supplier, according to PensionDanmark, which has 642,000 members.
The UN’s Green Climate Fund was opened in December to channel finance to emerging economies. Developing nations from India to China have said the GCF should compensate them for climate-related damage.
Today’s fund may cooperate with the GCF once the Songdo, Korea-based fund is more established, according to Pedersen.
“We expect to be co-investing with other investors in order to leverage the impact of the fund’s own capacity and I’m sure that the GCF will be a preferred partner in many of the projects,” he said. “They are not alternatives, they will be complementary vehicles.”
The fund must invest in emission-reduction projects with a Danish financial interest such as a co-investor or technology supplier, according to PensionDanmark, which has 642,000 members. It will yield a return of about 12 per cent a year and may spur total investments of as much as 9 billion kroner, based on experience from similar funding arrangements, it said.
PensionDanmark expects the four-year fund to raise a further 200 million kroner in a second round in the next few months, Pedersen said. The fund, which will also consider investment in Latin America and Europe, will finance part of the projects, with additional cash required from other public and non-state investors such as local banks. It will invest equity or other capital such as mezzanine debt depending on the project, according to Pedersen.
Pension administrator PKA A/S contributed 200 million kroner, retirement fund Paedagogernes Pensionskasse supplied 125 million kroner and private-equity investor Dansk Vaekstkapital 150 million kroner, the statement shows. The Danish state and its Investment Fund for Developing Countries, which co-invests with Danish companies, together provided 525 million kroner.