Investment heavyweights OMERS, CDPQ, and Wiltshire pledge support for transitioning debt in emerging markets.
In a significant move towards combating climate change, several prominent financial institutions have joined forces to invest in the energy transition in emerging markets.
Lombard Odier's Planetary Transition strategy will manage the listed equities allocation of the Clops portfolio, which represents 20% of the portfolio's assets. The Clops portfolio, owned by the Wiltshire Pension Fund, has allocated £75m to this strategy.
The EMTD fund, one of the investments within the Clops portfolio, is a $400m fund managed by Ninety One. This fund, which focuses on emerging markets, has garnered support from global pension funds such as OMERS and the Wiltshire local government pension scheme (LGPS) fund, as well as CDPQ, OMERS, and the Wiltshire Pension Fund themselves. Additional investors include BlackRock, the Global Infrastructure Partners (GIP), and the International Finance Corporation (IFC).
The EMTD fund is designed to provide commercial financing for energy transition projects in emerging markets, including clean infrastructure and technology, as well as decarbonisation. This investment is considered crucial for addressing global emissions, as many manufacturing processes have been outsourced to these markets.
Jennifer Devine, head of the Wiltshire Pension Fund, underscored the importance of investing in emerging markets for meeting the fund's target of reaching net zero by 2050. She acknowledged that investing in these markets can be challenging due to factors like data availability and environmental, social, and governance risks. However, she emphasised that these challenges are essential for addressing global emissions.
Marc-André Blanchard, ILN co-chair and executive vice-president and head of CDPQ Global, echoed Devine's sentiments, stating that institutional investors have a leadership role to play in the transition. He noted that much of the investment in the energy transition, particularly in middle-income emerging markets, is required in the form of private equity, private debt, project debt, and corporate debt.
The initiative, which also includes the U.S. Treasury and ILN, presents a crucial opportunity to have significant real-world impact for both climate and development goals. South African finance minister Enoch Godongwana praised the membership of the Investor Leadership Network (ILN) and the Bellagio Private Capital Mobilization Consortium, highlighting their potential to drive positive change.
Hendrik du Toit, ILN Co-Chair and Founder & Chief Executive, Ninety One, emphasised the need for institutional investors to focus on private sector investments for the energy transition, particularly in middle-income emerging markets. He believes that this strategy is part of the Wiltshire Pension Fund's innovative Climate Opportunities (Clops) portfolio, which aims to earn superior risk-adjusted returns by investing in a diversified mix of assets that support the transition to a low-carbon economy.
CDPQ, through its involvement in the EMTD fund, demonstrates a desire to actively participate in the energy transition and have an enduring impact. The strategy is part of a larger movement among institutions to take a proactive role in addressing climate change and promoting sustainable development.
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