Pension asset owners Alecta and APK Pensionskasse have invested in the latest impact-oriented emerging market bond fund from Amundi and the International Finance Corporation (IFC).

The fund – Sustainable Emerging Economy Development Debt – has raised $436m from institutional investors. IFC and Cassa Depositi e Prestiti (CDP) are also named as backers in addition to Alecta and APK.

Launched on the sidelines of COP26, the fund builds on Amundi’s and IFC’s experience working on an emerging market green bond fund launched in 2018.

Tony Persson, head of fixed income and strategy at Alecta, said that the strategy, Emerging Green One, was a “proof of concept for catalysing green finance in emerging markets”.

“The investment gives Alecta an opportunity to support a more sustainable development by encouraging the issuance of green, social and sustainability-linked bonds in emerging markets,” he said.

“This is an example of Alecta’s ambition to combine attractive returns and positive impact for our beneficiaries.”

The public-private partnership provides a capital structure that seeks to limit the risk for commercial investors who might otherwise be averse to investing in impact-oriented bonds on their own, especially in less developed markets. A partial credit guarantee is provided by an IFC development finance tool called the International Development Association’s Private Sector Window.

To further support the strategy, a technical assistance facility was created to increase the quality and quantity of sustainable bond issuance in emerging markets.

“In terms of sustainability matters, many issuers from emerging markets are currently not in compliance with our ESG standards,” said Poul Thybo, head of investment at APK in Switzerland.

“Disengagement or divestment will not change that fact,” he said. “This investment by APK is a perfect example of how we can promote positive change in emerging markets while at the same time securing attractive returns for our beneficiaries.”

Jean-Jacques Barbéris, head of the institutional and corporate clients division and ESG at Amundi, said: “This fund is a great example of the benefits of public-private partnerships in creating new markets trying to help addressing financing gaps in regions where funding is most needed.”

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