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Danish pension funds join global infrastructure-financing partnership

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Two of Denmark’s large labour-market pension funds – PKA and PensionDanmark – are among the governments, banks and other organisations to launch an international project aimed at “mobilising” $100bn (€92bn) in private financing over the next five years for infrastructure in developing countries. 

The project, named the Sustainable Development Investment Partnership (SDIP), was announced as part of the United Nations-sponsored Financing for Development conference now taking place in Addis Ababa.

The parties involved are not pledging to provide the investment but rather to work to make the conditions more attractive for the private sector to get involved, by reducing political, currency, regulatory and other risks.

Michael Nellemann Pedersen, head of investment at PKA, said: “At COP15 in Copenhagen (the 2009 UN Climate Change Conference), it was decided that industrialised countries should mobilise $100bn a year for climate-related investments in developing countries.

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“So we can fully endorse the basic idea behind the SDIP to find the right models for such financing for sustainable infrastructure in developing countries and emerging markets.”

PKA said it needed to have effective financing models to get a good balance between risk and return when it came to developing countries.

Besides the Danish pension funds, founding members of the partnership include the Danish Investment Fund for Developing Countries (IFU), Citi, Deutsche Bank, East Capital, Standard Chartered, Storebrand, Sumitomo Mitsui Banking Corporation, the Bill & Melinda Gates Foundation, Development Bank of South Africa, International Finance Corporation and the Senegal Sovereign Wealth Fund (FONSIS). 

The governments of Canada, Denmark, the Netherlands, Norway, Sweden, the US and the UK are also among the founders.

The World Economic Forum said it and the Organisation for Economic Co-operation and Development (OECD) were providing the partnership with institutional support.

The SDIP aims to create investment opportunities in water, sanitation, transport, green energy, agriculture, health, telecommunications and climate adaptation in developing countries, the World Economic Forum said.

Even though expected returns on investment and long-term cash flows offered in emerging markets are higher than in the industrialised world, infrastructure investments in developing countries are held back by political and financial risks, it said. 

The forum said the partnership would mobilise such investment by “improving and enhancing risk-mitigation tools to reduce political, regulatory, credit, currency and liquidity threats”.

Richard Samans, head of the Centre for the Global Agenda, and member of the World Economic Forum’s managing board, said: “Expanding public/private cooperation in the form of blended finance is one of the most important ways the international community can support developing countries as they seek to generate the very large amount of domestic and foreign investment required to meet their sustainable development goals by 2030.”

Nellemann Pedersen said PKA had seen that public/private partnership models for infrastructure financing worked well in more traditional financial markets when it came to large investments. 

“Such models are beneficial for all parties involved, and it is right to expand them to developing countries, which in many areas are in need of long-term capital,” he said.

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