Private capital is needed on a large scale in order to realise the United Nations’ Sustainable Development Goals (SDGs) by 2030 – and partnerships between pension funds and other actors are the way forward, according to PensionDanmark’s chief executive.
Torben Möger Pedersen, chief executive of the DKK224bn (€30bn) labour-market pension fund, told IPE: “If we are not able to mobilise capital on a relatively large scale, we will not be able to realise the goals.”
But he said he was quite optimistic that the international community would be able to get capital working to achieve this.
“Because of the low level of interest rates, investors are all looking for new assets in which to deploy capital, and if you look at the national action plans made by almost all governments on the SDGs, you will see that they realise large infrastructure assets that fit in well with most pension fund portfolios,” he said.
Möger Pedersen said it was critical for pension funds to identify where they could invest in assets at the right level of risk.
“This is why we have been stressing the potential for using blended finance in this, where the structure of the investment can be designed to combine finance from public budgets with that of pension funds, so you end up with risk mitigation in a way that makes it attractive for pension funds,” he said. “These blended finance initiatives are also attractive for governments because they get leverage by working together with the pension funds.”
The 17 SDGs were adopted by world leaders in September 2015 at a UN summit as part of the 2030 Agenda for Sustainable Development, and came into force at the beginning of last year. The targets involve countries acting to end all forms of poverty, fight inequalities and tackle climate change.
Möger Pedersen has been speaking at the United Nations’ annual conference in New York this week. He led a discussion at the organisation’s Private Sector Forum, and took part in the launch of the international initiative Partnering for Green Growth and Global Goals 2030, headed by Danish prime minister Lars Løkke Rasmussen.
He talked about the partnerships in which PensionDanmark was involved, including the Danish Climate Investment Fund and Danish Agribusiness Fund, both of which are run by the Danish Investment Fund for Developing Countries and funded by pension funds and public development money.
As an example of how the money is actually being deployed, PensionDanmark said that in late August, the Danish Climate Investment Fund – in which the pension fund has invested DKK200m – contributed $15m (€12.5m) to Mongolia’s third privately-financed windfarm as part of an international financing package.
“It was very promising to hear at the UN that there is very strong support for the Danish model of blended finance,” Möger Pedersen said.
However, it was not always necessary to mix pension fund capital with public money to create investments that can contribute to meeting the SDGs, he added.
“We recently launched the Africa Infrastructure Fund alongside other pension funds and AP Møller Holding, which is an example of private-private partnership – a big industrial company with deep expertise and long experience in this asset class linking up with pension fund money,” he said.
“This is a promising new structure which can be used as a model in other areas,” he continued, adding that is was similar to how Copenhagen Infrastructure Partners (CIP) worked – a private equity firm set up by PensionDanmark back in 2012 to invest in renewable energy assets in Europe and North America.
Möger Pedersen said there were still a number of unresolved issues concerning individual projects where governments and institutional investors were investing together, but these hurdles were not so high that they could not be overcome.
“Attitudes within governments to public-private partnerships are quite good and I think this will become a growth industry in the coming years,” he said.