CDPQ, OMERS and Wiltshire Back Ninety One's $400M Emerging Markets Transition Debt Fund

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Aysha Gilmore of Net Zero Investors reports OMERS, CDPQ and Wiltshire commit to emerging markets transition debt:

Global pension funds, including CDPQ, OMERS and the Wiltshire local government pension scheme (LGPS) fund, have committed to a $400m Emerging Markets Transition Debt (EMTD) fund managed by Ninety One.

The debt portfolio will focus on providing companies in emerging markets with commercial financing for energy transition projects including clean infrastructure and technology as well as decarbonisation.

Ninety One stated that the initial $400m raised for the EMTD fund was from a range of institutional investors, including CAD $434bn CDPQ, one of Canada’s largest pension fund managers, $128.6bn Canadian defined benefit pension plan OMERS and £3.1bn UK Local Government Pension Scheme fund Wiltshire.

Jennifer Devine, head of Wiltshire Pension Fund, said that investing in emerging markets is “vital” for meeting the fund’s target of reaching net zero by 2050.

“Although this can be more challenging in terms of data availability, environmental, social and governance risks etc, in the western world, we have outsourced a lot of our manufacturing to emerging markets, and with that we have effectively outsourced a large amount of our emissions. This is therefore a global issue, and supporting emerging markets to transition is essential in order to get to net zero.

“This strategy is part of our innovative Climate Opportunities (Clops) portfolio, which is a multi-asset portfolio aiming to earn superior risk-adjusted returns by investing in a diversified mix of assets which have the intention to deliver real World change by actively supporting the transition to a low carbon economy,” she told Net Zero Investor.

Wiltshire Pension Fund has allocated £75m to its Clops portfolio, with it announcing this month that Lombard Odier’s Planetary Transition strategy will manage the listed equities allocation of the portfolio, which represents 20% of portfolio assets.

The announcement of the investor interest in the fund comes as South African finance minister Enoch Godongwana praised the membership of the Investor Leadership Network (ILN) and the Bellagio Private Capital Mobilization Consortium toward its goals of increasing investment flows of institutional capital into emerging markets.

Alongside Wiltshire, Marc-André Blanchard, ILN co-chair and executive vice-president and head of CDPQ Global and global head of sustainability, said: “Institutional investors have a leadership role to play in the transition and finance opportunities like the EMTD fund can provide a solution by focusing on private sector investments.

“Aligned with our goal to deploy constructive capital to decarbonize the global economy, this initiative – alongside the U.S. Treasury and ILN – demonstrates CDPQ’s desire to actively participate in the energy transition and to have an enduring impact.”

Hendrik du Toit, ILN Co-Chair and Founder & Chief Executive, Ninety One, added: “So far institutional investors’ investment in emerging markets has been largely focused on public listed equities and sovereign debt. However, 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.

“We believe that this is a crucial opportunity to have significant real-world impact for both climate and development goals.”

Biz Community also reports G20 ministers spotlight $400m Emerging Markets Transition Debt scheme:

US Treasury Secretary Janet Yellen, Brazilian Finance Minister Fernando Haddad, and South African Finance Minister Enoch Godongwana praised the progress of the Investor Leadership Network and Bellagio Consortium. Their work aims to increase institutional investments in emerging markets.

Their sentiment underscores the progress of the Emerging Markets Transition Debt (EMTD) initiative, where investors are committed to a $400m investment in the energy transition in emerging markets.

This fund, supported by Investor Leadership Network members, Legal and General Investment Management, and Wiltshire Pension Fund, will target clean infrastructure, technology, and decarbonisation projects.

For many of the investors involved, the participation in this initiative would represent a new step forward aimed at helping to close the important financing gap in the decarbonisation of emerging and developing economies.

The purpose of the EMTD initiative is to provide companies in emerging markets with commercial financing to make critical investments, including in low-emission infrastructure and in heavy emitting companies with a credible transition plan—helping reduce carbon emissions and supporting the global energy transition.

This approach is consistent with the goals of the Partnership for Global Infrastructure and Investment (PGII), an initiative that President Biden and G7 leaders launched in 2022.

The Bellagio Consortium was launched in Paris by Secretary Yellen as a partnership between the US Treasury and the Investor Leadership Network – with the support of The Rockefeller Foundation - to undertake a variety of work aimed at increasing institutional investors' climate- and development-aligned investment in emerging markets over the coming years.

Significant progress has been made since the launch in 2023. At Cop28 in Dubai, the Consortium and the ILN announced a key partnership with the United States Trade and Development Agency (USTDA) to provide $100m through a technical assistance funding window to help prepare projects in key emerging markets for investment.

During the 2024 Spring Meetings of the World Bank and International Monetary Fund, the ILN, The Rockefeller Foundation, and the US Treasury co-hosted a first-of-its-kind forum for chief investment- and chief risk officers from institutional investment groups. The forum aimed to address barriers to investing in emerging markets and developing countries to finance critical climate projects.

Advancing Treasury priorities

Responding to this new initiative, Janet Yellen, United States Secretary of the Treasury, said it advances key Treasury priorities.

"Since the start of the Biden-Harris Administration, the Treasury has actively worked to promote economic growth, stability, and resilience globally, including helping countries accelerate their energy transitions and achieve their climate goals.

“To support these goals, President Biden and G7 leaders launched the Partnership for Global Infrastructure and Investment, through which we are driving investment flows into critical sectors that advance inclusive and sustainable growth and combat climate change around the world.

"As part of PGII, we have been working with investors like those in the ILN to find ways to increase climate- and development-aligned investments in emerging markets, leading to this new initiative.

“We are optimistic that all these efforts will lead an increasing number of investors to explore new opportunities in emerging markets, driving economic growth and dynamism.”

“Institutional investors have a leadership role to play in the transition, and finance opportunities like the EMTD fund can provide a solution by focusing on private sector investments," commented Marc-André Blanchard, ILN co-chair and executive vice-president and head of CDPQ Global and Global Head of Sustainability, CDPQ.

"Aligned with our goal to deploy constructive capital to decarbonise the global economy, this initiative – alongside the US Treasury and ILN – demonstrates CDPQ’s desire to actively participate in the energy transition and to have an enduring impact.”

Building energy momentum

Hendrik du Toit, ILN co-chair and founder and chief executive of Ninety One adds: “We are grateful to Secretary Yellen for her support as well as the investors who have anchored the strategy, including ILN members, CDPQ and OMERS and UK investors, LGIM and Wiltshire Pension Fund.

“Momentum is building for the emerging market energy transition, and while there are real risks that need to be addressed in these markets, the perception of risk is much higher than realised risks historically. So far institutional investors’ investment in emerging markets has been largely focused on public-listed equities and sovereign debt.

"However, 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 Emerging Market Transition Debt initiative is a mechanism to both allocate capital to the emerging market energy transition and to catalyse further such investment.

"We believe that this is a crucial opportunity to have significant real-world impact for both climate and development goals. A successful global energy transition is not possible without a successful emerging markets transition.”

Celebrating strategic milestones

“We are excited to stand here alongside Secretary Yellen, Minister Godongwana and our partners to celebrate this important milestone of progress for the Bellagio Private Capital Mobilization Consortium,” said Amy Hepburn, chief executive officer of the Investor Leadership Network.

“This milestone underscores that the right kinds of public-private partnerships, built to be focused on building trust among parties, learning from each other, and seeking new ways to look at old problems, can break down barriers that once seemed insurmountable.

"We are looking forward to continued progress from ILN members and Consortium, especially as we look toward our Global Investor Forum later this year in Cape Town, South Africa.”

To help vulnerable populations and combat the climate crisis, it's crucial to invest institutional capital in emerging markets and developing countries, said Rajiv J. Shah, president of The Rockefeller Foundation.

"This initiative is proof of what’s possible when diverse partners come together to unlock private capital for critical energy transition, climate resilience, and other investments in the developing world.

"The Rockefeller Foundation is proud to help advance this effort, which began with a convening at our Bellagio Center, to bring power—and progress—to those without electricity access."

CDPQ issued a press release stating US Treasury Secretary Janet Yellen, G20 Finance Ministers highlight work of the investor leadership network at the G20 finance ministerial in Rio de Janeiro:

United States Secretary of the Treasury Janet L. Yellen, alongside South African Finance Minister Enoch Godongwana praised continued progress being made by members of the Investor Leadership Network and the Bellagio Private Capital Mobilization Consortium toward its goals of increasing investment flows of institutional capital into emerging markets.

Today’s announcement highlights progress made toward the Emerging Markets Transition Debt (EMTD) initiative. Under this initiative, investors have committed to invest $400 million into the energy transition in emerging markets, with a focus on investments in three areas: clean infrastructure, clean technology, and decarbonization.  

As part of EMTD, ILN members Ninety One, CDPQ, and OMERS, alongside other institutional investors including the UK’s Legal and General Investment Management and Wiltshire Pension Fund, have expressed interest in contributing commercial capital to a new private sector initiative – “Emerging Markets Transition Debt”– a debt portfolio that will invest, subject to their customary approval requirements, an initial $400 million into the energy transition in emerging markets – with a focus on investments in three areas: clean infrastructure, clean technology, and decarbonization. For many of the investors involved, the participation in this initiative would represent a new step forward aimed at helping to close the important financing gap in the decarbonization of emerging and developing economies.

The purpose of the EMTD initiative is to provide companies in emerging markets with commercial financing to make critical investments, including in low-emission infrastructure and in heavy emitting companies with a credible transition plan—helping reduce carbon emissions and supporting the global energy transition. This approach is consistent with the goals of the Partnership for Global Infrastructure and Investment (PGII), an initiative that President Biden and G7 leaders launched in 2022.

The Bellagio Consortium was launched in Paris by Secretary Yellen as a partnership between the US Treasury and the Investor Leadership Network – with the support of The Rockefeller Foundation - to undertake a variety of work aimed at increasing institutional investors climate- and development-aligned investment in emerging markets over the coming years.

Significant progress has been made since the launch in 2023. At COP28 in Dubai, the Consortium and the ILN announced a key partnership with the United States Trade and Development Agency (USTDA) to provide $100 million through a technical assistance funding window to help prepare projects in key emerging markets for investment. During the 2024 Spring Meetings of the World Bank and International Monetary Fund, the ILN, The Rockefeller Foundation, and the U.S. Treasury co-hosted a first-of-its-kind Forum for Chief Investment and Chief Risk Officers from institutional investment groups to address barriers to making these kinds of investments into emerging markets and developing countries to finance critical climate projects.

Hon. Janet L. Yellen, United States Secretary of the Treasury: “This new initiative advances key Treasury priorities. Since the start of the Biden-Harris Administration, Treasury has been actively pursuing work to promote economic growth, stability, and resilience in countries around the world, including by equipping countries to accelerate their energy transitions and realize their climate ambitions."

“To support these goals, President Biden and G7 leaders launched the Partnership for Global Infrastructure and Investment, through which we are driving investment flows into critical sectors that advance inclusive and sustainable growth and combat climate change around the world.  And as part of PGII, we have been engaging with investors like those in the ILN to find ways to increase institutional investors’ climate- and development-aligned investment in emerging markets—leading to this new initiative."

“We are optimistic that all these efforts will lead an increasing number of investors to explore new opportunities in emerging markets, driving economic growth and dynamism.”

Marc-André Blanchard, Executive Vice-President and Head of CDPQ Global and Global Head of Sustainability and ILN Co-Chair, CDPQ: “Institutional investors have a leadership role to play in the transition and finance opportunities like the EMTD fund can provide a solution by focusing on private sector investments. Aligned with our goal to deploy constructive capital to decarbonize the global economy, this initiative – alongside the U.S. Treasury and ILN – demonstrates CDPQ’s desire to actively participate in the energy transition and to have an enduring impact.”

Hendrik du Toit, Founder & Chief Executive, Ninety One and ILN Co-Chair: “We are grateful to Secretary Yellen for her support as well as the investors who have anchored the strategy, including ILN members CDPQ and OMERS and UK investors LGIM and Wiltshire Pension Fund.”

“Momentum is building for the emerging market energy transition, and while there are real risks that need to be addressed in these markets, the perception of risk is much higher than realized risks historically. So far institutional investors’ investment in emerging markets has been largely focused on public listed equities and sovereign debt. However, 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 Emerging Market Transition Debt initiative is a mechanism to both allocate capital to the emerging market energy transition and to catalyze further such investment.  We believe that this is a crucial opportunity to have significant real-world impact for both climate and development goals. A successful global energy transition is not possible without a successful emerging markets transition.”

Amy Hepburn, Chief Executive Officer, Investor Leadership Network: “We are excited to stand here alongside Secretary Yellen and Godongwana and our partners to celebrate this important milestone of progress for the Bellagio Private Capital Mobilization Consortium,” said Amy Hepburn, CEO of the Investor Leadership Network.”

“This milestone underscores that the right kinds of public-private partnerships, built to be focused on building trust among parties, learning from each other, and seeking new ways to look at old problems, can break down barriers that once seemed insurmountable. We are looking forward to continued progress from ILN members and Consortium, especially as we look toward our Global Investor Forum later this year in Cape Town, South Africa.”

Dr. Rajiv J. Shah, President, The Rockefeller Foundation: “To advance opportunity for vulnerable people and reverse the climate crisis, we must unleash institutional capital in emerging markets and developing countries. This initiative is proof of what’s possible when diverse partners come together to unlock private capital for critical energy transition, climate resilience, and other investments in the developing world. The Rockefeller Foundation is proud help advance this effort, which began in a convening at our Bellagio Center, and others to bring power – and progress – to those without electricity access.”

ABOUT THE EMERGING MARKET TRANSITION DEBT INITIATIVE

The Emerging Market Transition Debt (EMTD) strategy is a new investment vehicle managed by Ninety One to catalyze investment into the EM energy transition. The strategy will aim to provide EM companies with commercial financing to support efforts in reducing real-world carbon emissions. It will provide credit to high-emitting companies which have strong potential to reduce emissions. This is a significant way to help bring about an energy transition, with the simultaneous goal of providing investors with an appropriate risk-adjusted return.

The EMTD strategy has been developed in collaboration with several global capital providers and advisors, including Cambridge Associates and Wiltshire Pension Fund.

ABOUT THE INVESTOR LEADERSHIP NETWORK

The Investor Leadership Network was launched at the 2018 G7 to facilitate and accelerate collaboration by leading institutional investors to drive the transition to a sustainable and inclusive global economy. As the leading network of investors taking action for people, planet and prosperity, the CEO-led group is composed of 13 global institutional investors representative of six countries, with over US$10 trillion in assets under management.

Operating as an open and collaborative platform, members pool resources, expertise, and networks to develop, promote and deliver action-based and scalable initiatives on major global issues such as climate change; equity, diversity and inclusion; and private capital mobilization. Every initiative is evidence-based, measurable, and drives macro change. Member commitment is leveraged through a central convening body, the Secretariat, that threads the needle among initiatives and tracks and reports impact.

The ILN benefits from the participation and support of various partners, including governments, foundations, nonprofits, multilateral institutions, and other industry bodies, while remaining fully autonomous.

ABOUT CDPQ

At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2023, CDPQ’s net assets totalled CAD 434 billion. For more information, visit cdpq.com, consult our LinkedIn or Instagram pages, or follow us on X.

CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.

ABOUT NINETY ONE

Ninety One is an active, global investment manager managing £128.6 billion in assets (as at 30.06.24). Our goal is to provide long-term investment returns for our clients while making a positive difference to people and the planet. Established in South Africa in 1991, as Investec Asset Management, the firm began as a small start-up offering domestic investments in an emerging market. In 2020, as a global firm proud of our emerging market roots, we demerged to become Ninety One.  We are committed to developing specialist investment teams organically. Our heritage and approach let us bring a different perspective to active and sustainable investing across equities, fixed income, multi-asset and alternatives to our clients - institutions, advisors and individual investors around the world.

For more information, please visit NinetyOne.com

ABOUT THE ROCKFELLER FOUNDATION

The Rockefeller Foundation is a pioneering philanthropy built on collaborative partnerships at the frontiers of science, technology, and innovation that enable individuals, families, and communities to flourish. We make big bets to promote the well-being of humanity. Today, we are focused on advancing human opportunity and reversing the climate crisis by transforming systems in food, health, energy, and finance. For more information, sign up for our newsletter at www.rockefellerfoundation.org/subscribe and follow us on X @RockefellerFdn and LI @the-rockefeller-foundation.

Pretty big announcement for late July so let me get to it.

Late last year, Ninety One launched a debt strategy to target EM energy transition:

Global investment manager Ninety One has developed an Emerging Market Transition Debt (EMTD) strategy to catalyse investment into the EM energy transition.

The strategy – developed in collaboration with several global capital providers and advisors including Cambridge Associates and Wiltshire Pension Fund – aims to provide companies within emerging markets with commercial financing to support efforts in reducing real-world carbon emissions. It also plans to provide credit to high-emitting companies which have strong potential to reduce emissions.

According to Ninety One, this is a significant way to help bring about an energy transition, with the simultaneous goal of providing investors with an appropriate risk-adjusted return.

“Working closely with our foundational partners, we have purpose built this strategy not only to maximise real world impact, but also to deliver commercially attractive risk adjusted returns,” said Matt Christ, portfolio manager for EMTD.

“We are well positioned to lean into the secular growth tailwind created by the urgent need to decarbonise emerging markets. EMTD is proof-positive that investors shouldn’t have to sacrifice return for impact.”

According to the International Energy Agency, investment into clean energy in emerging markets needs to triple in the coming years, with estimates suggesting that China is the only emerging market that could self-fund a transition. Unlocking global capital, therefore, is vital.

Ninety One said that they will work with leading companies in multiple emerging markets to support their transition activities when the solution is brought to market in early 2024.

Nazmeera Moola, chief sustainability officer at Ninety One, added: “A successful global energy transition is not possible without a successful emerging markets transition. This is the only way we will collectively achieve net zero. Specifically, we believe there is an opportunity to support and grow the corporate sector, by using debt to finance the climate-oriented evolution of their businesses. This provides competitive returns with substantial climate impact.”

I agree with Nazmeera Moola of Ninety One: "A successful global energy transition is not possible without a successful emerging markets transition. This is the only way we will collectively achieve net zero."

Moola adds: "Specifically, we believe there is an opportunity to support and grow the corporate sector, by using debt to finance the climate-oriented evolution of their businesses. This provides competitive returns with substantial climate impact."

The problem is how do we create winning conditions where private capital is incentivized to invest in emerging market companies looking to transition to net zero?

After all, nobody is doing this for charity, they expect a return on their investment.

This is where the US Treasury, the ILN and and the Bellagio Private Capital Mobilization Consortium and others play a critical role to figure out a way to bring institutional capital to the table to make sure there is a long-term commitment in aiding emerging markets transition to net zero.

Those of you too young to remember should look up how Brady bonds fundamentally transformed the landscape for sovereign finance in developing countries and continue to do so in a post-pandemic world.

Now, I'm not going to lie to you, this initiative carries tremendous risks -- some are traditional risks associated with emerging markets -- but others are more common in the ESG world of investing, like how do we measure progress and is the data reliable, especially in emerging markets where governance and laws aren't always up to snuff?

But there are also tremendous opportunities and lots of new funds are betting big on emerging markets in private credit and other areas of specialized finance.

The bottom line is this: we cannot ignore emerging markets if we are to achieve net zero by 2050.

This is what Marc-André Blanchard, ILN co-chair and executive vice-president and head of CDPQ Global and global head of sustainability, and Hendrik du Toit, ILN Co-Chair and Founder & Chief Executive, Ninety One, both stressed in the press release along with others.

And again, CDPQ, OMERS and Wiltshire are not backing Ninety One's emerging markets transition debt fund for fun or to make a statement in clean energy, they expect attractive long-term risk-adjusted returns.

I submit the success of this fund will be critical as it will lay the foundations for more funds like this one focusing on investing in the transition economy in emerging markets.

And again , the timing is a bit tough as the world enters a global recession and emerging markets feel the heat of Fed rate hikes but there are great opportunities here for skilled investors who know how to properly assess risk. 

Still, if the world is to achieve net zero by 2050, it must invest heavily in the transition economy in emerging markets and this will require a strong commitment by global institutional investors to invest there in many asset classes like private debt and especially infrastructure.

Below, US Treasury Secretary Janet Yellen has highlighted the urgent need for $3 trillion annually to finance the global transition to a low-carbon economy, a significant increase from current levels. Speaking in Belem, Brazil, Yellen underscored that this investment is crucial for achieving net-zero emissions and represents the "Single-greatest economic opportunity of the 21st century." this statement follows the recent G20 finance leaders meeting in Rio De Janeiro.

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