Seeking significant positive impacts in addition to financial return

OP Finnfund Global Impact Fund I is the first global emerging markets impact fund in Finland. The fund targets significant positive impacts on, for instance, climate change, food security, gender equality and the availability of financing. As someone who has been keeping a close eye on the global impact investment market, I foresee substantial growth in impact investing in the coming years.

At the beginning of January, the fund announced that in the second round of funding it raised a further €58m in capital – the total fund size now stands at €135m. We are happy to see that the proposition clearly appeals to investors, as the first round of funding, which ended in the summer, raised €76m.

Finnfund, a Finnish development financier and impact investor acts as an anchor investor and advisor to the fund. The fund is managed by OP Asset Management, part of OP Financial Group, one of the largest banking groups in Finland.

Finnfund has more than 40 years of experience of investing in emerging markets, and our role is that of an advisor. The fund benefits from our expertise in identifying suitable investments born out of our long experience and extensive international networks.

OP Finnfund Global Impact Fund I focuses on three main industries in developing countries: renewable energy, financial institutions, and sustainable agriculture.

The fund promotes the achievement of the UN Sustainable Development Goals (SDGs) in a measurable way while providing an attractive return for investors. The fund seeks an internal rate of return (IRR) of approximately 8–12%.

It is clear that private sources of funding are crucial for solving sustainability challenges both on global and national levels. However, impact investing is not about charity but making a positive impact, as well as competitive investment yields.

The fund will invest in developing countries defined by the OECD, and the focus is very much on Africa.

Around 40-50 % of all investments will be allocated to Africa. The fund’s investment universe is the whole African continent. I can confirm, that Africa is indeed very much at the focus of the fund.

COVID-19 creates investment opportunities

The Covid-19 crisis has been an unprecedented shock to many businesses in emerging markets. Concurrently, it has created new opportunities both for companies and investors.

In a crisis like this, private companies often are a key source of initiative and innovation. For development financiers and impact investors, such as Finnfund – and OP Finnfund Global Impact Fund I – this is a moment to find new innovative companies to their portfolio. I strongly believe in the growth of impact investing in the coming years. In addition to competitive returns and responsibility criteria, investors increasingly want their investments to have a real impact. And despite the ongoing coronavirus crisis, many investors are excited by the growth potential of emerging markets.

Impact investing has rapidly grown from a niche product to a global market worth more than $500bn. According to the UN, the annual funding deficit required to achieve the sustainable development goals is €2,200bn.

OP Finnfund Global Impact Fund I made its first investment in the autumn. The fund contributed $12.5m towards a loan package to a company called Net1 Indonesia.

Net1 Indonesia is building internet connections in the world’s fourth most populous country, focusing on areas where there are either no or limited internet access alternatives available. Its goal is to provide access to fixed broadband connectivity to over 300,000 households. The importance of reliable internet access has grown especially during the coronavirus pandemic.

In addition to our key sectors, we are actively seeking interesting investment opportunities in the field of ICT – also in Africa.

Markus Pietikäinen
Chief Investment Officer, Finnfund

This text has been originally published in Africa Global Funds magazine on Janary 2021