SDG Frontier Fund first closing
First-of-its-kind Belgian impact fund brings together 9 private investors to support sustainable economic growth in African and Asian frontier markets.
Brussels, 2 July - The SDG Frontier Fund reached its first closing at 25.3 million euros thanks to the participation of nine Belgian private investors together with BIO, the Belgian Investment Company for Developing Countries. The SDG Frontier Fund (referring to the Sustainable Development Goals of the United Nations), targets to reach 50 million euros in subsequent closings. Its goal is to generate an attractive financial return combined with a high development impact.
Mr. Alexander De Croo, deputy prime minister and minister of Finance and Development Cooperation encouraged BIO to leverage on its experience of frontier markets to attract private investors to invest together with BIO and expressed his pride in the creation of the first SDG Frontier Fund: “The SDG Frontier Fund further strengthens the dynamism of Belgian Development Cooperation. It joins forces with private investors by leveraging classical development aid. The SDG Frontier Fund comes at a critical time to continue raising the financial resources needed to achieve the Sustainable Development Goals.”
The SDG Frontier Fund
The SDG Frontier Fund is a self-managed co-investment vehicle which seeks to invest together with BIO in private equity funds active in Africa and Asia. The fund will capitalize on BIO’s extensive expertise in the field since 2001, while benefiting from its services at middle and back office level. The Fund is driven by its quest to create both economic and social prosperity in developing countries, with the objective of creating sustainable livelihoods, while ensuring good governance.
The SDG Frontier Fund looks to participate in 5 to 12 funds, which in turn will invest in 10 to 15 local small and medium-sized enterprises (SMEs). This means that 50 to 180 SMEs in Africa and Asia will benefit from the fund’s support. The ambition is to combine a high development impact with an attractive financial return, at the same time as carefully managing the risk, as demonstrated by BIO’s historical performance. This first-of-its-kind investment fund in Belgium offers a uniquely counter cyclical opportunity to diversify an investor’s portfolio.
The SDG Frontier Fund already approved its first two investments:
African Rivers Fund III
The African Rivers Fund III is a, new to be established, mezzanine
fund that aims at providing growth capital to approximately 35 SMEs in
the Democratic Republic of Congo, Uganda and Angola, where the
availability of SME finance is limited. It wishes thereby to achieve
sustainable economic development by encouraging entrepreneurship in
these fast-growing markets, and by creating a local manufacturing,
services and agricultural base to provide Central African economies with
locally produced goods and services.
Excelsior Capital Vietnam Private Equity Fund
The Excelsior Capital Vietnam Private Equity Fund will support established Vietnamese SMEs active in different sectors in their growth, thereby taking advantage of the ongoing regional economic integration and meeting the needs of Vietnam’s growing middle class.
Currently, advanced discussions are taking place to invest in a third private equity fund in India with a specific focus on clean energy and energy efficiency.
In its first closing the SDG Frontier Fund has partnered with nine institutional and private investors, including AG Insurance, Belfius Insurance, King Baudouin Foundation, Volksvermogen, vdk bank, several family offices, and BIO.
Wim Vermeir, Chief Investment Officer of AG Insurance, “AG insurance is proud to be an anchor investor in the SDG Frontier Fund, not only because we were impressed by the expertise and professionalism of BIO’s team, but also because we are a responsible investor and a supporter of the UN Sustainable Development Goals.”
The SDG Frontier Fund looks forward to welcoming new private investors in its subsequent closings.
SDG Frontier Fund and covid-19
Businesses in Africa and Asia have been severely hit by the covid-19 crisis. The lockdowns and the cessation of economic activities are having a significant impact on SMEs. Emerging markets will likely be further affected by an expected decline of foreign direct investments. In this respect, many SMEs in Africa and Asia will be in need for capital to survive the crisis, which will unlock opportunities to make long-term investments with appealing long-term returns and unprecedented development impact.
It should be highlighted that after the recent completion of its first closing, the SDG Frontier Fund will exclusively invest in selected funds that are in their startup phase. These funds will have the means to invest in quality companies in need of funding, and as such will accomplish both a positive economical and developmental impact in these current turbulent times.
BIO facts and figures
BIO, the Belgian Investment Company for Developing countries, was founded in 2001 and is wholly owned by the Belgian State. BIO supports a strong private sector in developing and emerging countries via direct and indirect investments. It enables them to gain access to growth and sustainable development within the framework of the Sustainable Development Goals.
- 70 experienced Staff, including 25 Investment professionals, totalling 300+ years of relevant investment experience.
- More than 1 billion euros in assets under management, investing equity and debt into companies, financial institutions, funds, and infrastructure projects, with a strategic focus on SMEs.
- Committed a total of 199 mln euros in 31 different projects in 2019.
- Invested in more than 60 private equity funds since its creation.
- Contributed to creating or maintaining more than 212.000 direct and indirect jobs worldwide (based on the latest available figures).
An interview with Luuk Zonneveld, An-Heleen De Greef & Eric Van
Den Bossche on the SDG Frontier Fund, published in Eventail on the 10th of December, written by Cédric Boitte. This article was published in French.
In July it was announced that Feronia was facing bankruptcy and was to undergo a financial restructuring in order to secure the long-term future of PHC, its palm oil business located in the Democratic Republic of the Congo. On November 23rd, 2020, the formal restructuring agreement between the company and its lenders was signed.
The Climate Finance Leadership Initiative (CFLI), the Association of European Development Finance Institutions (EDFI) and the Global Infrastructure Facility (GIF), are working to identify discrete hurdles to climate finance in emerging markets; support public-private dialogue around those challenges; and highlight ways for the financial sector to help strengthen investment conditions.
This collaborative working paper — called “Private Sector Considerations for Policymakers” — was drafted with the input of experienced lenders and investors. We are now inviting comments from diverse stakeholders across business, government, and civil society to ensure that this document accurately reflects the most critical considerations for attracting private climate finance in emerging markets.