IFC, a member of the World Bank Group, has launched an innovative program that aims to raise $5 billion from global institutional investors to modernize infrastructure in emerging markets over the next five years, opening up a new stream of capital flows to improve power, water, transportation, and telecommunications systems in developing countries.
The initiative, called MCPP Infrastructure, builds on the success of IFC’s Managed Co-Lending Portfolio Program, a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio. In its first phase, the program allocated $3 billion from the People’s Bank of China across 70 deals in less than two years. It demonstrated how large investors can benefit from delegating the processes of deal origination and approvals to IFC.
The first partnership under the program was signed with the global insurance company Allianz. Under the agreement, Allianz intends to invest $500 million, which will be channeled into IFC debt financing for infrastructure projects in emerging markets. IFC is also in advanced discussions with Eastspring Investments, the Asian asset management business of Prudential, for a commitment of $500 million. Similar discussions are being conducted with AXA, also for a commitment of $500 million.
MCPP Infrastructure is designed for institutional investors seeking to increase their exposure to emerging-markets infrastructure. IFC will originate, approve, and manage the portfolio of loans that will mirror IFC’s own portfolio in infrastructure.
It will do so in a manner agreed upfront with its partner investors, always subject to the overall governance of the platform.
“Modern infrastructure is essential for economic growth and lasting prosperity,” said IFC Executive Vice President and CEO Philippe Le Houérou. “Yet a huge investment gap exists in this sector—totaling trillions of dollars a year in emerging markets alone. MCPP Infrastructure marks a breakthrough in the search for large-scale financing solutions to the challenges of development. It is a key building block in the global effort to move from billions to trillions in development finance.”
Oliver Bäte, CEO of Allianz SE, said: “We work to ensure that our activities are profitable and sustainable. We create long-term value by embedding sustainability in our core business. The partnership with IFC and our co-investment in infrastructure is a perfect example how Allianz can provide thought leading investment expertise to support the economic development of emerging countries as well as serving the interest of our customers.”
With expected support from the Swedish International Development Cooperation Agency (Sida), IFC will provide a limited first-loss guarantee on the investments to meet the risk-reward profile that institutional investors require.
"We are in the process of finalizing a model where Sida’s guarantee instrument can catalyze private capital for sustainable infrastructure investments in developing countries,” said Marie Ottosson, Sida’s Acting Director-General. “This innovative partnership demonstrates how we can work together to reach the Sustainable Development Goals."
Next Finance , October 2016
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