Denmark ramps up Asia, EM climate investment push | ESG

Denmark’s government and development fund are making progress on several climate finance initiatives for emerging markets, with Asia as a key focus, and are keen for institutional investors to participate.  

The ventures include the Investment Mobilisation Collaboration Alliance (IMCA); the capital raise for the second Danish SDG Investment Fund; and recent launches of climate and nature investment coalitions.   

IMCA is a blended finance partnership between Nordic countries and the US to scale up and accelerate private climate finance mobilisation.

The second SDG Fund – led by the Danish Investment Fund for Developing Countries (IFU) – is seeking asset owner participation, with its predecessor now fully invested. Both aim to contribute to achieving the UN’s Sustainable Development Goals (SDGs)).   

In addition, IFU is one of the sovereign backers of the Asian Development Bank’s planned $12 billion climate lending programme, known as the Innovative Finance Facility for Asia and the Pacific (IF-CAP).

The focus on fossil fuel-heavy Asia is understandable: the region is home to more than half the world’s population and produces more than half of greenhouse gas emissions. It is also particularly vulnerable to the effects of climate change.

AsianInvestor learned about the current status of IMCA from Jesper Hilsted Andersen, thematic chief counsellor for development finance for Denmark’s Ministry of Foreign Affairs. 

After its launch at the COP 28 climate talks in December 2023, the alliance raised a first fund focused on energy transition.

That saw Denmark and the US jointly hand $15 million each to two asset managers – India’s Eversource Capital and Swiss firm ResponsAbility – with the expectation that they would each invest $75 million of their own capital alongside that.  

Jesper Hilsted Andersen
Danish government

The next fund is now under way, focused on climate adaptation, and IMCA expects to unveil plans for the third at COP 29 in November, said Andersen.

“We are working with USAID [the US Agency for International Development] and Sida [the Swedish International Development Cooperation Agency] to mobilise around $500 million in private capital for investments in adaptation.”     

IMCA made a call for proposals, having put up $100 million in development guarantees from Sweden and Denmark plus $5 million in technical assistance funding from USAID, Andersen said.

Of the 40-plus proposals received, 15 were deemed eligible and came from experienced asset managers, he said, adding: “It’s a process result in itself that so many found it interesting.”  

IMCA is down to a few finalists now and will announce the winner(s) in 2025, after which it also hopes to announce the outcome, said Andersen. 

The IMCA concept has been presented at the G20 meetings and in the OECD Development Assistance Committee as a new and innovative way of mobilising private capital for climate finance, Andersen said.    

Meanwhile, IFU is looking to raise its second SDG Fund, after fully deploying the $750 million from the first, which is comprised of 40% public money and 60% Danish pension capital.

“Based on the positive impacts created and a financial result that is expected to meet the annually targeted return of 10–12% in Danish krone, IFU has started the fundraising for the Danish SDG Investment Fund II,” said Lars Bo Bertram, CEO of IFU, in the impact report.  

The equity fund has made 27 investments since its inception in 2018, of which it has so far exited five, according to IFU’s September 11 report on the fund’s impact.

Asia received the biggest regional proportion (39%) of SDG Fund 1, with India receiving the largest share of that.

Denmark had further intensified its environmental finance push through a recent announcement by the Copenhagen-headquartered World Climate Foundation (WCF) that it is seeking to expand the Climate Investment Coalition and launching the Nature Investment Coalition. 

“Both [coalitions] have a clear focus on action now,” said Jens Nielsen, chief executive and founder of the WCF at their launch during the Climate Investment Summit in London on June 26.

The Nature Investment Coalition aims to mobilise $100 billion of private-sector commitments for nature-related investments by 2030, he added.

“The initiative will align closely with the Global Biodiversity Framework and the Paris Agreement on Climate Change.

“We warmly invite new collaborators from the public and private sectors – asset owners, asset managers, developers, governments, think tanks, etcetera – to join us on this transformative journey,” Nielsen said.

The Climate Investment Coalition, meanwhile, aims to build on its success since launching at COP 26 in 2021 “to expand globally to address the escalating emergency of climate change”, said Nielsen at the June summit.

Starting out with Danish pension funds and the Danish government, the Climate Investment Coalition brought in other Nordic countries and the UK and at COP 21 saw some 42 pension funds make a joint commitment of $130 billion by 2030, said Peter Damgaard Jensen, chair of the coalition and co-chair of WCF, at the same event.