Blended finance: delivering sustainable .development outcomes

MEDIA RELEASE

NOVEMBER 2021

CONVERGENCE AND FIRSTRAND HOST INAUGURAL SADC INSTITUTIONAL INVESTOR FORUM

The role of blended finance in the region to deliver sustainable development outcomes

Convergence Blended Finance (Convergence) and FirstRand Limited (FirstRand or the group) recently hosted a SADC institutional investor forum at which development finance institutions, asset owners, asset and economic consultants, and asset managers discussed portfolio diversification and risk mitigation using blended finance approaches.

The focus of the event was to address the major challenges of scaling up project investments and managing well-diversified funds that deliver attractive risk-adjusted returns while contributing to sustainable development.

The forum featured participation from senior international, regional and local professionals. Admassu Tadesse, Group MD/CEO of the Eastern and Southern African Trade and Development Bank (TDB) delivered the keynote address. Andries du Toit, FirstRand’s Group Treasurer, opened the event, Ladé Araba, Managing Director, Africa at Convergence presented blended finance’s capabilities, and Joan Larrea, Convergence’s CEO, closed the event.

Commenting, Andries du Toit said that the inaugural event represented an important contribution to the global debate on sustainable development. “Although this particular forum was focused on the SADC region, many countries, regions, and continents face similar challenges,” he said. “An important topic covered was the complementary roles of governments, development finance institutions, philanthropic organisations, financial intermediaries, and institutional investors in addressing these challenges”.

Joan Larrea commented that the private sector is the largest source of capital that could close the SDG funding gap. “However, investors cannot lose sight of their fiduciary responsibility in constructing their investment portfolios” she said.  “Blended finance can serve as the bridge between fiduciary responsibility and investing for development.”

Ladé Araba, MD Africa, Convergence added that, “Blended finance can help institutional investors to minimise volatility in their investment portfolios and therefore the risk of losses, while strengthening overall portfolio performance. It is an important financial structuring approach to mobilise institutional capital into SDG-linked transactions.”

Speakers discussed the value of partnerships for the 2030 Agenda for Sustainable Development, the use of blended finance for portfolio diversification and risk mitigation, and ways of connecting capital to least-developed countries.

The forum also included two interactive panels. A capital markets panel, hosted by FirstRand’s corporate and investment bank, RMB, focused on ways in which blended finance can solve intractable African financing problems, and featured participants from asset managers Ninety One and Sanlam, development institutions Norfund and Proparco, and specialist consultancy DNA Economics.

Commenting on the panel’s discussions Dalu Ajene, Head of Coverage for RMB, said: “The insights shared from the development finance institutions and commercial institutions demonstrate that there is scope to deepen collaboration and partnership to unlock even more flexible capital, with tiered return profile, required to sustain development in Africa.” 

An asset management panel, hosted by FirstRand’s asset management business, Ashburton Investments, explored the role of blended finance in incorporating development finance into pension and insurance portfolios, and was comprised of professionals from ABSA Financial Services, African Development Bank, the Compensation Fund, Shelter Afrique, and Willis Towers Watson.

Rudigor Kleyn, Managing Director, Corporate and Institutional, Ashburton Investments, summed up the panel’s discussions. “The major challenge to scaling investment in transactions that deliver attractive risk-adjusted returns, while driving sustainable development, remains the multiple risks to which they are exposed. While domestic institutional investors have the benefit of local knowledge to help them maneuver the region’s business terrain, they increasingly seek greater exposure to structured products and alternatives where risk mitigation is provided through a variety of blended finance approaches. The outlook for growth for ESG-orientated funds is definitely very positive in South Africa. We know that ESG factors are becoming more commonly recognised as an important part of the investment process.”

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For enquiries please contact:

Convergence: Sijia.Yi@convergence.finance

FirstRand: sam.moss@firstrand.co.za

RMB: Joandra.griesel@rmb.co.za / 082 462 6741

Ashburton Investments: Grant.Henry@commsadvisory.com / 082 561 7172