Danish development finance institution Impact Fund Denmark announced the final close of SDG Fund II, securing DKK 5 billion (USD$760 million) in commitments for its blended finance fund focused on backing private-sector businesses advancing the UN Sustainable Development Goals (SDGs) in developing and emerging markets.
Structured as a public-private partnership, with private investors contributing 60% of the fund’s capital and Impact Fund Denmark providing the remaining 40%, SDG Fund II targets investments in the private sector to help create sustainable companies that can contribute to the green transition, as well as just and inclusive development.
Blended finance brings together public or philanthropic capital and private funding through a common investment structure, enabling investors to invest in certain types of investments that have high perceived risk profiles, such as new climate mitigation-related technologies. Under the fund’s blended finance structure, private investors receive priority returns of up to 6%, while sharing a portion of gains above a 12% return threshold. The fund targets annual returns of 12% to 15%,
According to Impact Fund Denmark, the fund is expected to contribute in particular to SDG 5 (Gender Equality), SDG 8 (Decent Work and Economic Growth), SDG 10 (Reduced Inequalities), and SDG 13 (Climate Action).
Investors participating in the fund include Danish pension funds P+, PenSam, PKA, PFA and PBU, as well as Jyske Bank.
The fund has also secured an EU European Fund for Sustainable Development Plus (EFSD+) guarantee of more than €71 million, helping to reduce investment risk by covering potential losses on individual investments. The guarantee forms part of the EU’s Global Gateway strategy to mobilize private capital for sustainable development projects.
Impact Fund Denmark said that the fund focuses on private companies that are not yet listed, reflecting the significant share of economic growth in developing markets that takes place outside public equity markets, while the EFSD+ guarantee is intended to enhance the risk-return profile for institutional investors participating in the fund.
According to Impact Fund Denmark, more than DKK 1 billion (USD$152 million) has already been deployed through investments in five companies, including Indian solar developer Radiance Renewables, South African renewable energy company Sturdee Energy, Morocco-based tea packaging company Imperium Holding, Paraguayan fertilizer producer Project Villeta, and African electric mobility company Spiro.
The remaining approximately DKK 4 billion (USD$608 million) is expected to be invested by 2028.
Lars Bo Bertram, CEO of Impact Fund Denmark, said:
“Both five pension funds and now also Jyske Bank investing in the fund shows that an increasing number of private investors see the potential in combining returns with sustainable development.”
