We developed a set of case studies of impact investments in emerging and frontier markets made by institutional investors including pension funds, providing concrete examples of impact investments that meet the specific needs of UK institutional investors.
The case studies were developed in partnership with Dalberg Advisors and with support from the Foreign, Commonwealth and Development Office’s IMPACT Programme and cover multiple asset classes, themes and geographies, including emerging and frontier markets in Africa, Asia and other global regions. They are accompanied by asset class profiles, which summarise key asset class trends and opportunities in emerging and frontier markets from the perspective of institutional investors.
Our evidence shows, most importantly, that significant and measurable impact can be achieved while delivering a risk-adjusted financial return that is suitable for pension funds.
The case studies also show:
- Contrary to a prevailing misconception, pension funds can and do make impact investments in emerging and frontier markets. More and more pension funds are integrating emerging markets impact investments into diversified global investment portfolios. This includes pension funds based in Europe and in countries such as the US, Canada and Japan.
- There are diverse impact investment opportunities available to pension fund investors in emerging and frontier markets. Pension funds invest in both public and private markets, across different asset classes, thematic areas, geographies and expectations in terms of financial returns and environmental and social impact.
- Impact investing opportunities in emerging and frontier markets are becoming more innovative and sophisticated with the increasing need and opportunity to attract more institutional capital. Asset managers and intermediaries are developing innovative solutions to address the most common concerns of institutional investors, for example around currency, liquidity or ticket sizes, that may prevent them from investing in emerging and frontier markets. Partnerships between private and public investors in the market are important and include the key role that can be played by development finance institutions and multi-lateral development banks in providing investment opportunities with conditions suitable for pension fund investors.
In the coming months, we will engage with UK pension funds around the case studies and broader opportunities for impact investing in emerging and frontier markets and support them in embracing those opportunities. If you are a pension fund trustee, consultant, member of an in-house investment team, or an investment manager interested in finding out more, please contact us at [email protected].