Indonesia's SWF, Danish fund IFU ink $500m pact to support impact investments

Indonesia's SWF, Danish fund IFU ink $500m pact to support impact investments

Signing ceremony between Indonesia Investment Authority (INA) and Investment Fund for Developing Countries (IFU) on Tuesday (06/12/2022). (Photo by Tabita Diela/DealStreetAsia)

Sovereign wealth fund Indonesia Investment Authority (INA) on Tuesday signed an agreement to explore investment opportunities with the Danish Investment Fund for Developing Countries (IFU) in impact investing areas such as renewable energy and waste management in the archipelago.

The joint investment is expected to reach up to $500 million over a few years with INA and IFU set to commit $100 million each to the kitty. The balance sum is expected to be raised from other co-investors.

“For the [remaining amount] $300 million, we’ve been approached by quite a few [investors] but the way we do things is that we find the project first,” INA CEO Ridha Wirakusumah told reporters. “What is important now is not so much the capital but the investment.”

Andry Setiawan, INA managing director of investment, said the SWF has been scanning the market for over a year, looking for potential investments that not only have an impact on society but also generate a good return.

“At the end of the day, it is such a challenge to find the projects,” Setiawan said, noting that INA-IFU can invest in sectors such as fishery, forestry, and other projects.

INA has been pushing the green agenda as part of its efforts to support Indonesia’s plan to reach carbon neutrality by 2060 or sooner.

The SWF recently signed a Memorandum of Understanding with Chinese battery manufacturer Contemporary Amperex Technology Co., Limited (CATL), and CMB International Capital Corporation Limited (CMBI) to establish a $2-billion fund targeting electric vehicles.

The country’s sole SWF has garnered more than $20 billion of co-investments from funds to date, as reported by Reuters recently. The SWF, however, is struggling to find the right investments that fit its risk appetite.

According to its presentation, the SWF and its partners have deployed around $1.5 billion in tower company Mitratel’s IPO, toll road acquisition, and financing for Indonesia’s online travel agency Traveloka.

IFU, an independent Danish government-owned fund established in 1967, has deployed $3.5 billion in equity and loans with over 178 active projects. The development bank has completed 1,325 investments and makes about 15 to 20 investments a year.

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