We are honored to welcome our PPPHealth4All Persona – Lisbeth Erlands, Vice President, Europe and MENA at Danish Investment Fund (IFU), who has more than 25 years of experience in impact investments dealing with complex commercial transactions – business development, due diligence, deal structuring and contract negotiations.
Dear Lisbeth, could you please introduce IFU to our readers? What set you apart from other financiers?
IFU is the Danish Development Finance Institution with a clear mandate to create impact through our investments focusing on creating green, just and inclusive societies. The impact mandate is combined with a commercial approach to the investments, and consequently we also need to develop businesses that are financially sustainable and will provide a return to the investors. IFU is owned by the Danish state but is also acting as fund manager for several public private funds. This includes the Danish SDG Investment Fund that invests with the purpose of supporting the Sustainable Development Goals.
“IFU has vast experience from more than 1,300 investments in over 100 countries in Africa, Asia, Latin America and Europe. Total capital under management is EUR 1.7 billion.”
IFU is an impact investor focusing on developing countries whose investment strategy is led by a holistic, sustainable approach. How do you measure the impact?
The impact of the investments is measured across a range of indicators like direct employment, local taxes, energy produced, number of clients served with microfinance and the carbon footprint. The results are primarily based on annual reporting from our investees supplemented by model calculations on a few indicators. The impacts are published annually in IFU’s Sustainability and Impact Report and are used to take stock of our achievements, evaluate our performance and as the basis for a dialogue on how to improve, for example by reducing our carbon footprint going forward.
In our 2020 report, IFU has for the first time calculated the total climate footprint of its investments in order to monitor the development and contribute to reducing the total CO2 emissions in the portfolio. For this we were recently rewarded in Denmark, see here.
IFU publishes an annual Sustainability & Impact Report, which describe about our strategy, processes and results. The report is available on IFU’s website.
How IFU integrates sustainability and impact into the investment process?
As an impact investor sustainability and impact issues are integrated in the investment process from the first screening and until the investment is divested. First of all, a potential investment must fall within our country and sector focus. Moreover, it must fit the purpose of our impact criteria creating green, just and inclusive societies. This includes compliance with the EU taxonomy for green investments, for example. Finally, the activity must not be included on IFU’s exclusion list.
All investments are categorizes based on their identified environmental and social risk. The higher the risk the more comprehensive assessments will be made during due diligence.
“In general, IFU requires direct investments to comply with national regulation and to follow relevant international standards and principles.”
To ensure that the investees meet their environmental and social obligations, IFU and the investees agree on an action plan describing gaps and measures, which must be implemented within a certain timeframe.
The impact potential is also assessed in relation to the SDGs, and specific impact areas are identified. During the process this materializes into an impact creation plan that is implemented as part of IFU’s active ownership throughout the ownership period.
What are IFU’s priorities in Europe and MENA region?
Denmark and the EU have a strong commitment to the Eastern neighborhood with a special focus on Ukraine and Georgia and these two countries are also core focus countries for IFU. In terms of sector priorities, we pursue the same impact agenda as in any other regions and countries.
Healthcare is a relatively new sector for IFU, but it is already one of the primary focus areas. You’ve invested in Egypt, Morocco, India, Africa. Why have you chosen these countries and these projects?
As a key driver for our selection of healthcare projects we require that the investment will improve the access to quality healthcare for lower and middle-income patients at affordable prices. To achieve that goal, private healthcare must be integrated in the national healthcare ecosystem as a supplement to the public healthcare system in the given country e. g. by a regulatory framework for the private and/or public health insurance system.
What criteria the healthcare project or partner needs to meet to be considered by IFU to invest?
As a general rule, we partner up with companies and partners that have a proven track record in the business and a clear responsible investor and impact focus.
Are you interested in PPP projects? Under which conditions would you consider them?
The short answer is, we can invest in PPP projects. As for any project partnership to succeed, a successful PPP project will require that there has to be a common goal and a clear alignment of interests and expectations in the investor group. Also, there has to be a lead strategic (typically private) investor who is main responsible for driving the investment.
Interview by Natalia Domanska.