Eastspring Investments is to raise US$500m for an International Finance Corporation (IFC) program, that mobilizes funds from investors, to fund much-needed infrastructure projects in emerging markets regions.
Eastspring, the Asian asset management business of insurance giant Prudential, is the first Asian investor to participate in the program, known as MCPP Infrastructure.
The program seeks to raise US$5bn, mainly from global institutional investors, to modernise infrastructure in emerging markets by 2021, opening up a new stream of capital flows to improve power, water, transportation, and telecommunications systems in developing countries.
A signing ceremony was hosted by Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), earlier this week.
“Trillions of dollars a year are required to bridge the infrastructure gap in emerging markets, and it is impossible for the public sector alone to fulfil such needs without substantially drawing in private sector capital,” said Chan. “Through the IFFO platform, we look forward to collaborating more closely with public and private sector stakeholders, with a view to developing a more conducive environment in Hong Kong for facilitating infrastructure investment and financing.”
‘Emerging markets infrastructure’
The MCPP Infrastructure is designed for investors seeking to increase their exposure to emerging markets infrastructure. Through the program, IFC originates, approves, and manages a portfolio of loans that mirrors IFC’s own portfolio in infrastructure.
With support from the Swedish International Development Cooperation Agency (Sida), IFC provides a limited first-loss guarantee on the program’s investments to meet the risk-reward profile that institutional investors require.
The other first mover partnership under the MCPP Infrastructure program is with the global insurance company Allianz, IFC said.
“Building sustainable infrastructure strengthens economies, allows for cross-border business, and helps create new markets,” said IFC vice president and treasurer, Jingdong Hua. “This new partnership with Eastspring will help bring reliable power, roads, and other critical infrastructure to areas where they are urgently needed.
“IFC will continue to work with governments and investors to mobilize additional resources for infrastructure development in developing countries.”
According to IFC figures, in most developing countries basic infrastructure is failing, insufficient, or non-existent—compromising livelihoods and holding back economies. More than 1.2 billion people worldwide have no access to electricity. More than 660 million people don’t have a clean source of drinking water and one in three people worldwide lack access to sewage infrastructure. With the number of people living in cities in Asia estimated to double by 2030, the infrastructure deficit will only become larger.
Under the agreement IFC will originate transactions and provide Eastspring with co-lending opportunities in all deals that fit with Eastspring’s investment strategy.
“This partnership enables us to make a significant contribution to the economies and communities of developing countries while investing in infrastructure projects that deliver compelling returns for our clients,” said Virginie Maisonneuve, chief investment officer of Eastspring Investments.
“As a business with a strong focus in the developing world, we have long been committed to realising the full growth and development potential of emerging markets. Raising awareness and boosting infrastructure investment is a crucial part of that and we are always looking for innovative and sustainable ways to provide attractive long term returns for our clients.”
Eastspring Investments, part of Prudential Corporation Asia, is Prudential’s asset management business in Asia. With operations in 10 Asian markets as well as offices in North America and Europe it has almost 2,500 employees and US$146bn in assets under management (as of 31 December 2016).
IFC, is a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. In 2016, it delivered US$19bn in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity.