By Brenna Hughes Neghaiwi
ZURICH (Reuters) - Switzerland has launched a new public-private partnership to raise up to 1 billion Swiss francs ($1.09 billion) for social and environmental projects in developing countries.
Dubbed the Sustainable Development Goals Impact Finance Initiative, it is one of a number of 'blended finance' funds to launch in recent months to help ramp up investment in poorer countries - a key focus at the recent COP26 climate conference.
By pairing money and investment know-how from banks and government agencies, the hope is that this will attract private investors to projects in emerging markets that advance the U.N. Sustainable Development Goals (SDGs).
Blended finance initiatives, such as this, have increasingly been seen as critical to help fund social programs, including health and education, or back innovative energy and infrastructure projects, such as a recent private-public U.N. investment to distribute solar energy to off-grid communities in Kenya.
The U.N. also recently helped launch a blended finance scheme to fund coral reef conservation https://globalfundcoralreefs.org.
Switzerland's two biggest banks, UBS and Credit Suisse (SIX:CSGN), will participate in the new initiative alongside the Swiss government's State Secretariat for Economic Affairs (SECO) and its Agency for Development and Cooperation (SDC).
"It is all about collaboration and joining forces ... to mobilize more finance for the SDGs in developing countries," SECO's State Secretary Marie-Gabrielle Ineichen-Fleisch said in a statement.
Switzerland is home to one of the United Nations' two international headquarters, and is also a leading financial centre for managing private wealth.
The initiative hopes to help scale up impact investing, which aims to generate measurable environmental and social impact alongside financial returns, by providing grants and early-stage funding for promising projects.
For many private sector investors, projects in emerging markets are considered too risky. To help assuage these concerns, so-called blended finance initiatives https://www.reuters.com/business/cop/emerging-markets-needs-climate-cash-how-will-they-get-it-2021-11-08 partner public or charitable investors with the private sector.
The new Swiss initiative will look at mechanisms, such as the public investor taking the first portion of any losses or providing guarantees, to minimise private investor's risks.
"We're running out of time to achieve the (Sustainable Development Goals) and if we want to bridge that capital gap, the time is here and now for us to really be taking action," Dhun Davar, Head of Social Finance at UBS Optimus Foundation, told Reuters.
The Swiss government is contributing 19.5 million francs towards the 100 million francs target in public and charitable funding the initiative is hoping to raise, while the UBS Optimus Foundation will contribute a further 5 million francs.
They are in discussions to bring in other backers, from development banks and foundations to companies and financial institutions, as well.
Both Credit Suisse and UBS said they planned to tap their international networks of wealthy private and institutional investors, and help vet projects and cover the initiative's running costs.
($1 = 0.9197 Swiss francs)