Latest news with #DFIs
Business Wire
01-07-2025
- Business
- Business Wire
Pioneering Impact Strategy, Record EM Sustainable Finance (EMSF), Celebrates Its Fourth Anniversary With Strong Outperformance Since Inception
LONDON--(BUSINESS WIRE)--Record Currency Management, in partnership with UBS Wealth Management, is proud to celebrate the fourth anniversary of its pioneering Emerging Market Sustainable Finance (EMSF) Strategy. Operating at the intersection of impact investing, Emerging and Frontier Market currencies and private placements, the strategy offers investors an opportunity to achieve financial returns, alongside measurable impact. Since inception, EMSF has grown to over U$1 billion in AUM and delivered positive returns of +18.7% since inception. The strategy has significantly outperformed both USD and local currency EM Debt benchmarks with around 30% lower volatility - reaffirming that investors need not compromise between financial returns and measurable impact. By taking currency risk across a wide universe of emerging and frontier currencies, EMSF helps MDBs and DFIs raise local currency funding. This allows borrowers in Emerging Markets to receive funding in local currency, eliminating FX risk. Simultaneously, the strategy directly supports the financing of development projects through its investments in bond instruments issued by MDBs and DFIs with active operations in Emerging Markets. 'The need for capital in Emerging and Developing Economies continues to grow as we approach the 2030 deadline for achieving the UN Sustainable Development Goals. It is now estimated by the UN that an additional US$5-7 trillion of annual private sector funding is required to meet the SDGs by 2030. Innovative sustainable finance solutions, such as EMSF, have a vital role to play in bringing private investors into the development finance marketplace. We are proud to have delivered tangible impact and strong outperformance relative to Emerging Market Debt benchmarks, demonstrating that you don't need to sacrifice returns to do good. We remain committed to helping MDBs and DFIs with their local currency operations in Emerging and Frontier Markets.' – Andreas Koester, Head of EM and Frontier Investments. About Record Founded in 1983, Record is a specialist currency and asset manager offering best-in-class bespoke products to large global investors. The Group manages over US$100bn AUM for 140 institutional clients worldwide across FX Risk Management, Absolute Return and Private Markets.
Economic Times
26-06-2025
- Business
- Economic Times
Now, give credit where credit's due
Washington: As leaders gather in Seville for the UN Financing for Development meet that starts from June 30, putting developing countries' needs first - and fixing the broken credit-rating system - must top the agenda, along with operationalising Africa Credit Rating Agency (AfCRA). Today, Fitch, Moody's and S&P dominate the credit-rating landscape, with their assessments influencing the cost of capital for countries. In 2023, many developing nations paid over 5 percentage points more than developed economies when borrowing from instruments deployed by MDBs and DFIs include direct debt and equity, lines of credit to commercial banks, intermediated investments via funds (including impact funds), guarantees and technical assistance. They also provide concessional finance, which mobilises private investors. Today, most lending from MDBs and DFIs focuses on infra: 34% of concessional and market-rate finance provided in the 'global south' in 2021 ($2.5 bn) focused on this sector. This compares with only 7% focused on the farm sector in the same year, and far less in climate adaptation. However, regulations such as Basel 3 and 4, set up in 2008-09, to respond to financial crises, and reporting requirements of the financial system, such as International Financial Reporting Standards 9 (IFRS 9) and 10 (IFRS 10) are biased against incorporating realities of the developing world. These regulations and standards also affect lending from national and public development banks, which are similarly deterred from investing in agriculture and climate a result, (multilateral and national) banks end up allocating their capital to less-risky sectors - those that, for instance, have more regular payments than the seasonal nature of agriculture allows, offer more predictable returns, and require lower capital capital adequacy requirements also limit banks' overall lending capacity, increasing the opportunity cost of lending to businesses perceived as higher risk and less profitable (e.g., smaller or less formal businesses in rural areas).As a result, in East African countries, central banks require domestic commercial banks to hold 10-15% of their capital, well above Basel 3 requirements (8.5%). This exacerbates low levels of commercial bank lending to the agriculture sector, which in 2019 averaged just 6% despite the sector contributing about 60% to Basel 4 regulations require banks to take a standardised approach to determining risk-weighted assets. These disincentivise global banks from financing rural infra projects in the 'global south', which are perceived as Basel 4 implementation began in 2023, banks could use proprietary models, which considered investment history, to allocate risk weightings to different assets. Now, they must use standardised capital weightings, which assign higher risk weightings to investments in countries with low national credit ratings, and to loans with longer standardised approaches to calculating risk-weighted assets (RWAs) do not account for the reduced risk associated with banks - or other investors - investing in senior tranches of blended finance structures where a first-loss guarantee has been provided by an impact investor or DFI. This has also meant that participating in blended finance confers no additional advantage to investors, irrespective of a first-loss risk being taken by another skewed nature of risk appraisal also affects MDB lending. They target AAA credit ratings from major credit-rating agencies to ensure they can borrow at low cost. While this allows MDBs to pass on the benefit of low-cost borrowing to borrowers (including rural businesses), in practice, MDBs manage their capital to protect these credit ratings. This limits their capacity to take on ventures perceived as risky, including those in rural or agricultural countries are significantly more agricultural and rural. Lending in these contexts should not be automatically deemed 'below investment grade', forcing banks to write down assets. Seville must call for reform of international rating architecture, which unfairly treats high-liquidity, essential sectors in developing regions as high-risk. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Punit Goenka reloads Zee with Bullet and OTT focus. Can he beat mighty rivals? 3 critical hurdles in India's quest for rare earth independence HDB Financial may be cheaper than Bajaj Fin, but what about returns? INR1,300 crore loans for INR100? Stamp duty notice to ArcelorMittal, banks. Stock Radar: Titan Company breaks out from 3-month consolidation; check target & stop loss for long positions For risk-takers: More than bullish, be selective; 5 mid-cap stocks from different sectors with an upside potential of up to 38% Multibagger or IBC - Part 12: If transition is successful then there is no limit. But there is a big 'IF' These mid-cap stocks with 'Strong Buy' & 'Buy' recos can rally over 25%, according to analysts
Barnama
16-06-2025
- Business
- Barnama
SME Bank And BSN Forge Strategic Partnership To Spark Innovative Growth For Malaysian Entrepreneurs
KUALA LUMPUR, June 16 (Bernama) -- Small Medium Enterprise Development Bank Malaysia Berhad ('SME Bank') and Bank Simpanan Nasional ('BSN') have entered a strategic partnership through a Memorandum of Understanding ('MoU') to empower Malaysia's homegrown entrepreneurs. Aligned with the MADANI economic framework and the National Entrepreneurship Framework ('NEF'), this collaboration aims to catapult the growth of entrepreneurs through improved financial access, capacity building and digital enablement—reinforcing the role of Development Financial Institutions ('DFIs') in nation-building. Datuk Dr Mohammad Hardee Ibrahim, Acting Group President/Chief Executive Officer of SME Bank, said 'Reaffirming our developmental mandate, we are committed to fostering inclusive and sustainable national growth by forging strategic partnerships that enhance access for SMEs to embrace innovative digital solutions. Central to this collaboration, BSN's extensive pool of microfinance customers can leverage SME Bank's robust suite of digital tools tailored for MSME development. In particular, is through our ScoreXcess, a one-stop business financing application portal for small and micro financing operated by our capacity building and training arm – Centre for Entrepreneur Development and Research ('CEDAR'). By leveraging our combined expertise, this partnership signifies a strategic collaboration between two DFIs, reflecting our shared commitment to accelerate entrepreneurial growth and deliver tailored support that addresses the dynamic needs of today.'
Business Times
05-06-2025
- Business
- Business Times
Is blended finance the panacea for addressing sustainability issues in developing Asia?
BLENDED finance has been widely championed as a key pathway to decarbonising developing Asian countries, not least among policymakers in the region. However it has been noted of late that this innovative avenue of financing has 'fallen short of its promise'. Over the past 15 years, annual volumes of blended finance have been stagnant at around US$15 billion, with only 38 per cent sourced from private financing. Given the projected need of around US$9 trillion by 2030 for climate finance alone, the concern raised is not unfounded, as achieving this lofty target needs significant involvement from private financiers. Convergence, the global network for blended finance, defines the approach as 'the use of catalytic capital from public and philanthropic sources to increase private-sector investment in sustainable development'. The Organisation for Economic Co-operation and Development sees it as 'the strategic use of development finance to mobilise additional finance towards sustainable development in developing countries', due to the challenges in attracting private capital as the risk premium is usually too high, particularly for longer-term projects. Hence, entities such as development financial institutions (DFIs) and philanthropies are crucial to provide the initial cushion needed for private-capital participation. However, as the International Finance Corporation notes, it is crucial to ensure that the development finance provided uses the least amount of concessional funds necessary to mobilise private resources. This is in line with Principle 2 of the DFI blended finance principles, that the concessional finance should act as only a catalyst to help develop the market. This has been borne out in practice, where around US$2.5 billion of concessional capital helped finance more than US$13 billion of project costs, according to a March 2023 update by a group of DFIs. However, the promise of scale has yet to be borne out, with no significant dent as yet on the global needs for sustainable finance, and, in particular, climate finance. That would require active involvement with institutional investors, such as sovereign wealth funds, global insurance entities, asset managers, pension funds and private equity and credit funds, that invest on behalf of their clients. They manage over US$70 trillion of investable assets, and are hence the most relevant segment for private-sector mobilisation. A NEWSLETTER FOR YOU Friday, 12.30 pm ESG Insights An exclusive weekly report on the latest environmental, social and governance issues. Sign Up Sign Up An important requirement is a rapid improvement in the financial markets infrastructure of developing countries. Second, there is a need to design portfolio investment structures instead of lending at individual project levels, so that the investments are meaningful. Finally, to ensure that the capital flow is sustainable and repeatable, it is critical to set up credible monitoring and verification mechanisms that ensure the integrity of the underlying projects. Let us look at these requirements in detail. The financial markets in developing countries have become increasingly aligned to international standards over the last two decades. The 1997 Asian financial crisis as well as the 2008 global financial crisis highlighted the need for robust market infrastructure. To encourage capital flows, regulators have taken a more pragmatic view on foreign exchange and fixed-income markets. Derivative instruments such as non-deliverable forwards, which were previously anathema to many central banks, are now being embraced as efficient hedging mechanisms. Government bond markets have also deepened with more offshore participants, following their inclusion in global bond indices. However, local currency bond markets in most developing countries are still limited to a few large issuers, and secondary market liquidity is a challenge. In addition, close-out netting regulations have still not been fully implemented in a number of Asian countries, though surveys indicate that this is an important tool to manage credit risk exposure and increase liquidity. DFIs play a key role in bringing about these market reforms through their capacity-building and technical assistance programmes with the various governments and central banks. These reforms, if carried out, will increase confidence in the institutional investor community to commit significant long-term capital. However, they are less likely to invest in standalone projects, as that is usually the domain of banking entities in the region. This creates a role for financial intermediaries that can structure customised portfolio investments. The European Banking Federation has created a securitisation framework which can be replicated as a best practice in Asia. The intermediaries can embed hedging mechanisms to mitigate foreign exchange and interest-rate risks which may not be palatable to investors. These structures provide investors with their required level of risk participation, while simultaneously de-risking the balance sheets of regional and local banks and freeing up capital. Blended finance plays a key role here as philanthropies and DFIs can be the investors in the riskiest parts of these structures. In addition, a number of taxonomies have been developed in the region, such as the Singapore-Asia Taxonomy for Sustainable Finance and the Asean Taxonomy, which can be used to evaluate the projects in the portfolio to ensure that the proceeds are being used for sustainable purposes. Greenwashing has been one of the key impediments to developing scale in sustainable finance. Hence at a firm level, it is important for borrowers to determine key performance indicators (KPIs) and ensure their independent monitoring. While large corporations in the region have extensive resources to design appropriate KPIs and engage external assurance firms to independently verify their performance, particularly around Scope 1, 2 or 3 emissions, it is much harder for small and medium-sized enterprises to do the same. Hence third-party advisory firms, which help companies conduct assessments and set relevant targets, are growing in importance. Some organisations, such as LowCarbonSG from Singapore, are also developing digital tools that help companies measure their emissions and thus monitor their performance. Scaling up these resources across the region will also help lenders, particularly local and regional banks, to significantly grow their sustainability-linked lending portfolios, and correspondingly create more assets that can be securitised to achieve the scale needed for interest from institutional investors. The benefits of blended finance have been well documented, but the critique around scale cannot be ignored. While the participation of DFIs and philanthropies is indeed critical to ensure viability of many projects, these efforts must translate to meaningful impact on the environment in order to achieve the Paris Agreement goals. As Asia has seen a sharp uptick in extreme weather events and their consequences, the region's economies must come together and create an enabling environment to attract the institutional investments that can make a difference. The writer is a financial sector professional who has worked in Singapore, Hong Kong and India. He has a keen interest in following current trends in sustainable finance.
Hindustan Times
05-06-2025
- Business
- Hindustan Times
Time to rethink capital for sustainability
India's emergence as the world's fourth-largest economy reflects strong domestic demand and a rapidly growing entrepreneurial landscape. However, this growth is occurring against a backdrop of mounting environmental pressures. Air pollution levels in major cities routinely exceed safe limits, over 3,500 landfills dot urban India (CPCB, 2022), and increasingly erratic climate events threaten food and water security. The need to transition to a more resource-efficient, low-carbon economy is no longer a matter of debate, but of urgency. Tech-led innovation will be central to India's circular transition. From alternative materials and clean manufacturing to waste-to-value solutions, climate-tech solutions offer scalable pathways to decarbonise industries and strengthen climate resilience. However, many of these innovations do not conform to conventional investment frameworks. Traditional ROI models prioritise near-term financial returns and proven markets. In contrast, climate-tech ventures often require longer gestation periods, operate in nascent ecosystems, and deliver multi-dimensional returns--economic, environmental and social. To bridge the gap between innovation and implementation, India needs more catalytic capital; funding that is flexible, risk-tolerant, and impact-oriented. This is especially critical for early-stage climate-tech enterprises that operate in complex, unstructured markets. Consider Brisil Technologies, which upcycles rice husk ash, an agri-waste by-product known for exacerbating PM levels into high-purity green silica for use in rubber and paints. Or altM, which converts agricultural residue into renewable feedstock for chemical manufacturing, replacing the use of petrochemicals. Another case in point is Alt Carbon, whose enhanced rock weathering solution addresses the need to permanently remove atmospheric carbon. While the markets that these innovations operate in are still maturing, the long-term environmental value is significant. These are compelling business models that solve for national priorities while representing the frontier of India's circular economy, and investors backing such ventures must be prepared for non-linear growth trajectories and long-term capital commitment. Beyond just venture capital, blended finance models, milestone-based grants, and anchor investments from development finance institutions (DFIs) can help unlock scale. To accelerate India's circular economy transition, capital allocation must evolve along five key lines: India's path to net-zero by 2070 will require more than technology; it will require an investment architecture that recognises and rewards circular, regenerative models. The circular economy is not just an environmental imperative, it is an economic one. Bringing circularity into the mainstream isn't just about cutting emissions or reducing waste, it's about reshaping India's growth trajectory. According to the MoEFCC, a circular economy could unlock a market opportunity exceeding $2 trillion by 2050 and create ~10 million additional jobs. This article is authored by Alankrita Khera, director, and Sruthi Shanmugam, lead, ACT For Environment.
