The pension fund for the Swiss canton of Geneva is looking to federate commitments from fellow institutional investors for a venture capital-focused impact investing program leveraging the European Investment Fund (EIF).
CPEG is planning to launch the programme with a seed capital of €100m, with the intention for the programme to be scalable.
The first phase of the programme would involve investing up to 70% through the EIF’s investment universe and up to 30% directly in companies and infrastructure projects, mostly through co-investments, allowing the programme to target a specific impact.
The objective is to generate an internal rate of return of 5-7% in euros.
Greg Haenni, chief investment officer of the CHF21.9bn (€21.5bn) public pension fund, is the driving force behind the initiative, working together with colleague Jérôme Spichiger, finance specialist at CPEG, Dirk Meuleman of Phenix Capital, a Dutch impact investing consultancy, and Tim Radjy and Arlette Espinosa of AlphaMundi, a Swiss impact investor.
CPEG’s desire to establish the impact investing programme is informed by the view that rather than there being a funding gap for the low carbon transition, there is an “impact gap”, with solutions with the potential to address 50% of global emissions receiving only 10% of the capital invested in climate finance.
”There is a need to deploy capital in a coherent fashion, that is at the right time in a coordinated manner and to allocate to the right places,” Haenni told IPE.
CPEG is in discussions with a group of Swiss investors about the programme as well as the EIF, which is the EU’s investment arm. Ideally the first investment could be made in the first half of next year, but there are still a few items to work through.
In a second stage other managers may be considered but for now the EIF is the best fit, said Haenni.
“The EIF is the largest and oldest impact investor in the world,” he said.
“If we don’t manage to strike a deal that’s alright because lessons will have been learned for another attempt”
Greg Haenni, CIO of CPEG
The envisaged investment programme would have a regional European focus. Haenni acknowledged the importance of channeling finance to emerging markets to tackle climate change, but said the focus on markets closer to home was important as a first step.
“Developed markets also need climate investment and we also want to focus on the EU to allow for alignment with European regulation, such as the taxonomy,” he told IPE.
According to Haenni, if established, the programme would be the first public-private partnership of its kind. But whether or not CPEG is successful in setting it up, the outcome is “win-win,” he said.
“If we don’t manage to strike a deal that’s alright because lessons will have been learned for another attempt,” he said. “And if it moves ahead then we aim to create a model that can be replicated.”
For now discussions are ongoing with interested Swiss investors and the EIF. One of the planned features of the programme is the creation of an advisory committee, made up of the participating institutional investors, which would have a right of refusal on a deal-by-deal basis.
The committee would also determine the impact objectives, the UN Sustainable Development Goals (SDGs) to be prioritised.
Haenni also said that ideally, the impact investing programme would benefit from a first-loss guarantee facility, but this remains to be seen.