Appetite for impact propels Finnish fund to €76m first close

The impact fund has a five-year investment period but OP chief investment officer Erkko Ryynänen expects it to be fully invested within three years, at which point a follow-on vehicle will be raised.

A joint impact vehicle from Finnfund, Finland’s development finance institution, and the country’s OP Financial Group reached a first close on €76m.

OP Finnfund Global Impact Fund I was launched amid the coronavirus pandemic in April. Jari Matero, associate director and head of Finnfund’s agri and forestry portfolio, said it secured more than 75 percent of its €100 million target owing to heightened demand for impact vehicles.

“The private investors in Finland right now were keen to invest in a fund like this and invest in developing countries,” Matero told Agri Investor. “The impact investment market has grown and really gained popularity in the sense that there is a wider pool of investors willing to invest in developing countries.”

Finnfund and OP claim the vehicle is the first Finnish impact fund that will invest in emerging markets. The fund has a €160 million hard-cap and will seek to deliver an 8-12 percent internal rate of return. OP will act as fund manager and will be responsible for the risk management and administration of the vehicle.

Matero confirmed Finnfund acted as anchor investor and provided “roughly half of the first closing commitments.” Other investors included Finland’s Church Pension Fund, Security Trading Oy, Oy Julius Tallberg, the Finnish Industrial Union, the Finnish Municipal Foundation and the Finnish Red Cross.

OP Asset Management chief investment officer Erkko Ryynänen confirmed to Agri Investor that the OP Life Assurance Company had made a €10 million commitment to the fund.

Finnfund has historically been active in Africa and this will be reflected in the impact fund’s regional investment spread. Ryynänen said “roughly half of investments” would be in the continent.

“A quarter will be invested in Lat Am and another quarter [will be split between] Asia and Eastern Europe,” he said. “In terms of sector breakdown, 20-30 percent will be agricultural. Renewable energy will be another 20-30 percent, and industrial service and infrastructure will be the remaining sectors for the fund.”

Ryynänen said the investment period for the fund was five years, but he expected it to be fully invested within three years, at which point Finnfund and OP Financial Group would begin raising a second vehicle.

Matero said the fund will invest across the agri value chain in areas such as inputs, fertiliser, storage, agtech and logistics.

“The only product we excluded from the fund investment mandate was palm oil, and that was mainly due to the sensitive reputational aspects,” he explained. “Otherwise, it’s quite flexible. The idea is to create diversification in the portfolio – to find different companies in the different parts of the value chain in different markets, in order to diversify the risk.”