Global investment manager Schroders and its impact investment management affiliate BlueOrchard announced today that they have been selected by Luxembourg’s Ministry of Finance to jointly launch a new impact investing strategy, aimed at supporting the transition to carbon neutral and resilient economies, with a particular focus on emerging markets.

The new partnership is based on a Luxembourg-based blended finance vehicle designed to mobilize capital needed to address climate change and environmental degradation, particularly in emerging markets. One of the key obstacles to transitioning the global economy to a net zero model is the need for substantial capital investments in emerging markets, with the IEA estimating $1 trillion of investments needed through the current decade in clean energy initiatives in developing countries.

Blended finance brings together public or philanthropic capital and private funding through a common investment structure, enabling investors to invest in certain types of investments that have high perceived risk profiles, such as new climate mitigation-related technologies. The instruments are designed to attract large-scale institutional capital, allowing public financiers and other donors to use a small amount of their own resources as a first loss to mobilize large amount of private capital to reach large number of underlying climate projects needed.

Luxembourg Minister of Finance, Yuriko Backes, said:

“It is crucial to our common future that we solve the issues of climate change and environmental protection both nationally and internationally. As a leading international financial centre and investment fund hub, Luxembourg is uniquely positioned to mobilise capital to address these urgent issues. With this new partnership, we are strengthening our long-term commitment to blended finance and helping seed a new strategy that supports sustainable investments and contributes to resilient economies in emerging markets.”

The new impact strategy will focus on areas including climate mitigation, climate adaptation, and the protection of water and biodiversity, investing in solutions addressing the environmental goals of the Paris Agreement and the UN Sustainable Development Goals (SDGs).

BlueOrchard CEO, Philipp Mueller said:

“This landmark mandate will help us further accelerate climate and environmental action in markets where we can make the greatest impact. We are proud that the Luxembourg government has recognised our expertise in innovative blended finance strategies. We look forward to advancing climate change mitigation and adaptation with our partners, whose objectives are firmly aligned with our own.”

The win follows a series of moves by Schroders to grow its focus and capabilities on sustainable and impact investing. Schroders acquired a majority stake in BlueOrchard in 2019, and in 2020 the firm joined the Global Impact Investing Network (GIIN). Last year, Schroders announced the completion of its process to integrate ESG factors into the decision-making across all investments that the firm manages, and stated that it would next look to understand the impact of its investments and the risks they face as a result. Earlier this year, the firm announced that sustainability-focused engagement targets will become part of the performance goals for its equity and bond fund managers and analysts.

Finbarr Browne, CEO Schroder Investment Management (Europe), said:

“Schroders in Luxembourg is proud to have been selected as the management company by the Ministry of Finance. Schroders has had a significant and successful presence in Luxembourg for over 30 years, through which we offer a broad range of asset management products and related services. We look forward to working with BlueOrchard and partnering with the Luxembourg government to bring this innovative strategy to the market.”