Impact Fund Denmark Closes DKK 5bn SDG Fund II for Emerging Markets

Impact Fund Denmark has closed its second SDG fund at its full target of 5 billion Danish kroner, drawing in a group of major private investors alongside public capital to back companies across developing and emerging markets. The fund brings together five Danish pension funds, P+, PenSam, PKA, PFA and PBU, together with Jyske Bank, and invests across 13 markets with the stated aim of pairing sustainable development with competitive returns. More than 1 billion kroner has already gone into five companies, with the balance to be deployed by 2028 at an expected return of 12 to 15 percent.

 

How the Blended Finance Model Works

 

The structure is what makes the fund notable. SDG Fund II is built as a blended finance vehicle, in which private investors receive priority returns of up to 6 percent but give up part of the upside once returns pass 12 percent. That arrangement lets public capital absorb more of the early risk in exchange for a share of the higher returns, making growth-market investments palatable to institutions that would not otherwise take them on.

Reinforcing that structure is an EU guarantee under the EFSD+ programme worth more than €71 million, which covers potential losses on individual investments and further reduces the risk carried by private investors. The fund also invests substantially in companies that are not yet listed, on the reasoning that much of the growth in developing economies happens outside public equity markets. Chief executive Lars Bo Bertram said the participation of five pension funds and now Jyske Bank showed a growing appetite among private investors for combining returns with development impact, and pointed to the fund as evidence that public money can mobilise private capital at scale.

 

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Where the Money Is Going

 

The five investments made so far give a concrete picture of the fund's reach across sectors and geographies. In India, Radiance Renewables will use its investment to build an additional 926 megawatts of solar capacity, while Sturdee Energy is developing renewable projects in Southern Africa that are expected to cut carbon emissions by half a million tonnes a year. In Africa's mobility sector, Spiro, one of the continent's largest e-mobility firms, is expanding its fleet of electric motorcycles and battery-swap stations to lower costs for drivers and reduce emissions.

Two further investments broaden the picture beyond energy. Project Villeta in Paraguay produces green fertiliser using hydropower, displacing carbon-intensive imports from Russia and the Middle East, a combination of climate benefit and supply-chain resilience. In Morocco, tea-packaging leader Imperium Holding is expected to create more than 840 new jobs, 95 percent of them filled by women, underscoring that the fund's development mandate extends to social outcomes alongside emissions reductions.

 

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Public Capital as a Lever for Private Money

 

The closing sits within a broader push to use public financing as a catalyst rather than a substitute for private investment. The EU support flows in part through the bloc's Global Gateway strategy, its framework for financing infrastructure and development in partner countries, and the EFSD+ guarantee is the mechanism that translates that policy into reduced risk for commercial backers. The presence of Danish pension funds is significant, since these are conservative institutions managing retirement savings, and their willingness to commit to a growth-market impact fund signals that the blended model has matured enough to meet their risk and return requirements.

The test now is deployment. With around 4 billion kroner still to be invested over the next two years, the fund's ability to find companies that deliver both the targeted 12 to 15 percent return and measurable development impact will determine whether it validates the model it is built on. If it succeeds, it strengthens the case that guarantees and priority-return structures can reliably pull institutional capital into markets it has long avoided, and the pipeline over the period to 2028 will be the clearest measure of whether that promise holds.

 

Source: Impact Fund Denmark