SDG Impact Finance Initiative, with the support of Convergence, awarded a proof of concept grant under its Innovation Window to Octobre S.A.S. (joint consortium by Cardano Development, Innpact and Octobre S.A.S) for the design and launch of a USD 277 million blended finance facility “Octobre Liquidity Guarantee Facility" (OLGF), to help mobilize private capital for all SDGs, with an initial focus on SDGs 14 and 15
The challenge of limited liquidity for closed-ended investment vehicles presents a significant obstacle to the flow of new private capital into impact investing. According to the OECD, there exists a substantial USD 4.2 trillion gap in funding for the Sustainable Development Goals (SDGs). This gap is primarily due to a mismatch between the patient capital required for impactful projects and the need for institutional investors to maintain highly liquid portfolios. Investments in sustainable development, such as agriculture, aquaculture, and biodiversity conservation, often demand patient capital, which is illiquid and inaccessible to institutional investors. Octobre aims to tackle this market inefficiency by offering a liquidity solution and supporting the development of a secondary market for impact funds, ultimately working towards closing the SDG funding gap.
Design question and learning potential for the market: How can a guarantee facility increase investors’ access to liquidity in the secondary market and ultimately crowd in more investments toward the SDGs?
The OLGF offers a pioneering solution to address liquidity issues faced by closed-ended investment vehicles in the impact and emerging market investing sector. The guarantee facility is designed to blend public guarantees, private reinsurance as well as junior and senior shares to enhance impact investors’ access to liquidity, thereby fostering more efficient fundraising and attracting increased investment in impact finance initiatives.
By bridging the gap between investors and the Emerging Market & Impact (EM&I) market, the Fund will (i) offer liquidity guarantees, (ii) naturally form a secondary market platform, and (iii) introduce secondary market and innovative liquidity products in addition to (iv) providing specialized impact management assistance through the Fund’s technical assistance facility.The guarantee facility offers investors an opportunity to exit their participation in EM&I funds under any circumstance, thereby incentivizing investors to enter the impact investing space. Under the OLGF, investors pay a yearly fee, in exchange for the option to exit their participation in traditionally illiquid impact funds. When investors trigger the guarantee, OLGF will acquire investors’ stakes, which will then be sold in the secondary market or held until maturity by Octobre.
