L&G Expands EM Impact With $235M Nature Strategy

Legal & General (L&G) has made the leap in the expansion of its impact investment book with the new Nature and Social Outcomes approach, investing $235 million (£183 million) to fund environmentally friendly development within emerging markets. The new initiative takes L&G's entire impact investment commitment in these regions to more than $1.1 billion (£890 million), further demonstrating the company's commitment to funding environmentally and socially led projects.

As concern for conserving biodiversity continues to gain momentum, along with access to healthcare, education, clean water, and basic infrastructure, L&G's project squarely addresses the United Nations' projected $4 trillion per annum investment gap necessary to realize its Sustainable Development Goals (SDGs). By tapping innovative debt finance solutions like credit-enhanced bonds, the plan intends to unlock financial returns that are not only financially attractive to investors but also contribute to local people's welfare and ecosystems.

Jake Harper, L&G's Senior Investment Manager, highlighted the role of emerging markets in worldwide sustainability. "Investment in emerging markets can potentially provide strong returns for investors while seeking to benefit communities and ecosystems that contribute an invaluable part to maintaining economies around the world," Harper explained. He also underscored the manner in which new forms of debt help investors fund conservation and sustainable development while deriving a benefit from upgraded credit ratings as well as greater returns.

The new strategy is framed by L&G's Future World Multi-Asset Fund and Retirement Income Multi-Asset Fund, which are building blocks of its Target Date and Lifetime Advantage portfolios. These funds offer 5.5 million members of the UK's DC pension schemes exposure to high-growth, high-impact debt markets in emerging economies.

A central aspect of L&G's strategy is its utilization of credit-enhanced financial instruments, such as use-of-proceeds bonds, debt conversion bonds, and outcome bonds. These instruments are supported by multilateral guarantees and insurance, enhancing their risk-return profile and positioning them as viable investment opportunities.

A flagship investment of the strategy is a $250 million cornerstone commitment to Ecuador's second debt conversion for nature—the first of its kind to target forestry and freshwater conservation. This deal is expected to free up $460 million for the Biocorridor Amazónico project, which covers 4.6 million hectares of forest and 18,000 kilometers of freshwater habitats. L&G has also invested over $465 million in debt-for-nature swaps in Belize, Gabon, and Ecuador, allowing governments to reschedule their debt while directing money into conservation efforts.

In addition to nature-related investments, L&G has also invested $350 million in social and environmental infrastructure. This ranges from financing for solar power projects in Senegal, clean water projects in Africa, a public university development in Ivory Coast, and social housing developments to address living conditions in disadvantaged areas. In addition, as much as $100 million has been committed to ImpactA Global, a female-led infrastructure investment company that focuses on emerging markets.

To guarantee investments yield significant impact, L&G assesses projects against fundamental performance indicators reflecting progress in driving an inclusive economy, enhancing health and well-being, and the conservation of natural ecosystems. L&G closely works with development finance institutions, non-governmental organizations (NGOs), and industry stakeholders in ensuring governance principles and accountability are upheld in executing projects.

The Nature and Social Outcomes strategy fits with a wider pattern of growing private sector investment in sustainable development. In the face of growing global pressures like climate change, deforestation, and social injustice, programs like L&G's illustrate how financial innovation can be leveraged to bring real improvements. Through the mobilization of capital via structured debt products, the company is not only creating financial value for investors but also ensuring long-term sustainability and resilience in emerging markets.

As institutional investors increasingly acknowledge the economic and social value of impact investing, L&G's new initiative is a precedent for how financial institutions can weave sustainability into their fundamental investment strategies. With more than $1.1 billion invested so far in sustainable initiatives in emerging markets, L&G is leading the way in the industry, demonstrating the strength of finance in solving some of the world's biggest problems.