DFI sponsorship of new platforms and ventures: Why and how? Synthesis report

Gregory, Neil F.; Craviotto, Nerea; Getzel, Bianca; Fides Oltra, Laura Research Report DFI sponsorship of new platforms and ventures: Why and how? Synthesis report ODI Report Provided in Cooperation with: ODI Global, London Suggested Citation: Gregory, Neil F.; Craviotto, Nerea; Getzel, Bianca; Fides Oltra, Laura (2025) : DFI sponsorship of new platforms and ventures: Why and how? Synthesis report, ODI Report, ODI Global, London, https://odi.org/en/publications/dfi-sponsorship-of-new-platforms-and-ventures-why-and-how/ This Version is available at: https://hdl.handle.net/10419/314356 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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Neil Gregory, Nerea Craviotto, Bianca Getzel and Laura Fides Oltra March 2025 Key messages • Development finance institutions (DFIs) face a challenge in achieving their mission: important and unmet development needs they cannot address adequately by investing in existing firms. Some DFIs – including British International Investment (BII) and Norfund – have responded to this challenge by setting up new ventures themselves. • Based on case studies of 12 ventures created or acquired by BII and/or Norfund, this report sets out the rationale for and practical implications of DFI sponsorship of new ventures, and draws lessons for other DFIs and their shareholders wishing to follow this approach. • These ventures have big ambitions to generate critical investments in ports, power, healthcare, forestry, agriculture and other critical sectors in some of the most challenging lowand middle-income countries, while pioneering new approaches to investing in these sectors. • DFIs can multiply their potential impact by setting up platform ventures, whose purpose is to create more investible opportunities. They can multiply their financing impact by mobilising private co- ODI Report 2 investments in these ventures. These platforms can also generate co-investment opportunities for other DFIs at sub-project level. • A range of options for structuring DFI-sponsored ventures have proven fit for purpose. To sponsor new ventures, DFIs need the capacity and authority to invest equity and to take control positions. This is a limitation for many DFIs. • Sponsoring new ventures is a heavy lift for DFIs, in terms of operational and financial capacity, and staff and management time. As the owners of DFIs, governments play a key role in setting their strategy and structure, which determine the extent to which DFIs can sponsor new ventures. • There are early indicators that the ventures studied are on track to achieve their intended objectives. The ventures have mobilised $3 billion in private co-investments either in the venture or in projects developed by the venture. • The ability to sponsor new ventures expands DFIs’ potential to achieve impact. It enables them to pioneer new markets and finance activities that would be impossible under the traditional demand-led model. These new ventures can also be a vehicle for scaling up private capital mobilisation. The pioneering ventures sponsored by BII and Norfund offer lessons for other DFIs and their shareholders wishing to do more to promote private investment in places where investment opportunities are currently lacking. ODI Report 3 Readers are encouraged to reproduce material for their own publications, as long as they are not being sold commercially. ODI requests due acknowledgement and a copy of the publication. For online use, we ask readers to link to the original resource on the ODI website. The views presented in this report are those of the author(s) and do not necessarily represent the views of ODI or our partners . This work is licensed under CC BY-NC-ND 4.0. How to cite: Gregory. N, Craviotto, N., Getzel, B., Fides Oltra, L. (2025) DFI sponsorship of new platforms and ventures: why and how? ODI Report. London: ODI (www.odi.org/publications/dfi-sponsorship-ofnew-platforms-and-ventures-why-and-how/) ODI Report 4 Acknowledgements The research has benefited from the active cooperation of the staff of BII and Norfund. We are grateful to Paddy Carter (BII), Steven Ayres (BII) and Signe Kolbye Sorensen (Norfund) for coordinating the sharing of materials, arranging interviews and reviewing the case studies. The study also received guidance and comments from a Sounding Board, which, in addition to Paddy Carter and Signe Kolbye Sorensen, included Soren Andreassen (IFU), Samantha Attridge (ODI Global), Marko Bergland (Finnfund), Frederique Dahan (ODI Global), Guido van Heugten (FMO) David Kuijper (EDFI), Hans Peter Lankes (ODI Global) and Frederic Lucenet (EBRD). We thank them for their contributions. We thank Frederique Dahan for overall supervision and Ben Campbell and Roo Griffiths for the editing and production of this report. All errors and omissions are solely the authors’ responsibility. About the authors Neil Gregory is a Senior Research Associate at ODI Global. He teaches at Johns Hopkins School of Advanced International Studies and advises development finance institutions and impact investing firms. He has previously held a variety of senior research, strategy and operational roles at the International Finance Corporation and the World Bank. He holds Masters’ degrees in Economics from Cambridge and Oxford Universities and an MBA from Georgetown University. Nerea Craviotto is a Senior Policy Analyst at ODI Europe. Building on ODI Global and Europe’s work and analysis, she develops impactful work to inform European external policies, notably in the field of development cooperation and finance. Prior to working with ODI Europe, Nerea has almost 20 years of experience working on policy and advocacy work on sustainable development policies and development finance with civil society organisations, the trade unions and feminist organisations. Nerea holds a master’s degree in development policies from Deusto University and a degree in Sociology from the Autonomous University of Barcelona. Bianca Getzel is a Senior Research Officer in the Development and Public Finance Programme at ODI Global. Her research and advisory work focuses on how multilateral development banks and development finance institutions are adapting to an ever-changing world economy. Her work analyses how private investments can be de-risked and mobilised to support the 2030 Agenda, and how reforms of the international financial architecture can unlock more resources for today's global challenges. Laura Fides Oltra is a professional in international development and external affairs. In addition to her work at ODI Global, she has served as a Programme Coordinator and UN Liaison Consultant at the UNESCO Iraq Office. She has also worked on EU Enlargement and ODI Report 5 Neighbourhood Policy, as well as various international development programmes at the European Commission and the United States Institute for Peace. Laura holds a Master’s degree in International Relations and Economics from the Johns Hopkins University School of Advanced International Studies. During her undergraduate studies, she specialized in Asian private sector development. ODI Report 6 Acronyms AFIP African Forestry Impact Platform AgDevCo Agricultural Development Company Limited AKFED Aga Khan Fund for Economic Development APP Africa Power Platform AWID Africa Water Infrastructure Development BII British International Investment CEO chief executive officer CHAI Clinton Health Access Initiative CIO Climate Investor One DFI development finance institution DP World Dubai Ports World DRC Democratic Republic of Congo EBRD European Bank for Reconstruction and Development EDFI Association of European Development Finance Institutions ESG environmental, social and governance EU European Union FMV fair market value FMO Dutch Entrepreneurial Development Bank GGEF Global Green Economic Foundation GIP Growth Investment Partners GP general partner HNW high net worth investor HR human resources IFC International Financial Corporation IFU Danish Investment Fund for Developing Countries IndiGrid India Grid Trust InVit Infrastructure Investment Trust IPO initial public offering IT information technology JV joint venture LLC limited liability company LLP limited liability partnership LP limited partner MDB multilateral development bank MSMEs micro, small and medium enterprises NIIF National Investment and Infrastructure Fund Norad Norwegian Agency for Development Cooperation SEC Securities and Exchange Commission SMEs small and medium enterprises SPV special purpose vehicle T&D transmission and distribution TCX The Currency Exchange Fund UJV unincorporated joint venture UK United Kingdom VC venture capital ODI Report 7 WASH water, sanitation and hygiene ODI Report 8 Contents 1 Introduction ..................................................................................... 9 1.1 Definitions and scope .................................................................... 10 1.2 Methodology and structure of the paper ........................................ 12 2 Rationale for DFI sponsorship of new ventures ............................. 15 2.1 DFI strategies and venture sponsorship ........................................ 15 2.2 Private capital mobilisation ............................................................ 19 3 Key achievements by DFI-sponsored ventures .............................. 22 4 Implications for DFIs ...................................................................... 25 4.1 Long time horizon and risk tolerance ............................................. 25 4.2 Staff skills and incentives............................................................... 26 4.3 Operational support ....................................................................... 27 4.4 Accounting implications of control .................................................. 29 5 Design of DFI-sponsored ventures ................................................ 31 5.1 Corporate structures ...................................................................... 31 5.2 Capital contributions ...................................................................... 37 5.3 Asset acquisition and revenue generation ..................................... 39 5.4 Future growth and exits ................................................................. 39 5.5 Management team selection and compensation ............................ 41 6 Key lessons ................................................................................... 44 6.1 Lessons for governments .............................................................. 44 6.2 Lessons for DFIs ........................................................................... 45 7 Concluding remarks ....................................................................... 47 References ............................................................................................... 49 ODI Report 15 2 Rationale for DFI sponsorship of new ventures 2.1 DFI strategies and venture sponsorship DFIs pursue their development objectives mainly through a combination of: 1. directly financing the growth and expansion of existing medium/large formal firms 2. indirectly financing the growth of micro, small and medium enterprises (MSMEs) and ventures through financial intermediaries (including banks, investment funds, non-bank financial institutions) 3. financing private infrastructure on a project finance basis (i.e. one infrastructure asset at a time) Sometimes, this is with a general intent to support economic growth and job creation; sometimes, it is targeted at specific development challenges. 1 These approaches rely on the availability of investible firms, financial intermediaries and infrastructure projects that are seeking to raise capital. In many lowand middle-income countries, this constrains DFI operations, particularly their ability to invest and mobilise private capital in high-priority sectors and countries. There are relatively fewer large firms in lowand middle-income countries than there are in high-income economies. This gap – the ‘missing top’ – is especially pronounced in sectors requiring high degrees of specialisation and economies of scale (Ciani et al., 2020). It is rare for small or even medium-sized firms in these economies to grow into large enterprises, given challenges in obtaining raw materials, difficulties complying with regulations, corruption and weak connections to international markets (Freund and Pierola, 2020). Firms also find it harder to access growth capital to become large (ibid.). Banks in these countries often have limited capacity to provide longterm growth capital owing to regulatory constraints, collateral requirements and high interest rates (Keyton, 2007). Additionally, private equity markets are underdeveloped, and managing financial risk is challenging (Sinha et al., 2010). As a result, most large firms in 1 Such as adding value to agricultural or forest commodities by investing in agriprocessing and forestry firms, or improving healthcare by investing in the private provision of tertiary services to complement the public provision of primary healthcare. ODI Report 16 these economies are either government-owned or foreign-invested (Keyton, 2007). It is widely acknowledged that the standard DFI model of investing growth capital in existing firms often falls short, because there are insufficient large formal firms to invest in, requiring additional measures (Massa et al., 2016; Ciani et al., 2020; Henderson et al., 2021). This constraint is felt most acutely in lower-income, frontier and fragile/conflict-affected states, many of which are concentrated in Africa (Collier et al., 2019; Collier, 2024). Here, there is both a pervasive ‘missing top’ of large formal firms with the capacity to undertake investments large enough for DFIs to finance; and limited appetite for new sponsors (e.g. foreign investors) to enter the market and create new firms. When faced with this constraint, DFIs have the following options: 1. provide support for upstream activities such as investment climate reforms, market development and business training with the objective of encouraging the formation and market entry of large formal private firms (including financial institutions) that DFIs can later finance. ‘Market creation’ activities of this type may have limited impact without the presence of large firms able to benefit from an improved investment climate or market opportunities. 2. provide support and financing for venture capital (VC) to support start-ups with the potential to grow into large firms, and private equity and debt to help medium and large firms grow. The technology sector is notable for the ability of start-ups to scale quite quickly and with limited amounts of capital. For example, International Finance Corporation (IFC) has developed initiatives like Startup Catalyst, which invests in nascent tech ecosystems (World Bank, 2005–2006; IFC, 2020). In other sectors, including infrastructure and financial services, there are fewer examples of successful start-ups that have started as small ventures. However, private equity funds have been successful in helping midsize firms grow across a wider range of sectors 2 . 3. take the initiative to sponsor the creation of new ventures (Sampablo and van Laer, 2024), including platforms that can generate further investment opportunities. Box 2 Venture sponsorship in DFI strategies BII: BII’s current strategy (2022) emphasises using a flexible financial toolkit as a key element to achieve its productive, sustainable and inclusive development goals. It also stresses the importance of deploying varied investment vehicles to address diverse risk appetites. Additionally, the 2 https://www.bii.co.uk/en/news-insight/insight/articles/investing-for-impact-inafrican-private-equity-funds/ ODI Report 17 strategy highlights how partnerships with like-minded organisations can amplify both the impact and the financial success of investments. Before formalising this strategy, BII had developed an internal document (2021) that outlined the rationale for creating large and structured platforms, JVs and firms dedicated to sustainable development. This practice aims to decouple financial risks and accelerate operations separate from other initiatives. Moreover, this approach directly impacts targeted regions and sectors, providing financial opportunities for local populations and fostering growth when other tools may be less effective. Norfund: Norfund’s strategy (2023–2026) is focused on impactful investments in its targeted goals. Norfund aims to operate in countries, sectors and instruments where capital is scarce and its development impact is likely to be strong. The strategy prioritises equity instruments because, ‘in most developing countries, this is the scarcest type of capital that enterprises need’. Moreover, creating partnerships, and mobilising and circulating capital for increased additionality, is another key part of the impact strategy. This is why these platforms are relevant in Norfund’s investment toolkit and have helped it create an impact. As an example, the strategy showcases how Norfund sold SN Power, a platform created and built into a leading hydropower company in developing countries, and obtained $1.17 billion to reinvest in developing countries, (Norfund, 2020). Further, Norfund’s 2023 annual report illustrates how establishing new as well as strengthening existing partnerships ‘can enable industrial investors to realise more projects and enter into new markets’ and has ‘multiplied the impact of Norfund’s capital, and leading to sustainable business ventures’. Norfund reports also highlight how the establishment of these platforms through different levels of engagement has helped its goals and partnerships (Norfund, 2022). A few DFIs, including BII and Norfund, have taken option 3, and sponsored ventures with the strategic objective of enabling investment and service provision in sectors and countries/regions that lack existing private firms (see Box 2). This includes setting up platforms, which in turn develop and/or finance other firms or infrastructure projects (Collier, 2024; Thioune, 2023; Sampablo and van Laer, 2024). Based on the cases reviewed for this study, the rationale to launch this type of initiatives can include: a. to help develop new markets for private investment beyond the project, especially in high development impact sectors such as infrastructure, health and agribusiness/forestry, through pioneering investments that: • introduce new business models • demonstrate investment opportunities in previously underinvested sectors/countries/regions, where there is a lack of suitable firms to undertake investments or ODI Report 18 b. to mobilise more private capital for projects in impactful yet investible sectors/countries/regions, by: • generating an investible project pipeline, especially in infrastructure, at a scale beyond normal DFI project finance transactions • taking private investors to new markets on a programmatic basis, beyond single transactions There may be multiple rationales involved in the creation of specific ventures, with some being more important than others, as shown in Table 2, which summarises key objectives and other relevant objectives of BIIand Norfund-sponsored platforms. The ventures examined in this report have big ambitions to generate critical investments in ports, power, healthcare, forestry, agriculture and other critical sectors in some of the most challenging lowand middle-income country contexts, while pioneering new approaches to investing in these sectors. For example, Gridworks is working to expand electricity distribution in Burundi, where only 12% of the population have access, and bring grid electricity to three isolated cities in DRC for the first time. DP World is investing in a new deep-sea port in Senegal and the first deep-sea port in DRC (urgently needed essential trade infrastructure a country of over 100 million people). Globeleq has developed among the first gridscale battery energy storage projects on the African continent, and is developing the first grid-scale wind project anywhere between South Africa and Kenya. 3 Ayana, which differs from other platforms in this report because its role was to mobilize capital at scale in the Indian market with enormous demand for energy investment, has rapidly reached 4.1GW of renewable generation capacity in operation or under construction, and has recently been sold at enterprise value of $2.3bn. GIP Ghana is piloting a new approach to providing long-term and flexible finance to SMEs, meeting a need that commercial banks have been unable to respond to. If this model works in Ghana, BII plans to be replicate it in other countries. AFIP is creating markets for sustainable forestry products, with huge potential for carbon sequestration and rural job creation. Arise channels equity capital to support the growth of banks across Africa. MedAccess is providing guarantees that reduce prices of much-needed medical products in Africa. 3 The first grid scale battery project to start operations in sub-Saharan Africa was the 20MW Golomoti PV and battery project in Malawi, supported by the Private Infrastructure Development Group. Globeleq’s Cuamba project is the second. Globeleq has since been awarded the Red Sands storage project in South Africa, which will be the largest standalone battery in all of Africa ODI Report 19 Table 2 Key objectives of selected DFI-sponsored ventures Note: The table is not a comprehensive picture of all objectives within each example. For full details see the individual cases studies annexed to this report. Source: Authors’ elaboration. 2.2 Private capital mobilisation A key element of many DFI strategies is the mobilisation and catalysation of private capital. DFI-sponsored ventures can contribute to this objective in several ways: 1. By creating financially sustainable private firms in countries and sectors where they are lacking, DFIs can catalyse additional private investment by demonstrating the viability of such investments, and generating knowledge of value to private investors. For example, AFIP and AgDevCo are investing in forestry and agribusiness in Africa, which private investors typically regard as too high-risk to invest in. Gridworks aims to demonstrate the viability of private transmission and distribution (T&D) investments, attracting more private capital to the sector. In 2019, with the exception of BII, there was little or no appetite among DFIs to take the risk of developing T&D projects in Africa. BII recognised that underinvestment in Africa’s electricity networks was a significant market failure and needed to be addressed. In the almost four years since Gridworks was created, the sentiment towards encouraging private investment in this vital sector has slowly improved, among African governments and also among impact and commercial investors. Gridwork’s market-shaping activity has prompted growing interest among other DFIs in offering private sector solutions to complement the public sector solutions African governments currently have to the funding shortfall. ODI Report 20 2. By creating permanent capital vehicles, DFIs can offer the opportunity for private capital to come into the venture (at holding company level) at a later stage, either diluting or replacing DFI capital (allowing the DFI to exit). For example, private investors participate in Arise and Abler Nordic at the holding company level. The most successful example of mobilising local capital is Ayana, which was initially established with 100% BII ownership. BII initially set a mobilisation target of $50 million, and up to 2024 had mobilised around $1.8 billion. 4 The platform grew fast, to the point that it became difficult for BII to continue to contribute enough new capital for it to maintain its growth trajectory, making BII’s sole ownership a constraint to the business size and continued growth. It was successful in attracting Indian investment funds sponsored by the government to take equity stakes at the platform level, and over time BII relinquished management control. 5 3. In the shorter term, platforms can offer co-investment opportunities to private investors at the asset/project level, including in subsidiaries developed by the platform. Ayana, DP World, Globeleq and Gridworks aim to generate infrastructure assets that can attract private co-investment. This can be done either before or after project completion. Since much of the risk of infrastructure development occurs pre-completion, the risk-return profile may be more attractive to private investors post-completion. Hence, some platforms finance the pre-completion phase fully, with the aim of refinancing by bringing in co-investors post-completion. For example, Ayana has been able to refinance some of its power projects’ debt post-completion. 4. In the longer term, mobilising private investors at the platform company level provides risk diversification and opportunities for larger ticket sizes. In the first few years and during early/development stages, DFIs may accept higher risks and the distant prospect of financial returns at the platform level, because of the impact value of the activities and projects the platform undertakes. Yet private investors may not find these risk-adjusted returns attractive. Once the venture reaches scale and financial sustainability and the risks are reduced, mobilisation at the platform level may be more attractive to private investors than individual investments in sub-projects. For example, Ayana has been able to attract domestic investors at the platform level, while other vehicles like Gridworks and AgDevCo are aiming to attract private financing in the near to medium term. Platform-level investments are more likely to be equity-financed, but the lack of a clear exit path can be a deterrent. Hence, platformlevel investments may be of most interest to investors that share 4 This figure includes debt and equity commitments that have not yet been fully disbursed (they are tied to the construction of projects). 5 Ayana was sold to Indian investors in February 2025 at an enterprise value of $2.3 billion, after the study was complete. ODI Report 21 the patience and development impact orientation of the sponsoring DFI – for example other DFIs, family offices/high net worth investors (HNWs), mission-related investments of endowments and foundations, and donors. Because of the environmental, social and governance (ESG) and impact management systems that BII and Norfund have installed in them, some funds (e.g. Abler Nordic’s funds, AFIP) can be categorised as impact funds (Article 9 under the EU Sustainable Finance Regulations). This may make them attractive to impact investors. ODI Report 22 3 Key achievements by DFI-sponsored ventures While most new ventures are too recent to have achieved their full development impact or mobilisation potential, we can see early indications of their potential to bring both DFI and private capital to priority sectors and countries. This section presents some successes to date. However, it is important to note that this study and the points presented below should not be considered a comprehensive overview. This report has not sought, for example, to capture platforms that failed to pass investment committees, and our input has relied on information provided to us on a voluntary basis by DFI counterparts. The first indication of success is that the structures have been able to attract substantial financial commitments. Across 12 DFI-sponsored ventures examined in this report, total DFI commitments to date amount to more than $4.2 billion, with the potential to attract more capital, including debt, as the ventures grow in size. The second indicator of success is that although some of these ventures still have a steep climb ahead of them, all but one of them are on a path to operating with financial independence from the sponsoring DFI(s),aside from periodic capital infusions to finance expansion and growth. The exception is MedAccess, whose strategy relies on ongoing concessional funds for its operations, justified by its purpose of encouraging greater production of medical products and services at lower prices. These indicators may appear trivial, but they are not. New ventures face substantial risks in attracting enough capital to become operational, particularly in capital-intensive sectors like infrastructure. They then face a range of operational risks in moving from start-up to financial independence. The high success rate of the ventures sponsored by BII and Norfund studied in this report in achieving these milestones shows that it is possible for DFIs to succeed in the difficult task of establishing new large firms. A third indicator of success, for those ventures for which it is an objective, is mobilising private capital. As discussed above, the rationale for DFIs establishing and sponsoring new ventures is not always about mobilising private capital at scale, as these vehicles are often better placed to mobilise private capital for impact and market development in priority sectors. This of course does not preclude (i) crowding in new commercial players at scale as an externality of new venture creation or (ii) the opportunity for new platforms to prioritise scale as a strategic objective. Nevertheless, the ventures studied in this report have raised over $3 billion, notably Ayana and Globeleq which have mobilised over $2.6bn for infrastructure projects they have ODI Report 23 developed. In other cases, mobilisation numbers can be expected to grow as the ventures grow and mature, and generate more investment opportunities for both DFIs and private investors, especially infrastructure platforms like Gridworks and DPWorld which expect to raise hundreds of millions of dollars of cofinancing for the large infrastructure projects they are developing. GIP also has the potential to mobilise capital at scale for SME lending, especially if the model is successfully expanded to more countries Table 3 Capital mobilised by cases studied ($ millions) Platform Total value of DFI commitments Total private capital mobilised PCM platform level PCM asset level Equity Debt Equity Debt MedAccess 200 AgDevCo 280 Gridworks 175 GIP 50 AFIP 200 DP World 320 APP 145 AWID 15 Ayana 235 1,800 1,800 Globeleq 1,322 835 835 Arise 1,000 177 177 Abler Nordic 310 226 226 Total 4,252 3,038 177 226 2,635 Note: PCM = Private capital mobilised (following the MDB/DFI definition, which includes capital from state-owned enterprises on commercial terms). Cumulative amounts committed by BII and Norfund (and IFU for Abler Nordic) since inception of the venture, based on publicly available information. Numbers are indicative and approximate only, and may not include all recent commitments. Includes mobilisation at platform and sub-project level. Does not include existing assets brought into the new venture. Source: Authors elaboration based on case studies and public information on DFIs websites, which are published with a lag and hence may omit more recent DFI commitments into these ventures. Finally, in addition to having projects under development with high potential impact, there are many indicators of achieved impact among ODI Report 24 the platforms which have been in existence for some time. 6 Details of the activities to date of each platform can be found in the case studies annexed to this report; we present a few highlights here. MedAccess has achieved two market ‘firsts’: charging a commercial fee for its guarantees and leveraging volumes with partial compensation rather than the full sales price, which has increased the supply and reduced the prices of medical products in the African market, including of virus testing equipment, tuberculosis treatments and next-generation malaria nets and malaria vaccines. Ayana and Globeleq have both developed many GWs of power infrastructure assets that contribute to meeting the growing demand for power in South Asia and Africa. Arise, as the first long-term financial services investment platform in sub-Saharan Africa, is among the leading (minority) equity investors in banks across the region. Currently, Arise has equity stakes in eight banks and three non-bank institutions, with a fair value of approximately $1 billion, which it intends to double in the next few years. AgDevCo, one of the longest-established ventures examined in this report, has made and exited many highly impactful investments in agribusiness firms and primary agriculture that have strengthened supply chains while generating productive rural employment. 7 AFIP is managing sustainable forestry plantations that are providing employment for local communities, and it is developing new markets for African sustainable wood products. These are indicators that the ventures studied are on track to achieve their intended impact objectives. As long-run strategic activities, any achievements in the early years of operations offer only a limited guide to what they may achieve over a longer period. Unlike regular DFI investments, which have limited upside to what they can achieve within the typical fiveto eight-year holding period, platforms/JVs with unlimited life have much greater long-term potential. 6 Some of the platforms in this report had impactful operating assets transferred into them upon their creation, such as DP World, AWID and APP, and others have since acquired stakes in impactful operating assets as a foundation for future expansion, such as the Gridwork investments in Anzana and SPS. 7 See https://www.agdevco.com/news-and-resources/resources/ ODI Report 31 5 Design of DFI-sponsored ventures There is a range of options for structuring DFI-sponsored ventures, either under sole DFI control or with control shared with private partners or other DFIs. The trajectory of launching a new venture requires appropriate phasing of capital contributions and may include the acquisition of existing assets (which can be used to generate cashflow to finance new project development). As ventures have unlimited lives, DFIs also need to choose a structure that will enable the venture to finance further growth, while allowing for the DFI to exit once the venture has matured. The corporate structure will also affect its ability to hire and motivate a strong management team. 5.1 Corporate structures There is a range of legal forms that allow the DFI to play the role of a sponsor, a JV partner or an active minority shareholder – all of which represent a more active role than the regular business of DFIs. Table 4 shows which of the case studies adopted each type of legal structure. ODI Report 32 Table 4: Legal structures used in DFI platforms Spectrum Platform Structure Governance Sole shareholder MedAccess UK LLC 100% BII Gridworks UK LLP 100% BII GIP Ghana: SEClicensed permanent capital vehicle (limited liability); Zambia: SEC-licensed LLC 100% BII Controlling shareholder Globeleq UK LLC 70% BII 30% Norfund* AFIP Partnership Capital Vehicle 38% BII 38% Norfund 24% Finnfund AWID (Metito) UK LLC 60% Metito 40% BII Active minority shareholder AgDevCo UK LLC 64% AgDevCo 19% Norfund 17% BII Active minority shareholder (JV) DP World Unincorporated JV DP World and BII Ayana Incorporated JV 35% BII 53% NIIF 13% GGEF APP (AKFED) JV 50.1% AKFED 49,9% BII * BII is the controlling shareholder, with Norfund an active minority shareholder. Source: Authors’ elaboration Limited liability companies. Most of the platforms examined are structured as LLCs, in which the DFI takes a controlling share – anywhere from 38% to 100%. In some cases, the company is limited by guarantee 10 (e.g. MedAccess and Globeleq), or is a public benefit corporation, so enshrining its development purpose in its corporate structure. Companies may be incorporated in the home country of the DFI, or in one of the countries of operation – the choice often depends on what will simplify tax and regulatory compliance. In some cases, such as for financial institutions, they may be required to incorporate in the country of operation, as was the case with GIP operations in Ghana and other countries where this model can be replicated. DFIs may also make use of reputable offshore financial centres as taxneutral, low regulation locations, particularly where ventures operate in multiple countries. Box 4 Regional or country focus In most cases, platforms have been established with the intent to operate across multiple countries. However, in the financial sector, regulations require establishing ventures in each country, and cross-country variations in regulation may affect the available and optimal legal structure. For example, GIP follows a country-by-country strategy whereby a separate investment company is established in each market. This choice aligns with GIP’s key features and objectives: delivering finance in local currency, 10 A company limited by guarantee does not have any shares or shareholders but is owned by guarantors who agree to pay a set amount of money towards company debts in the case of liquidation. ODI Report 33 mobilising local institutional capital, recruiting a local management team and reaching SMEs – all of which are often more easily achieved through a local investment company. These country-specific institutions can still benefit from a cross-country approach by being owned by a holding company that provides centralised corporate services (e.g. HR, IT). Also, BII has developed a ‘playbook’ for setting up operations, which can accelerate the creation of new country-based financial institutions. Where the venture is a platform to develop sub-projects, it is usually structured as a holding company that holds equity in other companies/assets that it may or may not control. The holding company may be controlled solely by the DFI or jointly controlled under a JV agreement (such as AWID, where BII holds 40% and a private developer, Metito, holds 60% of the holding company equity). This structure allows for co-investment either at the holding company level, giving exposure to all the assets, or at the level of specific subsidiary companies or projects. An early example of this structure was SN Power, established in 2002 as a 50:50 joint venture between Norfund and Statkraft, the Norwegian power company, which developed and then invested in a series of power projects in Africa and Asia. Another option, albeit less common, is a UJV, where the assets remain with the partners. For example, DP World is not incorporated, as the assets it manages are held by DP World and BII in parallel holding companies. Box 5 SN Power SN Power is a renewable energy company originally established as a JV between Norfund and Statkraft, Norway’s largest renewable energy producer. SN Power was created in 2002 to develop, finance and operate hydropower plants in emerging markets, combining financial resources, technical expertise and local partnerships to promote sustainable energy solutions. Key achievements: • Promoting renewable energy: SN Power’s focus on hydropower was instrumental in reducing carbon emissions by replacing fossil fuel-based energy in countries like Lao PDR, the Philippines and Uganda. • Geographical impact: Projects in 14 countries across Africa, Asia and Latin America are aimed at addressing energy deficits while supporting economic development. • A model for public–private collaboration was pioneered, leveraging Norfund’s public funding and Statkraft’s technical expertise to attract private investment. • Circulating capital: SN Power was acquired for $1.17 billion in 2021 by Scatec, a leading renewable energy provider, allowing Norfund to reinvest the capital. In 2017, Statkraft exited the joint venture by selling its stake to Norfund. In 2021, Norfund exited by selling SN Power to Scatec, a private Norwegian renewable energy developer. In 2024, Scatec sold SN Power to Total Energy, a large private European energy company. ODI Report 34 Similarly, DFI-sponsored ventures to create investment funds involve the creation of an asset management company with the DFI and its partners as shareholders. The asset manager can both develop and manage funds (as in the case of Abler Nordic) and in some cases manage parallel project development or technical assistance facilities that generate assets to be financed by the funds it manages (as in the case of Climate Investor One – see Box 6). Box 6 Climate Investor One: an FMO-sponsored innovation for renewable energy financing Climate Investor One (CIO) is a pioneering blended finance platform sponsored by the Dutch Entrepreneurial Development Bank (FMO). FMO led the design of the platform and created Climate Fund Managers as a JV with private asset manager Sanlam to manage the fund (Sanlam was also an anchor investor). CIO is designed to accelerate the development of renewable energy infrastructure in emerging markets addressing critical financing gaps across the project lifecycle. The fund particularly targets solar, wind and hydropower projects to promote sustainable development and combat climate change. CIO uses a three-stage financing model: 1. The Development Fund provides risk capital for early-stage project development, including feasibility studies and environmental assessments. 2. The Construction Equity Fund offers equity bridge financing to cover the high-cost construction phase, reducing reliance on debt and accelerating timelines. 3. The Refinancing Fund facilitates long-term refinancing to stabilise projects and attract institutional investors. This structure minimises project delays and risks, making renewable energy projects more attractive to private investors. Key achievements: • Project pipeline: As of 2023, the platform has supported over 20 renewable energy projects, contributing to more than 1,500 MW of clean energy capacity. • Private sector mobilisation: CIO has demonstrated the potential of blended finance by leveraging institutional and private capital alongside public funding. • Carbon impact: The platform has prevented millions of tons of carbon dioxide emissions annually by expanding production of renewable power. • Job creation: CIO has delivered economic benefits through job opportunities and infrastructure improvements in host communities. - Geographic reach: CIO has funded projects across Africa, Asia and Latin America, bringing renewable energy solutions to millions. Perpetual and evergreen funds. Ventures can also be structured as perpetual or evergreen funds, which do not have to return capital to ODI Report 35 investors at a prescribed time (e.g. GIP Ghana, AFIP). This structure is well suited to investments in sectors that take a long time to generate returns, such as forestry. The fund may be managed by the DFI or a subsidiary that it controls as GP, or may be managed by a third party, with the DFI a LP with certain investor rights. Perpetual fund structures allow for platforms to have an unlimited lifespan, in the same way as LLCs. Fund structures may also allow the DFI to keep the venture’s assets and liabilities from being consolidated onto its own balance sheet, depending on financial regulations in the DFI’s home country. An example of DFIs establishing a permanent structure is the Currency Exchange Fund (TCX), created in 2007 by a consortium of 19 MDBs, bilateral DFIs and microcredit funds to provide foreign currency hedging solutions (see Box 7). Box 7 The Currency Exchange Fund (TCX) TCX was established in 2007 by a consortium of 19 MDBs, DFIs and microcredit investment vehicles. It is structured as a fund, managed by TCX Investment Management Company, a subsidiary of the not-for-profit Stichting Cardano Development. TCX’s primary mission is to provide innovative foreign currency hedging solutions for investments in emerging and frontier markets, where such tools are typically unavailable or prohibitively expensive. By absorbing currency risk, TCX enables local currency financing for projects in sectors like infrastructure, microfinance and renewable energy, fostering economic stability and reducing dependency on foreign exchange. Since its creation, TCX has hedged over $10 billion in development finance flows across more than 100 currencies. Notable successes include creating local currency solutions for high-risk markets, fostering financial stability and catalysing private investments through innovative instruments like frontier bonds. For example, the permanent capital vehicle structure 11 of AFIP provided the type of patient capital needed to support the needs involved in developing a sustainable forestry sector in Africa. This allowed AFIP to focus on optimising the performance of its forestry assets and maximising impact, rather than on returning capital to investors in the medium term. Unincorporated joint ventures. JVs may be incorporated as LLCs, which allows them to jointly hold assets, or they may be UJVs, where the assets generated by the venture sit on the balance sheets of one or more of the partners. As limited liability structures, corporate and fund structures can insulate DFIs from financial and operational risk, in a way that UJVs cannot. However, UJVs can be flexible vehicles for collaborating with partners on an investment programme without creating a new corporate structure or hiring staff. For example, BII partnered with 11 AFIP provided a long-dated structure with investor liquidity windows in Year 10 and every six years thereafter. ODI Report 36 ports operator DP World in a UJV to develop port and logistics investments in Africa. The actual investments in the projects developed can be made on a project finance basis, and the structure does not require pooling of any assets between BII and DP World. Likewise, existing assets managed by the JV are held on the partners’ own balance sheets. The UJV between DP World and BII shows how, when partners are well aligned and strategic control is shared, a platform can maintain a very lean and flexible structure with little upfront capital investment and high value for money. From a DFI perspective, operating effectively at this end of the spectrum requires alignment on strategy, as well as negotiating substantive control and governance rights. In the case of DP World, this took four years to agree. In addition, it often requires an existing or well-advanced pipeline of projects that both parties share alignment over. In turn, it is more likely for UJVs to be following a mobilisation rationale regarding generating investible project pipelines and bringing investors into new and/or riskier markets. Overall, it is more difficult for UJV structures to be established based on solely strategic aspirations. JVs are easiest to negotiate and manage when they are between two parties. Adding additional parties adds management complexity. Box 8 Partnership or sole ownership Sole ownership gives DFIs the greatest freedom to direct the venture. In creating MedAccess and GIP, BII chose to hold 100% of the equity so it had the freedom to move faster, take more risk and innovate, with the intent to bring in other equity partners later should the venture prove successful. In the case of Ayana, BII initially held 100% of the equity, but was able to bring in other investors once the business model was proven, bringing BII’s shareholding down to 35% 12 . In the case of MedAccess, 100% ownership has allowed it to be a patient investor as it tried to find a sustainable model for the business. However, the lack of a technical partner in the health space created challenges for BII, which had limited internal expertise in business or product development within the health sector. As a result, the initially envisioned commercially oriented fee model had to be redefined, leading to interim losses and deployment struggles. MedAccess and BII deepened collaborations with stakeholders like the Clinton Health Access Initiative, which helped deal flow during the first few years, as well as philanthropies like the Gates Foundation, which provided grant capital to help tailor MedAccess’ model with the subcommercial realities of the sector. On the other hand, creating a platform with other investors limits the DFI’s financial exposure; may provide access to technology, expertise, markets and assets; and can offer the operating experience that DFIs lack. It allows the platform to take larger stakes in the projects it develops while offering the partners greater diversification of assets. It can make it easier to bring in additional partners later, if the platform has been set up to accommodate multiple partners from the start. 12 BII sold its remaining investment in February 2025 as part of the sale of Ayana to Indian investors ODI Report 37 5.2 Capital contributions In sponsoring new ventures, patience and flexibility are key requirements – the trajectory to financial and operational sustainability may take longer than anticipated, and venture creation involves substantial learning by doing. This may lead the DFI to make changes to the direction of the venture. For example, APP has spent 10 years developing the Ruzizi hydropower project in Burundi – few if any private infrastructure developers would be willing to stay the course for so long. Similarly, with APP, it took almost three years between the start of the conversations between BII and the Aga Khan Fund for Economic Development (AKFED) and agreement of the terms and setting-up of the platform. Strategic patience must be matched by careful monitoring, with periodic checkpoints at which performance against financial, operational and impact benchmarks are assessed. IFC’s InfraVentures develops new infrastructure projects using a phased approach of this type (Box 9). Box 9 InfraVentures InfraVentures is a $150 million global infrastructure project development facility established by IFC. It aims to address the shortage of bankable infrastructure projects in developing countries by providing early-stage funding and technical expertise. It supports projects that address critical needs such as energy access, transportation and water supply, fostering economic growth and reducing poverty, with a focus on frontier and underserved markets where infrastructure deficits hinder economic growth. Key features: • Early-stage risk capital: InfraVentures offers critical equity funding during the initial phases of project development, when financial and technical risks are highest. • Expert project development support: InfraVentures provides access to experienced professionals to help mitigate risks and build robust project pipelines. • Access to World Bank Group financial products: As part of IFC, InfraVentures is able to arrange project financing from IFC, access World Bank and Multilateral Investment Guarantee Agency guarantees, and blend concessional finance from the International Development Association Private Sector Window for eligible projects. Successive rounds of capital and technical assistance bring projects through the high-risk early development stages to the point at which they can attract private investment. Early-stage projects may face political instability, regulatory uncertainty and feasibility issues, which raise project risks. Aligning interests among multiple stakeholders, including governments and private investors, can also be challenging. Infrastructure projects often require significant time to reach financial close and implementation. By phasing capital and technical assistance contributions, InfraVentures mitigates its exposure to these risks. ODI Report 38 InfraVentures has worked on the development of 46 projects since its launch in 2007, of which 33 have been exited without reaching implementation stage, 7 have reached financial close and are under implementation and 11 remain under development – demonstrating the long preparation times and low success rate of infrastructure project development. Nevertheless, InfraVentures has mobilised $2.65 billion of private project financing over this period. To accommodate this, DFIs may invest equity in multiple tranches linked to the achievement of performance milestones. For example, in the case of Gridworks, which is undertaking the time-intensive process of developing power distribution projects in countries where there has been little or no prior private investment in distribution, BII has set clear targets and triggers that guide Gridworks’ progress. This method ensures that the platform’s governance, team size, financing objectives and support levels evolve in alignment with investment activities. Further, by adjusting the remuneration structure of senior management as the platform grows, Gridworks avoids creating incentives that might prematurely increase overhead under the guise of necessary growth. Setting out a phased approach requires a realistic assessment of the time required to get to scale that helps focus team efforts and manage expectations. As an innovative venture, MedAccess took two years from initial idea to establishment, starting as a concept between the UK Foreign, Commonwealth and Development Office (FCDO) and BII. BII had to navigate extensive internal processes to approve this atypical, longterm investment in a lesser-known sector. As it was testing a new business model, managing expectations was crucial, with the understanding that success was not guaranteed and impact would be visible only eight or so years later. Continuous internal marketing and setting realistic objectives regarding deal flow and financial performance was essential. MedAccess pivoted to prioritise financial sustainability and expansion into new markets. As the initial business model of covering costs through fees and investment income did not pan out, MedAccess then pivoted towards a blended finance model, mobilising concessional funds to improve its financial sustainability. Box 10 Concessional finance In some cases, the DFI equity comes with the same financial risk and return expectations as its regular investments. In other cases, DFIs are willing to take more risk and/or accept a lower expected financial return in order to achieve the intended development impact. In the case of platforms intended to develop sub-projects for investment, DFIs may be willing to accept lower returns at the platform level in order to generate investible opportunities with higher returns at the sub-project level. DFIs can also attract concessional capital from third parties alongside their own commercial capital, in a blended finance structure, both at the holding company level and in sub-projects. Among the cases examined, MedAccess and Gridworks use concessional capital at the venture level. However, the creation of platforms and JVs offers new opportunities for blending concessional finance, at both the platform and ODI Report 39 sub-project level. Concessional funding can also be used for parallel technical assistance and project development facilities that support subproject development (e.g. Climate Investor One – see Box 6) or provide assistance to sub-investments by the platform (e.g. the financial institutions that Abler Nordic invests in can access technical assistance from a facility funded by the Norwegian Agency for Development Cooperation (Norad)). 5.3 Asset acquisition and revenue generation A key challenge for new ventures is building up business and operating assets on which to earn revenue. Starting with a set of existing revenue-earning assets can accelerate the process of the venture achieving financial self-sustainability. Some ventures have included existing assets transferred by JV partners. This can present valuation issues but has the advantage of providing the new venture with a stock of assets from day one, on which it can earn income to finance its ongoing operations. For example, Metito contributed two operating water projects to the AWID water infrastructure development JV with BII. The DP World–BII JV to invest in African ports also focused initially on the expansion of existing port assets owned by DP World. AFIP was also formed with the acquisition of Green Resources, an existing forestry firm. Where the platform is trying to innovate and develop a new business segment, there may be no existing assets with which to launch the business. In such cases, the DFI will have to commit to a longer incubation period, during which it provides additional support such as covering operating costs, providing support services and supporting business development efforts. For example, Gridworks’ initial incubation period provided it with a strong pipeline of assets. Similarly, MedAccess was initially incubated by BII until it had a first set of transactions to finance. In the case of GIP, BII played an active role in fundraising and management prior to the launch of the Ghana fund, which helped it make its first loans soon after its launch. It will take some time for the loan portfolio to mature and reflows become available to finance new loans. 5.4 Future growth and exits When selecting a legal entity for the venture, it is important to consider both future capital requirements and exit options. The open-ended structures involved in LLCs and perpetual funds raise the question of whether and how DFIs can exit from these structures. There are several reasons why they might want to exit: • The platform is not delivering its expected impacts, or is not financially sustainable. ODI Report 40 • The platform is succeeding and is financially sustainable, and continued DFI involvement is not needed to sustain its operations and impact. • They want to make space for private investors to take control of the platform, so contributing to long-term private engagement in the sector/country. Some platforms have clear sunset strategies defined in advance; in other cases, this is less clear. In principle, DFIs can sell their equity in companies and perpetual funds, but in practice this requires finding other investors willing to buy, or the venture to generate enough cashflow to buy back its equity, and requires a determination of the value of the equity stake. As with other unlisted companies and funds, this can be challenging. For example, BII aims to sell down its equity stake in GIP only after 10–15 years. In the case of SN Power, Statkraft exited the joint venture by selling its shares to Norfund in 2017. As sole owner, Norfund then sold the company to Norwegian renewable energy company Scatec in 2020 (see Box 5). In some cases, it may be possible to identify investors interested in buying mature assets and pre-arranging sales of assets to them. This is the approach taken by Energrid, a BII–Norfund platform that generates transmission and power storage projects in India (Box 11). Box 11 Energrid Norfund and recently announced the formation of Energrid, a partnership with India Grid Trust (IndiGrid), to develop greenfield transmission and standalone battery energy storage system projects. India’s electricity grid is dominated by coal (58%). To decarbonise, the country must reconfigure its grid away from historic energy centres towards locations of renewable power generation and build energy storage capacity so that renewable energy supply can be matched with demand. The Government of India has estimated that, to reach its goal of 500 GW of renewable electricity by 2030, cumulative investment of $30 billion would be needed into national transmission infrastructure. IndiGrid is an infrastructure investment trust (InVit), which means it acquires transmission infrastructure assets after they are operational, which returns capital to project developers and provides a yield to its investors. Regulations constrain the proportion of its assets an InVit can have invested in projects under construction to 10%. This means that, despite being a listed entity with a market cap of around $1.3 billion and an AAA credit rating, IndiGrid faces a tight limit as to how much capital it can allocate towards investments in new projects. Developing and constructing transmission lines and energy storage facilities has high upfront costs and is risky and complicated. The Indian transmission market is oligopolistic, and there are only three major developers. Commercial investors are wary of the risks involved and, without patient and risk-bearing capital from Norfund and BII, IndiGrid could not have created Energrid. The new platform will bid for and fund upcoming greenfield opportunities in the Indian transmission and energy storage sector, where there is an enormous need for investment. ODI Report 47 7 Concluding remarks DFIs face challenges in investing in the sectors and countries that are most critical for achieving their strategic goals. They are therefore faced with a stark choice – continue chasing investments in the few large firms operating in these sectors and countries, which are often in competition with each other, or seek to expand the set of firms by playing a more active role in new venture creation. The experiences of BII and Norfund in supporting new ventures offers insights into both the opportunities for DFIs to play a larger role and the limitations in their ability to do so. The opportunity is that the cases examined in this report show that it is possible to start up new large ventures and see them reach operational and financial sustainability. Unlike project finance, which finances a single asset, these platforms create open-ended permanent vehicles capable of continuing to generate new assets and new opportunities for co-investment, thereby mobilising private capital. More importantly, they generate knowledge about the risk/return of investing in sectors and countries that most investors know little about, and can provide proof of concept for new business models and technologies. The operational limitation is that setting up new ventures is demanding in terms of DFI financial and operational capacity. This can be hard to carve out in the face of pressures to deliver on annual investment volumes. Supporting new venture creation requires risk tolerance, a long time horizon and staff skills and incentives that are different to normal DFI operations. Building this capacity requires an intent to play a more active role in venture creation, and a willingness to be a patient investor. As the case studies show, there is now a range of structures for DFIsponsored ventures that have proven fit for purpose for investing in different sectors, and with different levels of equity and managerial commitment from DFIs. This offers a menu of options for DFIs that wish to pursue new venture sponsorship. Some of these structures can accommodate multiple DFIs co-investing in a venture, thereby limiting each DFI’s exposure and managerial burden. This may enable more DFIs to participate than the sole ownership model would allow. The core business of DFIs will continue to be lending to, and taking passive minority equity stakes in, privately sponsored firms. But the capacity to sponsor new ventures offers an important additional tool ODI Report 48 for the DFI toolkit. DFIs pursuing this approach can learn from the pioneering experiences of BII and Norfund and can contribute to further learning by experimenting with their own approaches. The lessons of these experiences are also relevant to a wider range of foundations and impact investors interested in promoting flows of private capital into high-impact areas, but that currently face similar constraints of lack of investible opportunities. Family offices and HNW investors have the greatest freedom to play a more active role in venture sponsorship, which could generate investment opportunities for investors seeking impact. ODI Report 49 References Asare, J. (2024) ‘Blended finance in fragile settings: P-RECs and P-REC Aggregation Facility’. International Growth Center (www.theigc.org/sites/default/files/202407/Asare%20Case%20study%20on%20Blended%20finance%20in%20fragil e%20settings%20July%202024.pdf). Beck, T., Demirgüç-Kunt, A. and Maksimovic, V. 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