Exclusive: UNOPS seeks investors for seed capital fund

The UN agency plans to deploy up to $80m to de-risk early-stage projects with a view to refinancing them with institutional capital once operational.

The United Nations Office for Project Services (UNOPS), the UN’s operational arm, is in the process of setting up a fund that will invest seed capital in infrastructure projects.

Vitaly Vanshelboim, UNOPS’ deputy executive director and chief operating officer, told Infrastructure Investor on the sidelines of this week’s Berlin Summit that “a corporate decision has been made” to launch a vehicle that will aim to de-risk projects in their development phase.

The fund will have up to $80 million of UNOPS’s own capital available to invest, though Vanshelboim noted that it would be “highly unlikely” it would be capitalised to that level.

“Actual grants or revolving fund-like investments will depend on how fast we will be able to source quality deals. We're also on the lookout for like-minded partners that would be willing to make ‘club-deal-like’ contributions.”

Harry Hummels, special advisor on impact investing at UNOPS, added that the agency would also seek to convince external investors to back the fund. These would range from traditional donors and foundations with a development-minded approach to “other investors willing to accept concessionary returns”, he specified.

The capital invested by UNOPS will, in effect, serve as bridge financing for chosen schemes, being repaid as soon as the next tranche of financing comes in.

“Once a project is successfully developed and constructed and in its operational phase – with steady cash flows – we aim to attract institutional capital to refinance the project.”

No specific performance target had been assigned to the fund’s investments, Vanshelboim said, though it would still aim to produce modest returns so that the vehicle can re-invest the proceeds at a higher level.

The fund’s remit will be wide-ranging, seeking impact investments in sectors including solar energy, hydro power, waste to energy, water sanitation, healthcare, social housing and education.

In parallel with the vehicle, Vanshelboim said UNOPS is currently working on other types of partnerships with the European Investment Bank, the Abraaj Group, Dalberg and Deloitte, among others. Such initiatives could include offering credit enhancement to projects in developing countries, though Vanshelboim noted such mechanisms would be provided by partners and not UNOPS itself.

The seed capital fund’s creation comes a few months after Infrastructure Investor reported that the agency was preparing to launch a $1 billion impact infrastructure fund targeting institutional capital. Vanshelboim said this fund had not yet been launched, with UNOPS currently seeking “the best ways to provide appropriate legal and governance structure for such a fund”.

In the meantime and in parallel, he said, UNOPS is working on bringing a number of pipeline deals to investment grade on a standalone basis.