Increasingly, long-term institutional investors are seeing opportunities in investing in renewable energy assets and climate change mitigation strategies, while trying to incrementally lower the carbon footprint. Ithmar Capital, a public investment fund from Morocco, has taken center stage on renewable investments. In November, the United Nations hosted the climate change summit in Marrakesh, Morocco. SWFI editorial has asked Ithmar Capital’s CEO Tarik Senhaji three key questions for our audience to get a better handle on what’s going on.
1. What was the genesis of creating Ithmar Capital and what role will it play for the country?
Ithmar Capital is part of the long-term development plans initiated by The Kingdom of Morocco in different economic sectors. While its initial focus was on tourism and infrastructure investments, Ithmar’s mandate has been extended in 2016 to cover all economic sectors in Morocco. Ithmar is a strategic publicly-sponsored investment organization with a dual objective: fostering development in Morocco and Africa while delivering financial performance. Its inception started from the identified demand of different institutional investors and sovereign funds willing to invest in different productive sectors of Morocco and looking for a local partner to reduce the project risk.
Ithmar’s strategy is aligned with State’s macro-economic strategies. The Fund takes strategic stakes in socio-economic projects and promotes policies that contribute to the development of key sectors of the national economy. As such, Ithmar plays an important role investing in projects in times when liquidity is scarce and in catalyzing foreign direct investments.
Ithmar Capital is a gateway to implement the proactive engagement of the Kingdom in terms of partnership and expertise.
2. Many pensions and a number of sovereign funds, such as the New Zealand Superannuation Fund, have a mandate to back climate-related commercial investments. What types of investments are going to be available in the GGIF Africa fund?
GGIF Africa aims is to implement major green development concepts and large infrastructure projects with the objective of catalyzing the evolution of Africa into a green economy.
Africa offers a great infrastructure potential, and research have demonstrated the necessity:
- Only 1,000 MW of electricity production have been developed during the last five years when Africa needs 7,000 MW on a yearly basis;
- Less than 5% of agricultural lands are irrigated;
- Less than 10% of the hydroelectricity potential has been utilized;
- Only 58% of Africans have access to drinkable water.
GGIF Africa projects will focus in scope on low carbon infrastructure, clean energy generation, low carbon transportation and efficient water usage to address the gaps highlighted above.
3. Will solar or wind investments be included in the GGIF Africa Fund?
Solar and wind investments will be encompassed as they perfectly fit into the definition of green projects in scope of GGIFA.
As stated above, Africa offers a great potential and electricity requirements in Africa are huge: less than 40% of Africa’s population has access to electricity (less than 30% in Sub-Saharan Africa), which creates immense opportunities for GGIF Africa investors.
The use of wind and solar energy has become more popular lately and has proven great benefits for both investors and the population. A concrete example is the implementation of solar and wind energy platforms in Morocco which has been successful so far and hence the experience can be replicated in other African countries.
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The Cassa Depositi e Prestiti Group (CDP) and its investee companies, which include Fincantieri, Italgas, Snam, and Terna, have reached an agreement with the Municipality of Naples and the Authority of the Central Tyrrhenian Sea Port System. The entities will cooperate to provide for the development of Naples and its surrounding area. There will be a focus on helping the institutions and the community at large through financial support, real estate, and infrastructure investment, and support for local businesses. Signatories can help to provide technical expertise and planning, loans, and oversee public projects. Further, assistance and consulting will be provided, particularly as they relate to interventions and renegotiation of contract terms for the purposes of freeing up capital. Sustainable mobility will be a priority, with natural gas and biomethane forming the core fuels of the future. The group will be developing the ports, which will include the construction of emission-reducing structures.
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The Federal Reserve made a decision to hold interest rates steady and indicated that no more hikes will be coming for 2019. Federal Reserve Chairman Jay Powell addressed the media saying that the Chinese and European economies have slowed ‘substantially’. Despite low U.S. employment, Powell explained to the media that the U.S. has the lowest labor force participation rate among developed nations.
There were four interest rate hikes in 2018.
The Federal Reserve committee intends to conclude the reduction of its aggregate securities holdings in the System Open Market Account (SOMA) at the end of September 2019. Essentially, the Federal Reserve is ending quantitative tightening in September 2019. Furthermore, the committee intends to slow the reduction of its holdings of Treasury securities by reducing the cap on monthly redemptions from the current level of US$ 30 billion to US$ 15 billion beginning in May 2019.
In a March 20, 2019 statement called “Balance Sheet Normalization Principles and Plans”, a portion of it reads, “The Committee intends to continue to allow its holdings of agency debt and agency mortgage-backed securities (MBS) to decline, consistent with the aim of holding primarily Treasury securities in the longer run.
Beginning in October 2019, principal payments received from agency debt and agency MBS will be reinvested in Treasury securities subject to a maximum amount of $20 billion per month; any principal payments in excess of that maximum will continue to be reinvested in agency MBS.
Principal payments from agency debt and agency MBS below the $20 billion maximum will initially be invested in Treasury securities across a range of maturities to roughly match the maturity composition of Treasury securities outstanding; the Committee will revisit this reinvestment plan in connection with its deliberations regarding the longer-run composition of the SOMA portfolio.
It continues to be the Committee’s view that limited sales of agency MBS might be warranted in the longer run to reduce or eliminate residual holdings. The timing and pace of any sales would be communicated to the public well in advance.”
source: Federal Reserve website
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