Mercer unpacks Asset Allocation at The COP28 Africa Investment Earthshot Leaders’ Summit

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Mercer, a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy, and people advising trillions of institutional assets, shared asset allocation assumptions at the COP28 Africa Investment Earthshot Leaders’ Summit, hosted by the COP28 Presidency, in association with The African Union Development Agency (AUDA), The AU Continental Business Network (CBN), Africa Investor (Ai) Group, and The Energy Nexus Network (TENN).

The COP28 Africa Investment Earthshot Leaders’ Summit builds on the Africa Climate Summit and the African Union’s 5% Infrastructure Investment Allocation Agenda (The 5% Agenda) to establish African green industrial infrastructure as a globally competitive investable asset class.

With Africa possessing 40% of the worlds super abundant natural capital for renewables, 60% of the green critical and in high demand minerals for the world’s transition, a plethora of emerging green industrial cities creating Africa’s silicon valley for global green technologies manufacturing corporations, and the continent possessing more than 50% of the world’s workforce by the end of the century with its youth bulge, Africa is uniquely positioned to significantly increase its share of the $10 trillion per annum and growing global green industrial economy and deliver market competitive, risk and climate adjusted returns, representing a unique and multi-generational investment opportunity for domestic and global long-term institutional investors representing over $150-200trn of assets under management.

The summit’s aim was to shape an African investment Earthshot Investment Allocation Plan for the Nairobi Declaration, to mobilise private capital at a scale that can be deployed at speed, de-risked through Institutional Investor-Public Partnerships (IIPP’s), and optimally marry African regional and global energy market demand with Africa’s industrial and Just Energy Transformation and growth, and to represent stable and performing assets in institutional investors’ portfolios.

The Summit brought together an influential group of visionary institutional investment leaders, comprising pension plans, sovereign funds, insurance companies, investment consultants and leaders representing more than $100trn of domestic and global institutional assets, to share insights to government and investment  leaders on a new institutional investor-public partnership agenda facilitated through an Africa Investment Earthshot process, to collaboratively draft an African investment Allocation Plan, which supports private capital mobilization at scale, for the Nairobi Declaration, as the continent’s equivalent of the Inflation Reduction Act (IRA) and Europe’s Net Zero Industry Act (NZIA) during The COP28 Presidency.

Mercer shared highlights from its note prepared for the Summit on ‘Considerations in Establishing Specific, Dedicated Allocations to Emerging Markets Infrastructure and Private Equity’. Rich Nuzum, CFA, Executive Director, Investments & Global Chief Investment Strategist, Mercer in delivering the paper, recognised that whilst some of the world’s largest, most sophisticated asset owners and fiduciaries (collectively “asset owners”) have established dedicated allocations to emerging markets infrastructure and/or private equity, as part of their strategic asset allocations or other means of deploying their risk budgets, he highlighted his intervention was intended to help educate asset owners who have not yet established such allocations, regarding some of the common considerations that come into play, as asset owners work through their deliberations on the pros and cons of establishing such allocations.

Speaking at the Summit, Dr. Hubert Danso, CEO and Chairman, Africa investor (AI), Chairman, African Union Continental Business Network (CBN), and co-host of The COP28 Investment Earthshot Leaders’ Summit and NDC Investment Awards, said,

“GIC’s are central to the delivery of Scope 3 decarbonisation, JET-Ps, the African Continental Free Trade Area (AfCFTA), and the African Union’s Nairobi Declaration. We therefore need to enfranchise more at-scale investment innovations and institutional investor-public partnerships (IIPPs), as well as the use of catalytic digital twin technologies, to bring together institutional investors, industrial companies, SME’s, and mayors while disencumbering and networking global off-take markets. This type of GIC place-based impact investment network is at the core of the emerging GIC Global Alliance we will launch during the COP28 Presidency”, says Dr. Hubert Danso, CEO and Chairman, Africa investor (AI), Chairman, African Union Continental Business Network (CBN), and co-host of the COP28 Investment Earthshot Leaders Summit and NDC Investment Awards

The Summit underscored that investable African Green infrastructure and industrialization, with global commercial, technology partnerships, and long-term bankable offtakes, represent a compelling strategy for the continent to leapfrog from a $9bn to a $7trn participation in global green value chains, whilst at the same time establishing African green industrial infrastructure as a stable and performing piece in asset owners portfolios, with the Nairobi Declaration as the enabling political framework, de-risked through Institutional Investor-Public Partnerships (IIPPs).

Read the Mercer note here: https://tinyurl.com/skkhu8xb

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