David Bohigian, who served as acting president and CEO of US development agency the Overseas Private Investment Corporation (OPIC) and oversaw its transformation into a new body, is frank about US pension funds not yet being part of the impact investing conversation.
“I have not seen a tipping point yet with pension funds in the United States.”
During a panel discussion on “Impact Economies” at the GSG Impact Summit in Buenos Aires, Bohigian told the audience: “I have not seen a tipping point yet with pension funds in the United States. These pension funds in many cases are underfunded. They have major benchmarks to meet. And they are not looking through an impact lens yet.
“I believe there are those out there that we have partnered with [on blended finance] that have a view to invest more in Africa. And it is wonderful for their investment committees to start to talk more about impact and fragile conflict states, places where we need to move people to prosperity. But it hasn’t been part of the dialogue with many pension funds yet. I’d like to see that resistance lowered.”
Bohigian, who has just announced his departure from OPIC, led its transformation into the U.S. International Development Finance Corporation (IDFC) – a new body created partly to “compete with Chinese influence in the developing world,” according to Democratic Senator Chris Coons, a co-sponsor of the law creating IDFC.
“We’re really trying to catalyse capital in solving the world’s biggest problems.”
Though the US spends less than 1% of its federal budget on foreign aid, the IDFC’s annual financing budget will be $60bn, almost double that of OPIC’s $29.5bn. IDFC was signed into law by President Trump last year, and has a mandate to catalyse private sector capital.
Bohigian, who spoke with RI on the eve of his departure from OPIC, says: “We’re really trying to catalyse capital in solving the world’s biggest problems. We’ve been successful with a number of different types of asset managers and several other types of institutional investors.
“For instance we’ve almost got a $4bn portfolio in private equity across 40 different funds. We’ve been successful working with family offices, large investment banks, as well as non-governmental institutions and foundations in catalysing capital.”
Bohigian continues that OPIC has had some success with pension funds: “They clearly have stakeholders who are seeking absolute returns. But, some of their trustees, board members and leadership are also starting to think about a stakeholder approach that’s broader than absolute returns. We are pleased as a development finance institution to be able to work with pension funds and change the conversation at investment committees so they can look at having an overseas portfolio.”
OPIC (IDFC is set to be up and running by year-end) is currently engaging with US pension funds through associations, roadshows and conferences. It has done some blended finance partnerships, such as loan guarantees, with a few.
“We are seeing a real primordial period where different innovations are being tested,” he says.
Along with a growing attention on stakeholders, Bohigian also highlights the financial case for US pension funds to look at emerging markets.
“We’ve seen the Business Roundtable take a stakeholder approach, remove the shareholder-centric model, and they’re not expecting to sacrifice returns in America’s great companies there. I don’t think America’s great pension funds need to sacrifice returns either.
“There is enormous opportunity in emerging markets. The demographic opportunities, the opportunities to create infrastructure around the world, the ability to invest in the world’s women, which has shown to be outperforming.”
A large part of OPIC’s commitment relates to women’s empowerment – an area championed by Ivanka Trump, the president’s daughter and advisor, who has been working with OPIC on this agenda.
“This has been through Advisor Ivanka Trump’s W-GDP Initiative and the 2X Initiative, which is meant to be both a signifier for the female chromosome as well as a multiplier effect for investing in the world’s women,” says Bohigian.
Commitments from OPIC have included a letter of intent to invest in women-owned private equity firms and $1bn to invest in women-owned businesses in Africa and in Latin America.
Bohigian says: “Advisor Ivanka Trump and I were in Argentina a few months ago. We are able to visit a female-owned bakery and clothing store. And she was able to see the impact we’re having on the ground.”
During a panel at the summit, Bohigian, whose reported next move will be in the impact investment industry, also highlighted investing in refugees. “It is clearly one of the great development needs in the world today with 17m refugees around the world,” he says.
“Just a year and a half ago, many weren’t thinking about that as an investment opportunity. The conversation is just starting about how to help displaced people across a number of different institutional players, whether that is affordable housing or energy.”