Canadian investment platform plays matchmaker for public and private funds

Investors interested in emerging markets have a new Canadian-made tool to help them mitigate risk and find partners.

It’s called Convergence and its proponents say it is on the cutting edge of rapidly developing field of blended finance.

Headquartered in Toronto, Convergence helps public and private investors find and connect with each other to co-invest in emerging and frontier markets.

David Creighton, vice-chairman of Cordiant, a Montreal-based private investment manager focused on investments in emerging markets, and a founding board member of Convergence, said the new investment platform was created to fill enormous investment gaps in delivering health and education, growing businesses and supporting infrastructure development in developing countries.

(click to listen the interview with David Creighton)

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Last July, the United Nations announced their Sustainable Development Goals, Creighton said. The UN estimated that the annual requirement for funding for development across the emerging markets was $4 trillion!

About $1.6 trillion was identified as coming from the traditional donors: Western governments, the World Bank, the Asian Development Bank, the African Development Bank, and various other funding sources, Creighton said.

“The other 2.4 trillion has to come from somewhere,” Creighton said. “And everybody realizes that the private sector is where you need that funding coming from.”

But the private sector hasn’t been very keen on these kinds of investments.

“Traditionally the private sector has always dipped their toe in the emerging markets, often on a short-term trading basis,” Creighton said. “And what we need to do and the whole concept of Convergence is to try to use that $1.6 trillion to intelligently and catalytically draw in the $2.4 trillion from the private sector.”

And while investments in emerging markets might look risky, Creighton said his experience of investing for the last 16 years is that the risks are actually lower than what people imagine them to be.

“So the challenge is to try and find ways be able to use that donor money to reduce that risk,” Creighton said.

Investing in developing countries makes not only humanitarian sense but also a business sense, he said.

“The reason they should do this is not only because it’s good and being involved in development finances has a positive long term effect on the world as a whole,” Creighton said. “But also because it creates diversification within your portfolio. You don’t want all your eggs in one basket.”

The federal government has contributed $23.5 million to create the Convergence platform.

Minister of International Trade Chrystia Freeland officially presented the platform at the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, last week.

“Today, we are making it easier for public and private investors to pursue purpose-driven investing and find co-investors,” Freeland said in a statement. “Convergence is a tremendous and innovative way to encourage more development financing, which will in turn lead to economic growth and stability.”

The government expects that the value of projects listed on the Convergence platform will reach up to $10 billion over the next five years.