Webinar 'The case for impact private debt in emerging markets'

September 17, 2026

  

CHAIRMAN Harry Geels, Economist, Senior Investment Adviser, Auréus   PARTICIPANTS Marcel Jeucken, Founder & Managing Director, SustFin Yvan Renaud, CEO, Symbiotic Investments Sarah Stols, Manager of Research & Selection for Alternative Investments, Van Lanschot Kempen Investment Management

   

According to Yvan Renaud, the sector began over twenty years ago almost entirely as microfinance. ‘We took an “NGO+” approach: we were involved in impact investing, not philanthropy, but we ventured into high-risk markets and weren’t yet generating much return.’ He believes the market has since expanded considerably. ‘Significant progress has been made within the ecosystem. We are not only collaborating with financial institutions, but also with companies, project funds and tech-driven business models. Furthermore, the macroeconomic environment in many emerging and frontier markets has improved significantly: central banks have become more independent and transparent, the ability to control inflation has increased substantially, and there are new local capital markets in local currencies. Moreover, there is substantial population growth and even greater economic growth. In terms of size, the asset class has grown from $2 billion in 2006 to around $33.6 billion today.’ Renaud describes this growth as enormous, but acknowledges that the asset class is still relatively small. According to the panel, the appeal for institutional portfolios lies in the combination of three elements: diversification, stable income and a measurable social contribution. Marcel Jeucken says that emerging and frontier markets are particularly interesting from the point of view of diversification and returns. ‘Diversification is particularly important for pension funds in the long term. You can benefit from illiquidity premiums, and you can enter markets where others have not yet ventured, thereby achieving returns that others cannot.’ For this reason, Jeucken expects frontier markets to become even more important.

Sarah Stols also sees clear advantages: ‘Emerging and frontier markets offer exposure to different economic cycles, regions and business models than those typically encountered by investors in developed markets. Moreover, certain impact themes, such as financial inclusion, agricultural value chains and off-grid energy, are much more scalable there. There are still significant funding gaps here, and that presents a wide range of opportunities.’ For that reason, she describes it as a very interesting area in which to invest. Finally, Renaud points out the asset class’s low correlation with anything listed on the stock market. ‘It is very stable,’ he adds.

When asked where the category fits within the portfolio, Stols responds that she sees the asset class as a ‘complementary’ building block for the portfolio. ‘It combines three important elements: diversification, stable income and measurable impact. We place it in our portfolio as a separate category.’ Jeucken points out that there is no one-size-fits-all approach. Some investors integrate it within their fixed-income allocation, whilst others create a separate impact bucket. ‘Ultimately, there isn’t just one way it ends up in the portfolio, and it’s important to determine in advance what you want to achieve.’ Renaud notes that he sometimes observes large institutions struggling to categorise it. ‘What we do is different from any form of listed investment in sustainable finance. It isn’t liquid, but it certainly cannot be compared to high-yield private debt either. We’re talking about the real economy here. Perhaps even a bit dull, but with a major impact.’

Despite this growth, the panellists believe a major challenge remains: the persistent perception that frontier markets are, by definition, highly risky. According to Renaud, this assumption does not reflect current economic reality. ‘Volatility and uncertainty are now more prevalent in developed markets.’ He points, amongst other things, to low public debt, strong GDP growth and stricter fiscal discipline in emerging markets. To illustrate this, he highlights the credit losses within his organisation’s portfolio. ‘Over the past twenty years, we have had only 1.2 per cent of irrecoverable defaults within our portfolio.’ Stols emphasises that the real risk lies primarily in a lack of local knowledge. ‘Much of the perceived risk is uncertainty rather than actual risk. It is crucial to select managers who understand the local market, have a local presence and a proven track record.’

Renaud recognises the importance of having ‘boots on the ground’. ‘But,’ he argues, ‘you also need a pipeline and diversification.’ Whilst institutional investors traditionally favour currency risk hedging, Renaud sees a growing acceptance of unhedged local currency strategies. Rightly so, in his view. Based on historical results, he sees an attractive long-term return for bearing currency risk. Diversification plays an important role in this. ‘You actually need at least 25 to 30 currencies.’

Moderator Harry Geels shifts the discussion to returns and liquidity. Stols praises the relatively stable returns with lower volatility than other asset classes, combined with predictable cash flows.

Renaud describes the asset class as ‘steady income plus’: for 20 years now, it has yielded around 300 basis points above the risk-free rate. ‘Perhaps not spectacular, but extremely reliable, and institutional investors appreciate that.’ In his view, the category has now developed into a mature investment segment. In practice, liquidity also rarely proves to be a bottleneck. ‘Even in periods of market stress, I have hardly seen any liquidity problems in 20 years, regardless of the structure in which investments are made.’
The panel then delves deeper into the subject of measuring impact. Jeucken argues that measurement is essential, but must not become an end in itself. ‘It is the lock on the door against greenwashing.’ He lists five key questions: what is the intended impact, who experiences it, how much impact is achieved, what contribution does the investor make, and what risks exist that the impact will not materialise? ‘If additionality is part of your impact strategy, this asset class actually helps you to achieve more additional impact. That is what makes it interesting.’

For Stols, additionality is a key benchmark. ‘It must be embedded at the start of the investment process and not something you measure and report on afterwards. It actively guides investment decisions, including when selecting fund managers.’ Jeucken warns against managers who make unfounded impact claims. ‘Understand the theory of change, understand the KPIs a manager uses and understand their intent. To find the right manager, you must also be selective yourself and understand your own intent. What is your goal? What KPIs do you set for yourself?’

All three speakers are optimistic about the future. Renaud expects further growth, but also warns against ‘impact washing’. ‘We must return to the fundamentals of the economy, the fundamentals of financing society – that is the key to changing the world.’ Jeucken highlights the opportunities that WTP can offer pension funds to increase their exposure to frontier markets. Stols concludes: ‘What began as a niche category is developing into a broad investment universe. I hope that more institutional investors will dive in and become just as enthusiastic about it.’
 

SUMMARY Impact investing in emerging and frontier markets has evolved from microfinance into a mature and broad investment universe. The asset class offers diversification, stable income, low correlations and measurable impact. Perceived risks are often greater than the actual risks. Emerging markets have low levels of public debt, strong GDP growth and stricter fiscal discipline. Local expertise and broad diversification are crucial.