Stronghold Global Finance’s new Global Advisory Board boosts the international investment house’s impact and sustainability offerings. Klaus-Michael Christensen, one of the Members of the new Global Advisory Board, answers questions about the future of global sustainability and project financing.
- In your opinion, why are emerging markets such an interesting/exciting investment proposition?
KC: Our mission at Stronghold Global Finance is to change finance to make a change. There is a range of new sources of finance for emerging markets, and blended finance is one of them that is here to stay. Investing in emerging markets requires a set of new transparent processes and frameworks to involve essential stakeholders in successful blended finance transactions. Stronghold applies these frameworks in their day-to-day operational routines. They are changing the way funds are flowing into emerging markets. Food, energy, housing, sustainably sourced materials and many other exciting sectors are leapfrogging these markets through innovative technologies which offer tremendous investment opportunities. Investing in these markets is usually seen as complex and, to most traditional investors, as a no-go. But, simplifying these processes and adding transparency to them, which is what Stronghold is doing, lowers the risks in these markets.
- What contribution do you see Stronghold Finance making?
KC: Three points I believe signify Stronghold’s uniqueness as an emerging market investor: 1) The selection of projects, 2) de-risking of them, and 3) accessibility to traditional investors. Stronghold is a catalyst for economic development because they select projects that impact local economies positively and, through its relationships and network they have built over decades, has access to both rural and urban development projects. Add its transparent transaction orchestration process, enabling funding partners to de-risk these projects, thereby playing a catalytic role in attracting more traditional investments to the underfunded emerging markets. Stronghold understands the local challenges and how to overcome the often invisible barriers in negotiating with local stakeholders in many regions. I feel Stronghold is a strong partner for project owners and investors since its unique skills in construction with asset-backed securities for economic development in remote areas of our world is an immense opportunity for investors and project owners to expand their investment and funding universes.
- How would you describe the potential of Islamic finance?
KC: Islamic finance is growing about 10% annually. However, we still need a unified global legal and regulatory framework for Islamic finance to be transformative in the emerging market on a large scale. There are several noteworthy standards in the development, notably in UAE, and I believe we will soon see a framework that can scale Islamic finance globally.
I believe Stronghold has all the elements and contacts to make Islamic Finance a USP of its business. It is crucial to integrate the Shariah-compliant investment process well into the fabric of your organization for it to become accepted. Stronghold deeply understands local issues and how Shariah law can make sense for regional economic development. It’s vital to be attuned to history, values, culture, and religion to recognize the importance of incorporating Shariah law as part of your projects. When you do, there are tremendous benefits for all stakeholders, which is at the core of Shariah Law.
- Has COP26 changed the priorities of the International investment banking industry, and in what ways?
KC: Yes, the momentum of the Paris Agreement continues to build. I believe it is an opportunity of a lifetime. The switch from fossil to new forms of renewable energies is the most significant transformation we have seen in such a short time. It is forced by regulation, public demand, and innovation. The investor community supported the momentum at COP26 and is prioritizing investing in the transition and asking for bankable projects. European investors realize it is not enough to only be good on home turf, but that the transition also must happen in the emergent economies through creative development driven by the energy transformation. The subsequent two COPs in Egypt and Abu Dhabi will hugely affect energy solutions in Africa. Stronghold is a leader in this transformation as an intermediary between the global north and global south, most notably Africa. The momentum made at the COP26 has justified a process of investing in emerging markets, and Islamic Finance will be a big part of it at the Abu Dhabi Cop 28 in 2023. COP28 has a lot of environmental expectations and is expected to make some major resolutions for international investment banks to follow up on.
