Makhtar Diop

IFC, a member of the World Bank Group, and T. Rowe Price has announced plans to create a pioneering global blue bond strategy to increase access to finance for blue projects in emerging markets and help improve market standards for the nascent blue bond market.

The proposed T. Rowe Price Emerging Markets Blue Economy Bond Strategy (T. Rowe Price Blue) is expected to mobilise international capital from eligible investors to support blue-labeled investments in emerging markets globally through blue bonds issued by financial institutions and real sector companies.

“The investor capital deployed into blue bonds through T. Rowe Price Blue will make a vital contribution to furthering a blue economy,” said Makhtar Diop, IFC Managing Director. “This first-of-its-kind strategy with a dedicated vehicle for blue investment will also be critical in promoting sustainable capital markets in emerging markets and developing economies.”

Blue investments seek to provide competitive returns while supporting the health, productivity, and resilience of the world’s oceans and water resources, which are vital for sustainable global development, especially in the face of climate change, overfishing, and pollution. Momentum is growing for blue finance, with interest from both investors and issuers in blue bonds and loans that fund ocean-friendly projects and safeguard clean water resources.

“We are proud to partner with IFC to further the blue economy,” said Rob Sharps, CEO and president of T. Rowe Price.  “We’re gratified that our emerging markets investment experience can be leveraged in such a meaningful, innovative, and important way, providing opportunities for positive investment returns while supporting sustainable capital markets and preserving valuable water resources for generations to come.”

The proposed T. Rowe Price Emerging Markets Blue Economy Bond Strategy will draw on IFC’s leadership in the blue bond market. Since 2020, IFC has invested and mobilised more than US$1.4 billion through 12 blue bonds and loans issued by private sector financial institutions and real sector corporates across emerging markets and developing economies.

To bolster the supply of blue bonds issued by real sector borrowers, T. Rowe Price Emerging Markets Blue Economy Bond investment activities will be complemented by a Technical Assistance Facility, or TAF, managed by IFC, designed to increase the quality and quantity of blue bond issuance in emerging markets.

By partnering on this innovative strategy, T. Rowe Price and IFC are sending a clear message to the market on the importance of mobilising capital needed to make meaningful progress towards achieving the Sustainable Development Goals. Specifically, UN SDG 6 “ensure availability and sustainable management of water and sanitation” and SDG 14 “conserve and sustainably use the oceans, seas and marine resources”.

 To ensure that the mobilised resources achieve the desired impact objectives, IFC and T. Rowe Price have jointly developed Blue Impact Investment Guidelines that will be implemented specifically for this strategy. These guidelines are aligned with IFC’s Guidelines for Blue Finance which were published in January 2022 to guide IFC’s own investments in support of a Sustainable Blue Economy.

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T. Rowe Price Group, Inc., has announced it has joined the Net Zero Asset Managers initiative (NZAMI)^[1] to support the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees Celsius.

In joining NZAMI, the firm is fortifying its commitment to providing investment products for clients with net zero ambitions.

“A growing number of our clients are setting net zero targets and require products that meet their needs,” said Rob Sharps, CEO and president of T. Rowe Price.

“Joining the Net Zero Asset Managers initiative enables us to help our clients meet their net zero ambitions in a manner compatible with our fiduciary duty to our clients. We are excited to be a part of this important initiative.”

“In establishing a net zero product range we want to promote a common industry standard, which we believe will ultimately provide better transparency for our clients,” said Maria Elena Drew, a director of research for Responsible Investing at T. Rowe Price.

“It is our intention that our net zero investment products will utilize the Paris Aligned Investment Initiative Net Zero Investment Framework, which is designed to allow for real economy transition to net zero.”

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Under the terms of the transaction, T. Rowe Price will acquire 100% of the equity of OHA and certain other entities that have common ownership for a purchase price of up to approximately $4.2 billion, with $3.3 billion payable at closing, approximately 74% in cash and 26% in T. Rowe Price common stock, and up to an additional $900 million in cash upon the achievement of certain business milestones beginning in 2025. The purchase price includes the retirement of OHA debt outstanding at closing. Excluding amortization of intangibles and the expense impact of the earnout, the transaction is expected to be accretive to T. Rowe Price diluted earnings per share by a low-to-mid single digit percentage in 2022.

OHA, a leading alternative credit manager, will become T. Rowe Price’s private markets platform, accelerating T. Rowe Price’s expansion into alternative investment markets and complementing T. Rowe Price’s existing global platform and ongoing strategic investments in its core investments and distribution capabilities. Alternative credit strategies continue to be in demand from institutional and retail investors across the globe seeking attractive yields and risk-adjusted returns.

With $53 billion of capital under management as of July 31, 2021,[1] across its private, distressed, special situations, liquid, structured credit, and real asset strategies and more than 300 employees in its global offices, OHA has generated attractive risk-adjusted returns over its more than 30-year history. OHA’s performance, its global institutional client base, and the positive industry backdrop have positioned it to raise $19.4 billion of capital since January 2020.

Scale is increasingly important as a competitive advantage in sourcing financing opportunities and driving differentiated returns across alternative credit markets. T. Rowe Price’s full range of equity, fixed income, and multi-asset solutions, along with its global footprint, is anticipated to facilitate these benefits of scale, offering greater opportunities for investors, borrowers, and financial sponsors. Given the limited overlap in investment strategies and client bases, the two firms expect to leverage complementary distribution opportunities. In addition, they plan to co-develop new products and strategies for T. Rowe Price’s wealth and retail channels, including its broker-dealer, bank, RIA, and platform businesses. T. Rowe Price has agreed to commit $500 million for co-investment and seed capital alongside OHA management and investors. Over time, both firms intend to explore opportunities to expand into other alternative asset categories.

Bill Stromberg, chair of T. Rowe Price’s Board of Directors and chief executive officer, stated, “While we are committed to our long-term strategy to grow our business organically, we have also taken a deliberate and thoughtful approach to considering adding new capabilities through acquisitions that advance our business strategy. OHA meets the high bar we have set for inorganic opportunities, and their proven private credit expertise will help us meet our clients’ demand for alternative credit.”

Rob Sharps, T. Rowe Price president, head of Investments, and group chief investment officer, added, “OHA and T. Rowe Price share organizational cultures that focus on long-term investment excellence and delivering value for clients and that are grounded in collaboration, trust, and integrity. As we bring together complementary capabilities and distribution, we can capitalize on growth opportunities for new product development that add value for our clients and stockholders. We share a vision with OHA’s seasoned management team to build a broader business in private markets by combining their specialty in alternative credit with our global scale.”

Glenn August, founder and chief executive officer of OHA, stated, “Joining with T. Rowe Price will better position us to meet the evolving investment needs of clients, as well as the financing needs of companies and financial sponsors, while maintaining our record of measured and thoughtful growth. T. Rowe Price and OHA share a consistent approach, focusing on investment excellence, integrity, collaborative culture, and client partnership, that will help us build a stronger combined organization. I am grateful for the hard work and commitment of our team members and looking forward to the opportunities ahead.”

While seeking to leverage the combined strengths of the two businesses, OHA will operate as a standalone business within T. Rowe Price; have autonomy over its investment process; and maintain its team, culture, and investment approach. August will continue in his current role and is expected to join T. Rowe Price’s Board of Directors and Management Committee following closing. Alongside August, all members of OHA’s partner management team will sign long-term agreements and continue to lead the business in their current roles.

The transaction has been unanimously approved by the T. Rowe Price Board of Directors and the partners of OHA and is expected to close late in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including the receipt of regulatory clearances and approvals and client consents.

Evercore served as financial advisor and Dechert LLP served as legal counsel to T. Rowe Price.

J.P. Morgan Securities LLC and M. Klein & Company served as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to OHA.

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