Spain Initiates €2bn Co-Investment SWF to Attract FDI

Spain is launching a new sovereign wealth fund (SWF), named Foco, with a capital of €2 billion, aimed at encouraging foreign direct investment (FDI) into the country’s greenfield projects. This move underscores a growing trend where governments collaborate with SWFs to stimulate inbound investments.

Foco operates as a co-investment fund, involving contributions from Cofides, foreign corporations, and institutional investors, focusing on Spanish businesses engaged in green and digital transition activities. The fund aims to provide assurance to foreign investors by partnering with a state-owned investment entity, thereby mitigating the risks associated with transformative projects.

According to Manuel de la Rocha-Vázquez, the secretary general for economic and G20 affairs at the office of Spain’s president, government involvement in Foco signifies the importance of the initiative, ensures visibility, streamlines permitting processes, and reduces investment risks by providing equity support.

Since its launch on December 27, Cofides has been refining the fund’s framework and evaluating potential investments. The first investments are expected by May or June, targeting sectors like hydrogen, sustainable data centres, biopharmaceuticals, semiconductors, and batteries.

The primary objective of Foco is to mobilise additional foreign capital into local greenfield projects. Despite Spain’s recent growth in FDI, the country faces a shortage of domestic savings. Foco seeks to address this gap by attracting foreign investments to support sectors crucial to the new economy, such as renewable energy and biotechnology.

Foco will invest in new or existing local companies, joint ventures, or equity funds targeting green energy, digital transformation, e-mobility, and sustainable agriculture. Investments range from €10 million to €150 million, with co-investment partners comprising foreign companies, institutional investors, or Spanish funds attracting overseas capital.

Historically focused on investments in developing countries, Cofides has transitioned to domestic initiatives with Foco, reflecting a global trend where SWFs collaborate with foreign investors to achieve national policy objectives. Similar co-investment funds have been established by bpifrance and Italy’s CDP.

In 2023, SWFs engaged in inbound and outbound co-investments exceeding $30 billion for the first time. Notable partnerships include Saudi Arabia’s PIF and Italy’s Pirelli, as well as the UAE’s Mubadala and the US’s Resilience, signalling a growing appetite for collaborative investment endeavours.

Foco’s inception was driven by investor demand for opportunities beyond traditional securities, emphasising greenfield projects and emerging technologies. By accompanying investors, Spain aims to provide them with greater confidence and facilitate their participation in innovative ventures.