I’ve known Harald Walkate for many years. We first met in person in New York in the early days of the Impact Management Project being led by Clara Barby. That project played an important role in laying the foundation for the International Sustainability Standards Board. Harald and I were advisors to the project. We’ve kept in touch over the years, and I recently learned about Route17 which he has started with Robert van Zwieten. I was intrigued with what they’re doing in blended finance. This is an important area where more work needs to be done and I’m impressed with their work. I asked if they would be willing to do an interview with me. They kindly agreed.

Logo of Route17

Eccles: Harald, let’s start with you. Please tell me a bit about your background.

Walkate: I think we first spoke when you were writing a Harvard Business School case on integrated reporting at Aegon. I was at Aegon Asset Management at the time, working on responsible investment. I looked it up and this was 2014!

Eccles: Wow, I can’t believe it’s been 10 years! And what were you up to before that?

Walkate: I had a down-to-earth childhood, growing up in the Netherlands, though I also lived in New York for a couple of years, when my father worked for the UN. I went to law school in the Netherlands, worked as a corporate lawyer for three years, but wanted to work on the business side and got my MBA at the University of Chicago. Soon after, I joined Aegon where for the first couple of years I worked on M&A in Central Eastern Europe and corporate strategy. In 2009 I moved to Aegon Asset Management where I originally focused on corporate strategy, but then gradually moved more and more into responsible investment. Ultimately, I became the head of responsible investment for the group in a full-time role in 2014. From 2019 until 2021 I also worked for Natixis Investment Managers in a similar global role, and then three years ago decided to become independent consultant and part-time academic.

Eccles: You’ve had an interesting career and I saw the arc for how you got to what you’re doing now. Robert, how about you?

Van Zwieten: Harald and I have somewhat similar backgrounds. I was also born and raised in the Netherlands, also spent a lot of time in the US, attended the same law school and same business schools as Harald, though at different times. This has likely facilitated our collaboration, especially the Chicago approach: rigorous thinking, challenge everything, never just assume anything.

Eccles: Kind of Dutch peas in a pod it seems! And what about your career?

Van Zwieten: I started as a corporate lawyer and then joined ABN AMRO Bank. Having turned myself into a banker, I worked for their investment banking and global clients division in Amsterdam, Chicago, and Singapore. At the outset of the Asian Financial Crisis I was hired by GE Capital to become their treasurer for Asia-Pacific. I then served as global treasurer at GE Energy out of Atlanta and subsequently spent three years on Wall Street with Lehman Brothers. I went back to Asia to become CFO for Singapore Exchange and then joined a hedge fund as COO that was spun out of a commercial bank.

In 2009 I joined the Asian Development Banks (ADB) in Manila as director for private sector capital markets, advancing financial markets development in ADB’s 42 developing member countries; this is where my interest in private capital mobilization comes from. A development bank can run out of balance sheet quite quickly, and it was immediately clear to me that ADB needed to engage private sector capital, and shift from origination and on-balance sheet financing to much more of a distribution model and active private capital mobilization. My team and I incubated several new financing vehicles and platforms in these years, and we were successful in raising money for these. After ADB I went back to Washington, D.C. to become President & CEO of the Emerging Markets Private Equity Association (now renamed Global Private Capital Association) and built that out to a powerful voice for the private capital industry in emerging markets. I decided to become an independent advisor in 2017 and had longer-term engagements with organizations such as PwC Southeast Asia Consulting and Convergence. I moved back again to Asia in 2019 because there is so much work to do here.

Eccles: You too have had a very interesting—and very global—career and I see a similar arc to what you’re doing now. How did you guys meet?

Van Zwieten: I was introduced to Harald through another Chicago alumnus, and I found we looked at a lot of the same themes. We wanted to focus on blended finance and private capital mobilization, working with asset owners on SDG finance, and we realized that with our complementary backgrounds we’d be well-positioned to do this together. And hence we founded Route17.

Eccles: I can see how your careers built the capabilities for what you’re doing but Route17 sounds pretty idealistic for two Dutch corporate lawyers with Chicago MBAs. These are hardly “Do Gooder” backgrounds! So, if you don’t mind me asking, why are you guys doing what you’re doing now?

Harald Walkate, Co-Founder of Route17

Walkate: For me, it is indeed in part driven by idealism. My father was a human rights lawyer, and I come from a family of 19^th century industrialists, the Stork family, who were amongst the most socially engaged of their time. Probably some of this rubbed off on me However, for me this has also always been about the intellectual challenge. We need so many trillions of dollars to fund solutions to societal problems and then we have all this institutional capital. The problem to solve is “How do you bring these things together?”

I’ve always been very interested in the question of which ESG practices result in real additionality, the shifting of capital to make a difference as well as making a return. At Aegon I had the opportunity to test a lot of this though, looking at ESG integration, voting, engagement, impact investment, exclusions etc. To be frank, this has made me a bit skeptical about many of the solutions that sustainable finance brings. There’s a lot of emphasis on disclosures, reporting, box-ticking, and market-led solutions, but it appears to bring very little in terms of change in the real world. So gradually my interest has shifted from ‘sustainable finance’ towards ‘financing sustainability.’ This is reflective of the vision and mission we have at Route17.

Van Zwieten: For me it was very similar. While I have a healthy respect for the power of financial markets, and the private sector plays a very important role in today’s society, we need to recognize that sometimes markets break down in bad ways and can be far from efficient. We also need to recognize that there are limits to what corporations can and will do in addressing societal problems. Governments and public institutions have crucial roles to play. The most impact can be had by bringing the private and public sectors together. And so, I thought it made sense to take my skills and experience from global financial markets into development finance.

Eccles: All makes sense, both intellectually and morally. Please tell me about how you got started and where the name Route17 come from.

Walkate: As Robert said, we were introduced by a fellow Chicago alumnus about two and a half years ago. We both had an ambition to work on public-private financing and blended finance; we were also both academically engaged and very interested in what the research says on these topics. We realized we had complementary backgrounds, skillsets, and networks – and opinions! – and had regular discussions for about a year about a collaboration and what this would look like. In January 2023 we started working together as Route17.

Van Zwieten: The name Route17 comes from the 17 Sustainable Development Goals and particularly the 17^th: collaboration and partnerships. We realized there was a big chance that it would be too early for our proposition and in fact it has been a journey. We have both continued doing independent work alongside Route17 to pay the bills. But now we are seeing real signals that this is going to fly, that this can create meaningful differences for people in emerging markets. It’s getting traction with institutional investors in the Global North and with multilaterals working in the Global South.

Eccles: What are your beliefs and operating principes? And what kind of work have you done? Of course there are two sides to the blended finance equation: development finance on the public side, and institutional investors on the private side. Who are your clients?

Robert van Zwieten, Co-Founder of Route17

Van Zwieten: Well, it’s both but actually it goes beyond that. We have also worked with academic institutions on the education and convening that is needed and with governmental organizations like the Vulnerable 20 (V20) – the countries in the Global South that are most vulnerable to climate change— and are looking to fund climate mitigation and adaptation at scale. We are also working with larger consulting firms who are starting to see interest in these themes with their clients but lack the relevant expertise. Finally, we have also worked with startup companies who are doing impactful work and need funding.

But to answer your question more directly, it’s mostly the public sector organizations we’d like to work with, the Development Finance Institutions and Multilateral Development Banks. Unfortunately, they are not created equally in terms of desire to mobilize capital or in the ability to pull it off. Many talk about private sector mobilization but don’t necessarily know how to execute that strategy. Often, the necessary relationships are lacking. This is surprising because we’re living in a poli-crisis era with climate change and the SDGs that we need to achieve, and we can only truly move the needle through unconventional partnerships.

Eccles: What about the private sector side. Is it mostly pension funds?

Walkate: Indeed mostly pension funds and insurers in the Global North; that’s where most of the global private capital sits. Robert makes a good point that the public sector – development banks in particular – should take more of the initiative here, but we shouldn’t forget about the private sector side either and we’d like to work with them too. Many of these institutional investors have made commitments to impact investment and have set targets for contributing to SDGs, but sadly not much of this has resulted in the generation of actual impact, or in the ‘additional’ investments that we’d like to see, especially in emerging markets where most of the heavy lifting needs to be done.

There are many reasons for this, but one of the most important is that doing blended finance comes with a degree of complexity and challenges. Often ticket sizes are small; often pension funds have no or very small allocations to emerging markets, often investment committees or risk managers are unfamiliar with the deal structures; and often it’s unclear where this should sit in terms of allocation. And there are few investment advisors who have knowledge of this space and who can advise on this type of allocation. Which is where we come in! Interestingly, we recently did a small project with a UK-based investment advisory firm who would like to become more proactive in bringing these kinds of investments to their clients.

Jenderal Sudirman street crowded with many cars and motorcyles in Jakarta, Indonesia (Photo: iStock)

Eccles: I’ve heard about these challenges for years. Doesn’t it all pretty much come down to how interested institutional investors are in emerging markets?

Van Zwieten: “We’re seeing institutional investors allocate less to emerging markets, rather than more, which is what we should be seeing if they want to be impactful. And to be sure, there is a lot of inherent political risk in these countries but there are also ways to structure around this. For example, there’s a USD 2.5 billion platform to invest in toll roads in Indonesia, which involves a couple of parties including the Abu Dhabi Investment Authority, the huge Dutch pension fund APG, and Indonesian Investment Authority, the Indonesian sovereign wealth fund. This has scale, it has the potential for attractive returns, and political risk mitigation is built in, so it can be done. But it does require a willingness to go out of the comfort zone which requires pension fund staff to spend time on this to help properly structure investments and to get comfortable with the risk profile. We have all the tools to do this: there’s MIGA (Multilateral Investment Guarantee Agency, part of the World Bank Group), GuarantCo (part of the Private Infrastructure Development Group, PIDG, a government-funded infrastructure developer), etc. There’s a whole constellation of solutions. This doesn’t always work as efficiently as it should but it’s all there. It just needs to be put together.

Eccles: I know you guys have backgrounds as investors but sounds to me like you’re acting more like a consulting firm to help develop capabilities in both the public and private finance sectors.

Walkate: This is in fact what we’re doing. When we started out, we thought the main focus would be on structuring of transactions. Instead, until now there has been much more emphasis on education, convening, developing relationships, and awareness building on both sides of the equation. One of our first engagements was to organize a symposium on blended finance with Dimensional Fund Advisors. We invited 60 people from government institutions, development banks, pension funds, banks, and academia. There were quite a few participants who told us, “I’ve never been in a room with people like this before.”

Eccles: Sounds very exciting! But I have to say that I’ve never heard of anyone trying to build capabilities on both sides. Everyone’s talking about blended finance, but I see few people talking about the skills and relationships that need to be developed for this to happen. I wrote a piece about this, basically saying “USD 2.5 trillion in need is not USD 2.5 trillion in investment opportunity.” These projects need to be created and investors need to be brought to the table. Do you have a sense of what money could reasonably be put out there every year?

Van Zwieten: I worked with the international development contractor DT Global which was bidding on a USAID flagship project in the Pacific Islands. I was lucky enough to serve as the technical lead for this project. The moonshot target was to mobilize at least USD 1 billion of private sector capital for climate finance in the Pacific islands over the next five years. We designed a suite of financial solutions that will be taken to market from this year onwards. This will show good solutions can be designed, but a lot of people who can do this kind of work aren’t working on these challenges. There are many Wall Street bankers who could make this happen with one arm tied behind their back, but the incentives aren’t there to lure them to design and execute these deals.

Walkate: To your question about mobilizing private capital, as part of an assignment for the World Bank we ran some numbers on this exact question. This is a function of a lot of things, especially how much public capital can be made available to mobilize private capital, what the leverage ratio is (i.e. how many private dollars can be raised for each dollar of public capital committed), how much institutional capital is out there, and how much can realistically be committed by pension funds and insurers to these kinds of investments. You need to be very careful with all these assumptions, but we think we were fairly conservative, and we arrived at a number of USD 1.7 to 2 trillion available today. While this sounds good, you have to keep in mind that closing the climate and SDG finance gaps would require that amount of money every year. We are a long ways from getting to that place.

Also, as we’ve been discussing, it’s all very nice that you can make the numbers work on paper, but making it happen in real life requires public and private commitments, following through on those commitments by allocating resources and mandating teams to seek out collaborations and investments, and again it requires capabilities and unconventional partnerships. We’re nowhere near that kind of execution power today but we’ll need to scale up quickly if we’re to have any chance of reaching our goals.

iStock-1167358618 – Climbers work in harmony and climb (Photo: iStock)

Eccles: You have this unusual set of capabilities, mindset, networks, etc. But there’s only two of you guys and there’s only 24 hours in a day. Sounds to me like you have your own kind of scaling problem. So how do you scale this?

Van Zwieten: Fair point and it’s a challenge but we’re seeing on both sides that it’s starting to pay off. People now know where to find us. I hope and expect Route17 will take off. This is all about achieving meaningful impact, getting this sorted, and building those unconventional partnerships.

Walkate: I agree with Robert. Also, financial success would allow us to hire a small team of associates so that we can train them and pass on our skills and networks. We need many more highly skilled people for this to happen.

Eccles: What would you guys like to see happen in the next year?

Walkate: If you would have asked me half a year ago, I would have said “more recognition of the role of the public sector,” but also judging by the 2024 New York Climate Week we’re already there. I’ve lost track of how many reports and LinkedIn posts I saw discussing the importance of public policy, blended finance, with mentions of the Defense Advanced Research Projects Agency (DARPA) that is linked to the US government, and Mariana Mazzucato, the academic who is advocating for public investments in innovation. The recent UK Transition Finance Market Review is also a case in point. I guess what I’d say now is this. We want to see a more collaborative and proactive stance with asset owners. They made ambitious commitments to impact investing over the last decade and they now seem to realize what it will take to deliver on them. We need to now see them put their money and human resources, where their mouths are, proactively seeking blended finance solutions and public-private partnerships.

Van Zwieten: On my part I’d like to see more interest in scaling up deals on the development finance side. We have all this public sector infrastructure and balance sheets that are suboptimally deployed. There’s so much we could do with more efficient and smarter approaches. But here again, we know this works on paper, and often the development finance institutions know this as well. But everything depends on the execution – bringing resources, financial engineering skills, relationships, and a commitment to getting ambitious things done. We’d like to think Route17 can make a meaningful contribution to this.

Eccles: It’s been tremendous fun speaking with you guys. I think it’s fantastic what you’re doing with Route17. This is good news for the sustainable development agenda and the sustainable finance community, and I hope they’re paying careful attention to what you’re doing. Everyone will need to up their game and you’re pointing in the right direction of the relationships and capabilities they need to develop to make this happen. And you need to up your own game by scaling up and I wish you the best of luck with that!