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Our policy on environmental and social responsibility

Finnfund’s own operations and the operations of the companies it finances must be sustainable both for the environment as well as for the people and the society as a whole.

Environmental and social policy aligns the principles under which Finnfund evaluates, monitors and develops responsibility in all its activities. It is also a framework for specific policies and guidelines e.g. on human rights, responsible tax, and gender equality.

Finnfund’s first environmental policy was introduced in 2005, and revised into environmental and social responsibility policy in 2013. The latest update was done in 2014.

Environmental and social policy

Finnfund’s mission is to promote economic and social development by financing socially responsible and profitable private projects in developing countries.

Finnfund’s Environmental and Social Policy (“the Policy”) stems from Finnfund’s strategy and from good international practices and principles1)  as well as the cooperation of development financing institutions at global and European levels in adopting and promoting environmentally and socially responsible principles for development financing2).

The Policy incorporates environmental and social considerations into all of Finnfund’s activities in a cross-cutting way for all potential and actual investments in all target countries, activities and sectors, from assessment to decision making, management, monitoring and evaluation.

Finnfund aims to:

  • contribute towards sustainable development
  • promote good environmental and social practices and work toward the improvement of environmental and social performance of the private sector in developing countries
  • raise the awareness of Finnfund’s clients on good management of environmental and social issues and support them to achieve improvements
  • increase its investments in projects specifically designed to create environmental and social benefits.

The Policy is also tightly linked with the need to promote, monitor and evaluate the developmental impacts of the projects financed, to promote sound corporate governance and to fight corruption and money laundering. Relevant procedu res have been developed at Finnfund to cover these aspects.

The Policy covers environmental and social impacts, benefits, opportunities and risks, both directly and indirectly associated with the investments. In addressing these, Finnfund’s key considerations include: resource efficiency and pollution prevention, biodiversity conservation and sustainable use of natural resources, labour rights and working conditions, community health, safety and security, land ownership and acquisition, resettlement, indigenous peoples and cultural heritage. A number of cross-cutting topics such as climate change, gender, human rights, and water, are also embedded in Finnfund’s considerations.

Specific attention is also paid to sound environmental and social management, adequate baseline and impact assessments as well as participation and consultation of stakeholders (external and internal).

Projects are assessed as a whole and over their whole life cycle including design and planning, construction, operations, expansions and decommissioning or closure and for their short-term, long-term, and cumulative contexts.

Finnfund uses its best efforts to ensure that its clients and the projects it finances comply with the relevant host country legislation and actively work towards reaching compliance with relevant internationally-recognised environmental and social guidelines and standards. Finnfund will not finance projects or clients that cannot be expected to meet the requirements of its Environmental and Social Policy over a reasonable period of time. In addition, there are activities that Finnfund does not finance and that are listed in Finnfund’s exclusion list.

Finnfund expects its clients and the projects it finances to:

  • assess and manage the social and environmental risks, impacts and opportunities associated with their projects/activities
  • be in compliance with the relevant local environmental and social legislation
  • depending on the level of environmental and social impacts and risks associated with the project, be in compliance (or reach compliance within a reasonable period) with the identified relevant Internationally recognised Environmental and Social Standards and Guidelines, based on the IFC’s Performance Standards and World Bank Group Environmental Health and Safety Guidelines; the ILO’s Core labour Standards and Basic Terms and Conditions at Work as well as relevant sector specific standards
  • work towards continuous improvement of their environmental and social management and performance using, as necessary, action plans and management systems with sufficient resources
  • work towards avoidance, prevention and mitigation of negative environmental and social impacts and risks and promotion of environmental and social benefits and opportunities
  • communicate and engage as and when possible with stakeholders
  • provide timely and adequately the information needed for Finnfund’s assessment and monitoring of the environmental and social management and performance of the client and the project
  • clients in the financing sector are expected to develop environmental and social management systems, with sufficient resources, to assess and manage the environmental and social risks associated with their investment portfolio.

Finnfund has developed specific procedures for environmental and social management integrated into the overall investment process. Finnfund focuses on the key environmental and social impacts, benefits, risks and opportunities relevant for each project. For each investment, the degree of detail of the due diligence assessments and the level of requirements imposed to the client/project are determined by the nature and scale of the project and commensurate with the level of associated environmental and social risks and impacts.

Following the assessment of the environmental and social performance, compliance and management of the potential project/client; Finnfund introduces environmental and social requirements/covenants into its financing agreements and monitors compliance with these.

For the implementation of The Policy, Finnfund develops and maintains adequate internal resources, procedures, tools and regular training. Finnfund keeps The Policy and procedures up to date and continuously improves and adapts them. Finnfund reviews regularly the performance of The Policy and associated procedures.

Finnfund strives to enhance its accountability through public disclosure especially regarding the environmental and social impacts of the projects financed, in line with the requirements of the relevant legislation, while observing normal commercial confidentiality.

1 January 2014

1) These include the World Bank Group’s Environmental and Social Policies; IFC Performance Standards; WBG Environmental, Health, and Safety Guidelines; the principles of UN Global Compact, UNEP-FI and the UN Guiding Principles on Business and Human Rights; the Equator Principles and the Harmonized Environmental and Social Requirements agreed upon by the European Development Finance Institutions (“EDFIs”).

2) ”Towards Sustainable Development – EDFI Principles for Responsible Financing” were signed by all EDFIs, including Finnfund in May 2009.