Climate and nature

Climate and nature lie at the core of Finnfund’s mandate as a development financier and impact investor.

Climate change and biodiversity loss are two of the key global crises of our time. They cause significant threats to the well-being of the planet and the sustainable development of societies and economies – and their consequences are clearly visible across the globe.

We believe that the private sector and investors have a key role to play in developing, introducing, adapting and fostering new, environment-friendly business models and solutions. Strengthening biodiversity and adopting climate-smart approaches reduce business risks and create new business opportunities.

You may find some examples of our work for climate and nature among our impact stories.

Climate change and biodiversity loss are two of the key global crises of our time. Photo: Shutterstock

Every investment is assessed

Finnfund assesses the risks, opportunities and impacts related to climate, nature and biodiversity of every investment before the investment decision as well as annually during the investment period. The assessment includes both physical and transition risks of climate change for all direct investments.

As part of the climate risk assessment, Finnfund also identifies possible climate change adaptation needs and opportunities in every investment, both from a business perspective and in terms of the support the business may give to adaptation efforts among their clients and in society. The process of assessing climate risks and potential is further explained in this article and in Finnfund’s annual reports.

In the case of nature and biodiversity risks, the focus is on physical risks. Currently, the risk assessment methodologies cover direct risks and impact, and to some extent supply chain risks.  When nature and biodiversity risks are identified, investees are required to follow mitigation hierarchy practices and establish biodiversity action and management plans – based on the assessment against the applicable IFC Performance Standards – that ensure no-net-loss as a minimum.

The same principles of assessing the risks and opportunities apply to fund investments, but the assessment can be made either by Finnfund or by the fund manager.

To quantify and better understand the climate effects of its investments, Finnfund calculates and / or models investments’ absolute emissions, avoided emissions of energy investments, and carbon removals of forestry investments. These results are published in Finnfund’s Annual Report. The methodology and the process of climate accounting at Finnfund is further explained in this article.

Among other climate and nature-related tools that Finnfund applies in its investment cycle, the Planetary Boundaries Investing Framework is a new tool for assessing and monitoring investments’ potential for generating positive planetary effects and for controlling negative outcomes in selected investments.​ The framework also contributes to Finnfund’s strategic target to inspire other investors and mobilise private capital for sustainable development. 

Finnfund’s investments also form part of Finland’s climate finance, including official development assistance related to climate action.

A person holding a bird
Since 2022, Finnfund has partnered with MLR Forestal, a Nicaraguan agroforestry company, on a pilot project to restore 554 hectares of degraded forest land with significant biodiversity potential in Nicaragua. Photo: Finnfund

Our commitment

Support to mitigation of climate change and biodiversity loss as well as for adaptation and resilience are among Finnfund’s key objectives and development achievements. We are committed to supporting climate action, strengthening the well-being and diversity of nature, and mitigating climate, nature and biodiversity risks in our investment activities.

In our strategy (2024-2027) we aim to continue allocating half of our new investments to climate and nature. The progress towards this objective is reported in our annual report.

This commitment is reflected in our investment strategy and our focus on sectors such as renewable energy, forestry, agriculture, and financial institutions, including microfinance, as further explained in our sector-specific Theories of Change.

We push for more systematic, harmonised, and transparent disclosure and reporting practices both in our own operations and encourage the companies we finance and other investors to do the same. Since 2021, we have continuously developed our approach to assessing and managing climate-related risks and opportunities, aligned with the four pillars of the Task Force on Climate-related Financial Disclosures (TCFD). In 2023, the TCFD was disbanded, and its recommendations were incorporated into the ISSB (International Sustainability Standards Board) standards. Finnfund does not currently report according to the ISSB standards, but we continue to apply the TCFD reporting framework. As of the beginning of 2024, Finnfund also joined the early adopters of the Task Force on Nature-related Financial Disclosures (TNFD). Finnfund’s climate- and nature-related reports can be found as part of our Annual Reports.

Respectively, our climate and energy statement and nature and biodiversity statement further refine and elaborate our approach and guidance.

Thematic news

Green leaf. Photo credit Shutterstock

Finnfund announces successful completion of multi-tranche green and sustainable bond offering

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Finnfund issues a EUR 100 million green bond

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Finnfund and MLR Forestal to work on an innovative biodiversity remediation programme in Nicaragua

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Finnfund issues a EUR 75 million sustainability bond

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Finnfund publishes Sustainability Bond Framework

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CDC Group, Finnfund, Norfund propose innovative partnership with New Forests with an ambition to raise $500m for sustainable forestry across sub-Saharan Africa

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First investors in African Forestry Impact Platform announced

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Finnfund is one of the founding members of the Forest Investor Club launched at COP26

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New statement on climate and energy will guide Finnfund’s climate actions

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New open-access FRESCOS Tool launched for accounting the carbon sequestration in forestry projects

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Finnfund first development financier to report carbon net-negative investment portfolio

Finnish development financier and impact investor Finnfund today released data showing that its total…

Finnfund’s new Sustainability Policy finalized and approved

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Thematic blog posts

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