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

Finnfund has adopted a new statement on climate and energy. With this statement, Finnfund expresses its commitment to the objectives of the Paris Agreement and explains what this commitment means in practice for its portfolio management, investment process and measuring of the portfolio’s carbon footprint.

Finnfund strives to take the lead among development financiers in the transition to a net-zero carbon future while supporting the broader sustainable development agenda.

“Fighting climate change is the greatest global challenge of our time and an integral part in fulfilling our mission.  That is why we wanted to come out with a specific statement to clearly spell out our commitment and ambition on fighting climate change and to guide our work in the future,” says Juho Uusihakala, Senior Development Impact Advisor at Finnfund.

The statement is built upon three key targets:

1. We are committed to keep our investment portfolio net carbon negative and align all new investments with the Paris Agreement.

In May 2021, Finnfund released data showing that its total investment portfolio has a negative carbon balance. By doing so, Finnfund was the first development financier to report a net-negative investment portfolio. The result stems from Finnfund’s sizeable forestry investments. In its new climate and energy statement, Finnfund commits to keep the investment portfolio net carbon negative also in the future.

In addition to working to keep the investment portfolio net carbon negative, Finnfund is committed to aligning each investment with the Paris Agreement objectives and country or sector pathways to net zero emissions by 2050. Finnfund will work with other Development Finance Institutions to develop harmonised and transparent methodologies and approaches to ensure investment alignment with the objectives of the Paris agreement.

2.  We will make €1 billion worth of new investments in climate finance by 2030.

At the end of 2020, Finnfund estimated that approximately 40% (290 million euro) of its investment portfolio can be classified as climate finance. If funding is available, Finnfund will commit €1 billion in climate finance by 2030, including investments both in mitigation and adaptation.

Finnfund has already been committed to investing 105 million euros in businesses that mitigate climate change and help people in developing countries adapt to it in 2019-2021.

3. We contribute to the push for more systematic, harmonised and transparent climate finance disclosures and reporting.

Finnfund reiterates its commitment to the continuous improvement and harmonisation of best practices in climate financing, including reporting and disclosure. For instance, Finnfund uses the multilateral development banks’ (MDB) common list for classification of activities for climate change mitigation finance.

Finnfund has also played a key role in developing new methodologies and tools, such as FRESCOS, a web-based, open-access tool to account for the carbon sequestration of afforestation and reforestation projects. Finnfund is also currently developing and piloting a new adaptation risk assessment and opportunity identification approach. As climate change is closely bound to another major threat to our humanity, biodiversity loss, all investments are screened for their potential impacts on biodiversity and natural habitats.

Finnfund adheres to the European Development Finance Institutions’ (EDFI) exclusion list to exclude coal and fossil fuel financing in all our investments including all new direct financing, all new indirect equity through new commitments to investment funds, and new dedicated lending via financial institutions. However, Finnfund will continue to invest in hybrid-power, off-grid, or mini-grid solutions where the majority of the power is generated by a renewable source, such as solar, but needs to be backed up by battery storage and/or diesel generators. Under exceptional circumstances, Finnfund may also finance gas-fired power plants until 2030. In all new investments in power production using fossil fuels, Finnfund will publicly disclose the assessment methodology for alignment with the Paris Agreement.

As of 2021, Finnfund will also adopt and make disclosures consistent with the recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD).

The Finnfund Statement on Climate and Energy is effective as of July 2021 and will be applied to all new investment decisions.

You can read the full text of the Climate and Energy Statement here.

More information
Juho Uusihakala, Senior Development Impact Adviser, juho.uusihakala@finnfund.fi, tel. +358 50 549 3198
Kirsi Pere, Communications Manager, kirsi.pere@finnfund.fi, tel. +358 40 620 9767 (media contacts)

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