February 28, 2018
Evaluation of Finnfund’s special risk financing completed – the focus successfully shifted to the poorest countries
The evaluation of the special risk financing, commissioned by the Ministry for Foreign Affairs, which is responsible for steering Finnfund’s operations, has been completed. According to the evaluation, the special risk financing has worked out as planned, as the focus of Finnfund’s investment portfolio has shifted to the poorest countries and to high-risk projects with significant development impacts.
“The evaluation indicates that special risk financing has worked out as planned—that is, shifted the focus of the company’s investment portfolio to the poorest countries and to high-risk projects with significant development impacts that would otherwise find it difficult to get financing,” says Satu Santala, Director General at the Ministry for Foreign Affairs, in the Ministry’s press release.
In practice, special risk financing meant that potential credit or investment losses incurred by special risk financing investments could be partly covered with the loss guarantee granted by the State. Factors affecting the risk level include, for instance, the destination country, the investment volume and the industry. Finnfund had carried out similar projects before special risk financing but now the company could increase their volume.
The loss compensation commitment was valid for 2012–2015 and restricted to EUR 50 million. The guarantee covers 16 corporate projects, 14 of which have been launched without any losses so far.
Altogether, 81 per cent of these investments are in LDC countries, 6 per cent in other lower income countries and 13 per cent in lower middle income countries. Ten investment projects are located in Africa, five in Asia and one has Latin America as its target area. Many of the investments are allocated to sustainable forestry and renewable energy projects.
Since the 2000s, Finnfund has shifted the focus of its investment activities to the poorest countries, a development that has been accelerated by special risk financing. Currently, LDC countries account for approximately a third (34%) and other low income countries for roughly a fifth (18%) of all investments. The shares are clearly larger than among, for instance, other European development financing companies on average.
The evaluation was made by the consulting and auditing company KPMG.
Evaluation: The focus of Finnfund’s investment activities successfully shifted to the poorest countries (press release and the summary of the evaluation on the Ministry’s website)
Helena Arlander, Director, Risk Management and Impact, helena.arlander(a)finnfund.fi, tel. +358 50 561 1516
Jaakko Kangasniemi, Managing Director, CEO, jaakko.kangasniemi(a)finnfund.fi, tel. +358 40 577 7676