October 8, 2019
Finnfund invests new government loan fully in gender and climate projects
The Finnish government has granted Finnfund a loan of 210 million euros from the state budget for 2018 and 2019 (read foreign ministry press release). Finnfund will invest the full amount in climate action and women’s empowerment in developing countries.
“With this government loan, we can invest over 100 million euros in companies that boost women’s economic empowerment in developing countries or produce products and services that benefit particularly women. The other half of the investments will target climate actions in developing countries, including renewable energy, energy efficiency, sustainable forestry and adapting agriculture to climate change”, says Finnfund’s CEO Jaakko Kangasniemi.
“Finnfund has a long history of investing in companies that support women’s economic empowerment. Now, in the past year, this work has become more systematic and ambitious. Our new Gender Statement and the criteria from the 2X Challenge have introduced stronger guidelines and clearer indicators to our investment process,” says Finnfund’s Senior Development Impact Adviser Kaisa Alavuotunki.
71.9 million euros to climate action
Last year, Finnfund invested EUR 71.9 million in companies or funds that mitigate climate change or help developing countries adapt to it. In autumn 2018 the largest wind farm in Africa, the 310 MW Lake Turkana Wind Power, was connected to the grid in Kenya. It covers up to 15 percent of the electricity needed in the country. Finnfund has been a shareholder in the company since the beginning of construction in 2013.
This year, Finnfund has taken its first steps into the energy market in Nigeria as well as invested in the Syvash wind farm in Ukraine, expected to be the largest one in the country.
Finnfund’s Gender Statement guides investment decisions
Finnfund adopted a statement on promoting gender equality through its investments in March 2019. The document compiles the measures through which Finnfund guides its investment decisions to better promote gender equality. These investments promote women’s role in leadership and the markets, strengthen their economic empowerment, and increase the access to services and products that benefit especially women. Before each investment decision, Finnfund assesses the investment from the point of view of gender equality.
In May 2019, Finnfund joined the G7 initiative 2X Challenge, which aims to mobilise USD 3 billion in commitments for women’s economic empowerment in developing countries by 2020. Finnfund’s first 2X project was a loan of 15 million euros to Annapurna Finance, which is a company offering microloans and financial literacy education primarily to poor women in rural India.
Strategic focus on sectors crucial for climate change
An independent evaluation commissioned by the Ministry for Foreign Affairs stated that Finnfund has managed to invest more and more in the poorest countries and difficult sectors while maintaining its economic viability. Finnfund’s strategy focuses on sectors critical for mitigating climate change and supporting adaptation: sustainable agriculture, sustainable forestry, renewable energy and financial institutions. The key objective of Finnfund’s strategy is to double investment volume and triple development impact.
The evaluation notes that Finnfund’s share of state funding is smaller (around 40 percent) than it is for other development financiers of equal size. Finnfund borrows from the markets for its investments and always reinvests its profits. The assessment also draws attention to the fact that the UN Sustainable Development Goals 2030 require massive private investments.
During the evaluation period 2008-2018 Finnfund’s investments have undergone a major change in composition, e.g. Africa’s share rose from 29 percent to 45 percent. The share of Least Developed Countries (LDCs) rose from 13 percent to 32 percent. In 2018, Africa was the most important region with 67 percent of financing targeting Africa. 89 percent of new investment decisions targeted countries in three lowest income categories.
Pasi Rajala, Director of Communications, pasi.rajala(a)finnfund.fi, tel. +358400 464 393
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