Finland–IFC Blended Finance for Climate Program

Finland and the IFC (International Finance Corporation) together set up a joint climate fund in October 2017 that will support renewable and clean energy solutions and climate projects in developing countries.

Solar panels.
Photo: AdobeStock

Finland will channel a total of EUR 114 million into the Fund, whose duration is 25 years. The funds will be invested in climate projects during the first six years of the Fund.

This will be the largest funding ever targeted at international climate action. The Fund will help create markets for climate change solutions in countries where no investments are available or where investing is very difficult due to a challenging operating environment and lagging market development.

In return for Finland’s financing, the IFC, which is part of the World Bank Group, will also invest its own capital in all of the projects. The aim is also to attract a large amount of other private and public capital.

Renewable energy for developing countries

Money from the Fund will only be invested in developing countries. In addition to climatic effects, the purpose of the funding is to promote development impacts, such as creating more jobs and increasing and tax revenue and thereby reducing poverty. The funding is primarily targeted at the least developed countries, other lower income countries and lower-middle income countries. For instance, all of the partner countries with whom Finland has pursued long-term development cooperation, with the exception of Kenya, are classified as least developed countries.

The IFC will make investment decisions in accordance with the terms and conditions specified together with the Ministry for Foreign Affairs. It will report annually to the Ministry on the programme’s development impacts.

The funding instruments of the programme comprise loans granted for companies operating in developing countries, capital investments and guarantees, among other instruments. Accepted sectors include energy efficiency, renewable energy, sustainable forestry and land use, meteorology, and water and wastewater solutions. So far, the Fund has financed hydroelectric power in Nepal, waste management in Vietnam, and solar energy in Senegal, Congo, the West Bank and Armenia. Cooperation with the world’s largest private sector development financier can also open up new opportunities for Finnish companies, of which many have strong climate competence and expertise in the sectors emphasised in the fund. However, the participation of Finnish companies is not a precondition for project funding, which means that it is not a tied form of support.

Keeping the global temperature rise under two degrees Celsius requires that climate-resilient, low-carbon investments are made with unprecedented speed and scope in the future. Costs cannot be covered by public funding alone. With the investment decision, Finland supports both the Paris Climate Agreement and the broader sustainability goals set in 2030 Agenda. The programme seeks to address the UN Sustainable Development Goals (SDGs) on food security and agriculture (SDG 2), on sustainable water use (SDG 6), on sustainable energy (SDG 7) and on climate action (SDG 13).