Financial investments lead to major emission cuts in developing countries

Finland's investments attract an estimated EUR 1.7 billion of other funding for climate action and sustainable development projects.

Finland introduced loan and investment type of development cooperation in 2016, also referred to as development policy investments. They are one way of promoting the channelling of private capital to climate change mitigation, sustainable development and economic growth in developing countries.

A special feature of loan and investment type of development financing is that the money spent on it is returned to the state with interest or investment income.

Financial investments have been allocated in particular to climate change mitigation and the promotion of gender equality, with a geographical focus on Africa.

Between 2016 and 2021, Finland provided this type of financing in the form of ten loans and investments totalling approximately EUR 723 million. The funding was provided to various climate funds, the International Fund for Agricultural Development IFAD, the African Development Fund ADF, Finnfund and Finn Church Aid’s FCA Investments Ltd.

In particular, financial investments made by Finland aim for significant emission reductions. Investments have also attracted, or leveraged, significant additional capital from the private sector to development impacts which would not attract capital without public funding. According to estimates, financial investments made so far by Finland are being used to leverage more than EUR 1.7 billion in other funding for sustainable development projects. This is a rather conservative estimate and the figure is expected to increase in the coming years.

The time span of financial investments is often very long, and the funds in which Finland has invested in are still in the investment phase. For these reasons, accurate investment performance data can only be measured after some years.

Loan and investment type of development financing is allocated to different types of projects

Supporting climate innovations

Korean start-up E Green Global has developed a seed potato for the markets of Asian developing countries that is suitable for the Asian climate and more resilient to climate change. The investment in the development of this seed potato was made through the Ventures Fund under the Asian Development Bank, in which Finland invested EUR 20 million in 2020.

Supporting local small and medium-sized enterprises in the world’s poorest countries

Amfri Farms is a medium-sized Ugandan company that produces products suitable for export from local fruit, vegetables, spices, nuts and seeds. This investment will increase livelihoods and jobs in the Ugandan countryside and support the development of the country's export industry. The company's cultivation method also helps to protect forests and increases carbon sinks. The investment was made from the FCA Investments, an impact investment company owned by Finn Church Aid, to which Finland granted a loan of EUR 16 million in 2018.

Notable emission cuts through renewable energy projects

The Upper Trishuli 1 run-of-river hydropower plant in Nepal increases local energy production and responds to the country's growing energy needs. This investment was made from a climate fund jointly established by Finland and the IFC, in which Finland invested EUR 114 million in 2017.

Development policy investments have a long implementation time line

2017

The IFC Blended Finance Committee provides preliminary support for the project idea

 
Finland invests in a climate fund to be established together with IFC
 
IFC starts looking for suitable investment targets and building a pipeline for investments
 
IFC selects a solar energy project called Kahone in Senegal as one of its initial investments
October
 
 
 

2018

Due diligence process, including an assessment of the environmental and social impacts of the project

April:
Selection of the winning bidder company to implement the project
 
 

2019

February:
IFC internal meeting where all aspects of the project (funding, responsibility, etc.) are reviewed
March:
The IFC's Blended Finance Committee gives final approval to the project and the use of Finland’s money
April:
IFC Board of Directors makes the investment decision
October:
Project building begins

2020

 

2021

May:
The project has been completed and the solar power plant generates electricity
  • 1

    An entry is made in connection with new funding decisions based on the targets set on a scale comprising human rights blind, human rights sen­sitive (taking human rights into account), human rights progressive (promoting human rights) and human rights transformative (addressing human rights challenges) or not specified.

  • 2

    The entries are made on the basis of target-setting in connection with new funding decisions. The sample contains the funding decisions which have the promotion of gender equality as the principal or significant objective.

  • 3

    A three-year average of decisions involving funding that supports equal­ity. For example, the figure for 2017 shows the average for 2015-2017.

  • 4

    Multilateral Organisation Performance Assessment Network.

  • 5

    OECD DAC Corruption Risk Management Recommendations 2016. https://www.oecd.org/corruption/oecd-recommendation-for-develop­ment-cooperation-actors-on-managing-risks-of-corruption.htm

  • 6

    London Safeguarding Summit 2018 commitments. https://www.gov.uk/ government/collections/safeguarding-summit-commitments

  • 7

    The Ministry for Foreign Affairs (16 May 2022): Table 4. Development financing payments to Finland’s largest partner countries 2016-2021. https://um.fi/documents/35732/0/Tilastoliite+2021%2C+osa2. pdf/47739300-0dac-50c8-d9ce-706195ee8070?t=1649772600686

  • 8

    MOPAN (16 May 2022) MOPAN Assessment library https://www. mopanonline.org/assessments/

  • 9

    MOPAN: 2017-18 ASSESSMENTS, Global Environment Facility (GEF) 2019. https://www.mopanonline.org/assessments/gef2017-18/GEF%20 Report.pdf

  • 10

    MOPAN: 2017-18 ASSESSMENTS, United Nations Population Fund (UNFPA) 2019.
    https://www.mopanonline.org/assessments/unfpa2017-18/UNFPA%20Report.pdf

  • 11

    MOPAN: 2017-18 ASSESSMENTS, UN Women 2019. https://www.mopanonline.org/assessments/unwomen2017-18/Final_assessment_UN_Women_2019_02_14.pdf

  • 12

    MOPAN: Assessment Report United Nations Children’s Fund (UNICEF) 2021. https://www.mopanonline.org/assessments/unicef2020/MOPAN%20Assessment%20UNICEF%20web%20[for%20download].pdf

  • 13

    Ministry for Foreign Affairs of Finland (2020). Finnish Development Policy Influencing Activities in Multilateral Organisations, Volume 1, Main report. https://um.fi/documents/384998/0/Vol1+_MainReport_Evaluation+of+Finnish+Development+Policy+Influencing+Activities+in+Multilateral+Organisations+%281%29.pdf/2666cd6a-0bb2-1c76-0659-db1ac6fa30bf?t=1591860985653

  • 14

    A more in-depth examination was conducted by the World Bank Group, UNFPA, UNICEF, the World Food Programme WFP, UN Women, Interna­tional Fund for Agricultural Development IFAD, the Food and Agriculture Organization FAO and the International Trade Centre ITC.

  • 15

    MOPAN: 2017-18 ASSESSMENTS, International Fund for Agricultural Development (IFAD) 2019. https://www.mopanonline.org/assessments/ifad2017-18/IFAD%20Report.pdf

  • 16

    African Development Bank Group (2022). Annual Development Effectiveness Review 2022.  https://www.afdb.org/en/documents/annual-development-effectiveness-review-2022

  • 17

    European Commission (2021). Global Europe: Neighbourhood, Develop­ment and International Cooperation Instrument. https://ec.europa.eu/ info/funding-tenders/find-funding/eu-funding-programmes/global-eu­rope-neighbourhood-development-and-international-cooperation-instru­ment_fi

  • 18

    One of the organisations receiving programme support is Fingo, the members of which include 270 Finnish civil society organisations.