Organisation, administration and operating principles

Organisation

Finnfund, the Finnish Fund for Industrial Cooperation, is governed in accordance with the Act on a Limited Liability Company named Teollisen yhteistyön rahasto Oy (291/79, ‘the Finnfund Act’).

The mission of Finnfund is to promote economic and social development in developing countries by financing responsible private business operations on a self-supporting basis. The purpose of the company is not to generate a profit for the shareholders.

Finnfund can finance manufacturing, service, infrastructure and financial sectors as well as capital markets. It finances companies to be established or already operating which involve a Finnish interest. In addition to commercial profitability, Finnfund emphasizes positive development and environmental impacts in the projects it finances.

Finnfund provides its customers with equity capital, long-term investment loans and expertise in operating in developing countries.

Finnpartnership, a business partnership programme managed by Finnfund and financed by the Ministry for Foreign Affairs of Finland, provides advisory services for the business activities of Finnish companies in developing countries as well as financial support in the planning and development phases of a project and for training.

At the end of 2012, the State of Finland owned 91.5 per cent of Finnfund’s share capital, with Finnvera plc owning 8.4 per cent and the Confederation of Finnish Industries (EK) owning 0.1 per cent. Finnfund is a company entrusted with a special assignment by the State and belongs to the administrative sector of the Ministry for Foreign Affairs.

Finnfund’s principles of corporate governance are described in the 2012 Annual Report under the Corporate Governance section.

Corporate social responsibility management

The Managing Director is in charge of corporate social responsibility management and the implementation of related key principles with the assistance of the company’s management.

The Director of Administration is responsible for corporate social responsibility reporting and the development of reporting in accordance with the current decisions and guidelines of the principal shareholder, the State of Finland.

The Board of Directors monitors corporate social responsibility management as a part of guiding the operations of the company.

Every employee or other person working for the company is obliged to act in accordance with the principles of corporate social responsibility followed by the company.

Questions related to corporate social responsibility have been considered extensively in the company’s operations, guiding decision-making at all levels from the overall strategy to individual investment decisions.

Special assignment and development policy mission of the company

The Ministry for Foreign Affairs defines Finnfund’s special development policy assignment and sets goals for the company in terms of development policy, financial profitability and cost-efficiency. The Ministry for Foreign Affairs also monitors the achievement of the goals annually.

The goals set by the Ministry for Foreign Affairs and their achievement are reported to the company’s Board of Directors, which participates in guiding the company’s operations in accordance with the goals set for it.

Finnfund’s mission is geared towards supporting the development of the private sector and improving its operating conditions in developing countries in a manner that promotes economically, socially and environmentally sustainable development.

Finnfund aims to promote corporate social responsibility both in its own operations and its partners’ operations. In 2009, Finnfund signed the principles for sustainable development and responsible financing of the Association of European Development Finance Institutions (EDFI) and is committed to implementing them in its operations. The EDFI principles are in line with the ten principles of the UN Global Compact initiative.

In the autumn of 2011, Finnfund and 24 other development finance institutions signed the Corporate Governance Development Framework, including a common set of guidelines on promoting good corporate governance in the companies they invest in, thus supporting sustainable economic development in developing countries.

Moreover, the operations of Finnfund and all the companies it invests in must be both environmentally and socially sustainable.

Environmentally sustainable operations include using raw materials economically, recycling effectively, protecting the environment against pollution and climate change and preventing the loss of biodiversity.

Socially sustainable operations include respecting the rights of indigenous peoples, promoting the working conditions and rights of employees, considering health and safety issues, avoiding involuntary resettlement of populations and protecting cultural heritage.

The goals set for Finnfund stress the importance of generating positive development impacts. Since 2009, the company has been developing a method for the systematic assessment and reporting of development impacts. In 2011, the company started to test the tool by assessing the development impacts of all new projects and monitoring them with the tool. The tool was adjusted based on the test results, and at the end of 2012 it was in full use.

Finnfund’s goals in their current form have been set by the Ministry for Foreign Affairs since 2011, and their achievement was assessed for the first time in the spring of 2012. The company’s goals reflect the issues emphasized in Finland's Development Policy Programme as well as the requirement to operate in a cost-efficient and self-supporting manner. The achievement of the goals is assessed annually by looking at different indicators.

Values

The values guiding Finnfund’s operations were determined in cooperation with the entire personnel. The work was completed in the autumn of 2010, when the values and their definitions took the following form:

Responsibility

• We finance responsible business operations in developing countries.
   
• The Finnfund team always does its best.

Respect

• We respect different cultures, their people and their ways of working.
• We appreciate each other and the work done by others.

Development

• We have the courage to develop new ways of working under challenging conditions.
• Finnfund supports and encourages its team in continuous development and learning from experience.

Effectiveness

• Our successful investment projects reduce poverty and inequality.
• We focus on the essentials and use our resources as effectively as possible.

A set of common ground rules has been derived from the values in order to make them a more tangible part of the daily work of all Finnfund employees.

Environmental policy

Environmental issues have always played a pivotal role in Finnfund’s operations. Finnfund’s environmental policy was approved by the administrative bodies as early as 2005.

The environmental policy also pays attention to issues associated with corporate social responsibility. The environmental policy is available on Finnfund’s website.

Stakeholders and stakeholder interaction

The company’s most important external stakeholders include the owners, key development policy operators (including non-governmental organisations), operators in the Finnish business sector (particularly the company’s client organisations), the company’s European sister organisations and co-investors and, on a case-by-case basis, local authorities in the target countries and other parties related to the projects financed by Finnfund.

Finnfund aims to maintain regular and open interaction with its various stakeholders, identify their expectations and possible concerns and respond to these quickly and openly.

The Managing Director is responsible for Finnfund’s stakeholder communication and interaction in cooperation with the company’s management and the Communications Coordinator.

Finnfund requires its investment targets and investee companies to have a channel for interaction with local communities when this is required by the nature of the project.