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 2015, the State of Finland owned 93.4 per cent of Finnfund’s share capital, Finnvera plc 6.5 per cent and the Confederation of Finnish Industries (EK) 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. The detailed content of the company’s special development policy mission is assigned annually by the Ministry for Foreign Affairs on the basis of the development policy programme currently in force.
Finnfund’s principles of corporate governance are described in the 2015 Annual Report under the Corporate Governance section.
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.
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.
The company believes that in 2015 it was successful in achieving and largely exceeding the main objectives set for it. This concerns operations that were cost-effective and self-supporting; their positive development impacts; the proportion of new investment decisions related to investments in low-income and lower-middle-income countries; and the net tax revenues created by the projects financed.
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 endorsed 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.
The operations of Finnfund and all the companies it invests in must be sustainable both environmentally and socially.
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 tool for the systematic assessment and reporting of development impacts. Since 2012 all new projects have been assessed with the tool.
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:
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. Implementation of these values by the company and in the activities of all employees is assessed annually in development discussions.
Environmental issues have always played a pivotal role in Finnfund’s operations. Finnfund’s first environmental policy was approved by the administrative bodies as early as 2005.
In 2013 the environmental policy was reshaped into environmental and social policy, which is available on Finnfund’s website. An in-house environment manual was completed in 2014, laying out the details of the company’s environmental process.
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.
In 2015 the company’s interaction with stakeholders was guided by a debate aroused by the government’s development cooperation budget and the need for information. There was more public discussion about Finnfund than ever before. Stakeholder operations and communications were aimed at reacting to public claims made about the company’s activities and at improving understanding of it.
Stakeholder work and communications were the responsibility of the Managing Director, aided by company management, the Senior Adviser and the Communications Coordinator. In a reorganisation at the end of the year it was decided to establish a separate team to promote communications and awareness and to allocate additional resources to these operations. Stakeholder communications and interaction continue to be led by the Managing Director, supported by the new team and company management.
In 2015 special attention was paid to human rights in projects financed by Finnfund. The company reviewed its investment process tools’ compatibility with international standards and the company’s commitment to human rights was expressed even more clearly than before.
Finnfund expects 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.