Direct investments and Finnish skills

About three-quarters of Finnfund’s investments have been made directly to project companies in developing countries. In a large proportion of these investments there is a linkage to Finnish companies. Finnfund’s direct investments are listed here.

Finnfund’s direct investments are spread over many sectors varying from engineering to plantation forestry and from pharmaceuticals to power. More than half of investments made in recent years can be regarded as climate finance because they have been used for projects in renewable energy, prevention of deforestation, energy and material efficiency or to improve the ability of poor people to adapt to the challenges posed by climate change.

The investments are also geographically diverse. Co-investments with Finnish companies are mostly in middle-income developing countries such as India, China and Ukraine, as well as in Russia. In low-income countries Finnfund mostly finances infrastructure, often together with other development finance institutions, although Finnish companies are often involved in these projects, too, as technology suppliers.

Finnfund’s mission is to catalyse the investments and expertise of Finnish companies to developing countries. A pivotal role is to collaborate with the Finnish companies that have solutions to the burning problems of the developing world and therefore also opportunities in the markets of growth countries. These opportunities are often related to clean technology, which Finland would like to encourage to be implemented in developing countries. We focus on medium-sized companies and projects that are large enough for internationalisation but too small to partner with international development banks.

Finnfund’s investment can be a loan or equity. We are always a minority shareholder in a project and the sponsor role is assumed by a partner with industry or country expertise, or both. Some investments are for expansion; others are greenfield. Finnfund’s investments are aimed at development impacts, such as the creation of proper jobs, a tax base, higher export earnings and better or cheaper services or products for the people of developing countries. Different projects serve development in very different ways. For example, the impact of our investment in a Kenyan pharmaceuticals plant is mainly in public health and will bear fruit when medicine of lower cost and higher quality become available. On the other hand, projects to generate electricity for poor households have a mostly indirect impact, created when electricity allows thousands of small enterprises and their employees to work more productively.

Data collected from customers demonstrates that the companies financed by Finnfund employ 22,000 people directly and even hundreds of thousands indirectly but our participation plays a very variable role in creating or maintaining these jobs. Looking only at directly financed customer companies during the period while Finnfund has financed them, the net increase in jobs is about 6,900.

Finnfund expects its investee companies to assume corporate social responsibility and does not allow any corruption, tax avoidance or money-laundering. For example environmental affairs and working conditions are some of the aspects that have to meet international standards even if local legislation imposes looser demands or none at all.