Environment and society

Environmental and social management

One of Finnfund’s key objectives is to generate positive environmental and social impacts in the target countries. Any negative effects are to be prevented and reduced. One of the conditions for receiving financing from Finnfund is that the investee company must meet the corporate environmental and social responsibility requirements set for it. For each project, the company carries out a separate environmental impact assessment and environmental classification before making the investment decision. The greater the possible environmental and social responsibility risks associated with any project, the more strictly Finnfund imposes conditions on the project company and the more closely it monitors their fulfilment.

In order to qualify for financing, a project must, among other things, meet the environmental requirements set forth in local legislation and the relevant international standards. The target company must be committed to developing an environmental management system covering the matters relevant to its operations, and to reporting to Finnfund on environmental issues regularly.

The Managing Director is responsible for the management of environmental and social risks in cooperation with the Director of Portfolio and Risk Management. The company has two Environmental and Social Advisers and one Development Impact Adviser. The Environmental and Social Advisers ensure that the environmental and social risks of all Finnfund projects are assessed and monitored throughout the project life cycle. The Development Impact Adviser makes an advance assessment of the impacts of every project financed and reports on their realisation.

The Environmental and Social Advisers and the Development Impact Adviser are also responsible for developing Finnfund’s work processes and methods, organising training for the personnel and maintaining international cooperation.

Environmental and social responsibility, and risk management

Ensuring the responsibility of activities financed is a key principle of Finnfund’s operations. The environmental and social risks and opportunities related to a project vary significantly depending on the sector, target country and a number of other factors. In its financing operations, Finnfund pays special attention to the management and mitigation of environmental and social risks, and to reinforcing positive impacts.

Finnfund has prepared environmental guidelines in order to supplement the company’s environmental and social policy. The environmental guidelines document the procedures and responsibilities related to the assessment of environmental and social risks and describe the assessment and monitoring of Finnfund’s projects.

In its corporate environmental and social responsibility assessments, Finnfund complies with the standards of the International Finance Corporation (IFC), a member of the World Bank Group, as well as the procedures and standards Finnfund shares with the other European Development Finance Institutions.

The assessment of environmental and social risks covers the environmental and social risk management systems used by the client companies. An assessment is carried out for all investment projects and, on a case-by-case basis, their subcontracting chains, if these are considered to involve environmental or social risks. This procedure has been integrated into Finnfund’s financing process.

Finnfund aims to maintain close cooperation with its clients in order to avoid adverse environmental and social impacts and improve its clients’ capabilities in related issues.

Climate change

Finnfund aims to finance projects that reduce greenhouse gas emissions or help adapt to climate change. The company’s current strategy focuses on projects involving renewable energy or improving energy and material efficiency as well as projects for sustainable forestry. The company does not finance any coal-fired power plants, or hydropower projects involving large dams that cause extensive displacement of populations.

In compliance with the requirements of the Organisation for Economic Co-operation and Development (OECD), Finnfund reports to the Ministry for Foreign Affairs of Finland regularly on those projects that are significant in terms of climate change prevention and adaptation. Finnfund’s operations create climate finance flows and thus serve to meet Finland’s international climate finance commitments.

With the aid of external experts the company has developed a tool for calculating greenhouse gas emissions (CO2) in accordance with international practices. Two versions have been created; one for renewable energy projects and the other for forestry projects. These allow the company to calculate the gross emissions and the net emission reductions of projects. Calculations have been made for applicable energy and forest projects since the start of 2015.

The tools have been constructed to apply the guidelines of the Intergovernmental Panel on Climate Change IPPC and the Greenhouse Gas Protocol. They also employ the methodology of the International Financial Institutions (IFI) to harmonize project-level greenhouse gas accounting.

At the end of 2015 Finnfund’s portfolio contained 160 projects in fields that differed greatly from each other in some respects. Because of this heterogeneity it is impossible to assess the greenhouse gas emissions of all projects and the tools have been concentrated on the two main sectors. A precise assessment of the emissions or reductions of the whole project portfolio is therefore unobtainable.

Due to the nature of Finnfund’s operations, the company’s employees must travel to the target countries quite frequently. Therefore, air travel is the most significant factor in the company’s operations causing greenhouse gas emissions, but as a whole and in comparison with the impact generated by the investee companies it is regarded as minor.

The company aims to control the need for air travel by, for example, developing electronic tools that may replace personal attendance and communication under certain circumstances.

Commuting-related greenhouse gas emissions are curbed by encouraging employees to use public transport, by offering them the opportunity to use employer-subsidised commuter tickets and by work partially from home.

Water, waste and energy saving

The water consumption and waste generation within the organisation is insignificant.

However, the company aims to improve material efficiency in its operations by, among other things, reducing office paper consumption by means of duplex printing, promoting electronic document management, sorting waste and using energy-saving office equipment and lighting solutions.

The company is not aware of any environmental damage caused by its operations.

In accordance with the international standards followed by Finnfund, the investee companies must improve their resource efficiency by aiming to prevent the generation of waste, recycling the waste that has been generated and operating in a manner that saves water and energy.