Environment and society

Environmental and social responsibility and risk management

A key principle of Finnfund’s operations is to ensure the responsibility of all activities financed. 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. Finnfund pays special attention to the management and mitigation of environmental and social risks, and to reinforcement of positive impacts.

In the assessment of the environmental and social risks and impacts of the projects, in compliance with its environmental and social policy, Finnfund complies with the standards of the International Finance Corporation (IFC, member of the World Bank) and the European Development Finance Institutions (EDFI). Finnfund is committed to the principles of UN Global Compact, the UN Guiding Principles on Business and Human Rights and the Fundamental Principles of the International Labour Organization (ILO).

To be eligible for Finnfund’s financing, a project must comply with local legislation and all environmental and social responsibility requirements laid down in the international standards applied to the project. Each company financed must commit to assessing risks and impacts of company operations, creating and implementing an environmental and social management system that covers its operations and supply chain, guarantee sufficient expertise in management of environmental and social responsibility and submit regular reports on its environmental and social management.

Finnfund has an internal environmental manual to supplement the company’s environmental and social policy. The manual documents the procedures and responsibilities in Finnfund’s financing process related to ensuring environmental and social responsibility. The assessment and monitoring cover all the funded projects and their subcontracting chains. The assessment and management of environmental and social risks and impacts, determination of actions for improvement and on-going monitoring are part of the Finnfund financing process.

Responsibility in financing process

 Environmental and social sustainability in the financing process


Climate change

Finnfund aims to finance projects that reduce greenhouse gas emissions or help adapt to climate change. The company’s strategy focuses on projects on 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 will cause extensive displacement of local people.

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

In 2016, around half of the investments in the Finnfund portfolio were targeted to projects that are important in terms of the climate change mitigation.

Prevention of climate change


Projects important in terms of the prevention of climate change in the Finnfund portfolio

With external experts, Finnfund has developed a tool for calculating carbon 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. Since beginning of 2015, calculations have been made for applicable energy and forest projects (see figure below). 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.

Greenhouse gas and emission calculation methods

Greenhouse gas and emission calculation methods of Finnfund

Due to the major differences between the project types, the calculation tools cannot yet assess the carbon emissions of all projects, and the tools are only used in the two main sectors. The goal for 2017 is to develop carbon foot printing at the portfolio level.

In 2016, the net emission reductions could be calculated for four new projects using the existing tools. The combined net emission reductions of these projects were approximately 4.3 million tonnes of CO2 equivalent.





Finnish Fund for Industrial  
Cooperation Ltd. (FINNFUND)

Uudenmaankatu 16 B
P.O. Box 391 FI-00121 Helsinki, Finland
tel. +358 9 348 434
fax +358 9 3484 3346