Sound, responsible business is a vital prerequisite for sustainable development. Profitable enterprises create jobs and yield the tax revenues that facilitate public sector activities and help to reduce the dependence of developing countries on external aid. Companies generate export earnings and offer consumers cheaper or better services and products. By operating responsibly and using resources efficiently, well-run companies also protect the environment.

To receive Finnfund finance, a project must be profitable and implemented in a responsible way. It must promote the economic and social development of developing countries. The projects that we accept for planning must be in line with the Finnfund Act and in accordance with Finnfund’s strategy.

Alongside direct investments we can make indirect investments via private equity funds. We also finance banks and financial institutions. Our finance is provided on market terms and depends on the risk profile of each project.

in 2017, Finnfund focused on renewable energy and sustainable forestry but we also finance projects in other sectors.

Project planning

In the initial phase of the project planning process, we ensure that the project meets our fundamental requirements on environmental and social responsibility. These requirements include the performance standards of the International Finance Corporation, the part of the World Bank Group that specialises in private sector financing. An assessment of environmental and social responsibility also helps to set the financing terms to be negotiated with the customer.

Finnfund requires good environmental and social responsibility from the projects it finances and does not tolerate corruption, tax evasion or money laundering in its projects. Environmental performance and labour conditions are two of the matters that must meet international standards, even if local legislation is less stringent or entirely non-existent.

More information under section Responsibility.

Geographical and sectoral distribution

At the end of 2017 Finnfund had a portfolio of 171 investments although some projects accounted for more than one investment. Of these investments 129 and 75 percent were in low-income and lower-middle-income countries, which is a good achievement for the company’s development policy mission. The number of enterprises or other investees totalled 140, and they were in 39 countries.

At the end of 2017 Finnfund had a portfolio of 69 investments and 40 percent were in Africa.

There were 107 direct investments and 64 indirect investments via private equity funds and financial institutions. Finnfund’s direct investments were spread over many different sectors, from engineering workshops to plantation forests, and from poultry farming to power generation.

In terms of the number of projects, 2017 was a record year and a second consecutive year of strong growth for Finnfund. During the year 29 new financing decisions were made, worth a total of EUR 201 million.

The target set for Finnfund by ownership steering is that 75 percent of projects should be located in lower and lower-middle income countries. In 2017, 87 percent of new investment decisions were for projects located in such countries. The combined investments in these countries totalled EUR 178 million or 89 percent of the investments decisions made in 2017.

In terms of both the number and value of the financing decisions made, Africa with 9 decisions and Asia with 8 decisions were the leading continents. Africa was also the most popular target area in terms of euros, with 31 percent of the financing.

Approximately 69 percent, or EUR 138 million, of last year’s new financing decisions were made in companies or fund whose operations help climate change mitigation and/or adoption. This includes, for instance, investments in renewable energy, sustainable forestry and agriculture.

Read more:
• Graphs
• Financials
• Responsibility
• Development impact
• Managing Director’s Report