Finnfund’s mission is to promote economic and social development in developing countries. When assessing development impacts, the focus is on the companies and their nearest stakeholder groups. In addition, the funding provides opportunities for indirect positive development that benefit society at large in the target countries.
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.
Assessment of development impacts plays a key role in Finnfund’s investment process. Before making an investment decision, Finnfund assesses the project for
In 2017, Finnfund further developed the Development Effect Assessment Tool (DEAT) used in the ex-ante assessment of development impacts.
After the investment decision, Finnfund monitors the number of jobs and, in particular, female employees, tax revenues and other tax-like payments for each of its investments annually.
In addition, for example produced energy, local purchases, and the volume of microloans and loans to small and medium-sized enterprises are monitored. This is based on common indicators of international development financiers. In addition, relevant development effects for individual investments are monitored. The results are compiled annually in a separate publication.
The indicators have been developed in cooperation with other European development finance institutions. The same indicators are also used in the annual ownership steering memorandum, drafted by the Ministry of Foreign Affairs. In addition, during the year, theories of change describing the development effects of key sectors were developed.
In 2017, Finnfund had two development impact advisers and a Director, Impact and Strategy.
The development impacts of 2017 will be compiled during the spring and summer 2018, so the figures used in this report cover development impacts of 2016.
In 2016, companies funded by Finnfund, for example
In 2016, Finnfund made payments worth EUR 46.2 million to 26 companies or funds whose operations help climate change mitigation or adoption. In practice, this means clean energy production, sustainable forestry, agricultural development and microfinancing that creates new ways to make a living. Of the total EUR 46.2 million, EUR 7.6 million was classified as Finland’s official climate funding. This includes only funding considered to be official development aid (ODA), i.e. equity financing, not investment loans. For more information about 2017, see section Environmental responsibility.
In principle, Finnfund is a minority investor, so the investments always include other financing sources. The results have not been attributed or separated according to Finnfund’s share of the funding, as determining the impact mechanisms is challenging and an internationally reliable method for assessing them has not yet been developed. With development funding, it is typical that in addition to the investment amount, the impact depends on the characteristics of the financial instrument (for example loan, equity investment, mezzanine financing, securities), the risk level of the project, degree of involvement of the investor, and the ability to influence, for example, catalysing external funding, reducing risks or developing responsibility.
Impact assessment is developed continuously. Finnfund also actively participates in the discussion on attribution and the development of methods and is engaging in cooperation with other European development finance institutions.
EDFI, European DFI's contritubution to development outcomes