Finnfund in brief

Finnfund in brief

• Finnish Fund for Industrial Cooperation Ltd. (Finnfund) – development finance institution

• State of Finland 93,4%, Finnvera Plc 6.5%, Confederation of Finnish Industries EK 0.1%

• Founded in 1980• Office in Helsinki, staff of 58 persons• Member of European Development Finance Institutions (EDFI)• Risk capital for projects in developing countries and Russia• Investment criteria include:

- profitability- social and environmental responsibility- development impacts

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Finnfund in numbers 31 December 2015

Shareholders’ capital EUR 251 million

Portfolio EUR 369 million

Portfolio and undisbursed commitments (at original value) EUR 602 million

Total assets EUR 377 million

Number of investments 160

Number of investment countries 33

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Finnfund’s target countries by income level

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What does Finnfund finance?

• Profitable private projects- establishment or additional investments- from small and medium-sized companies to large

companies- in different sectors

• Positive development and environmental impacts • Finnish interest• In developing countries and Russia

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Finnish interest

• Finnish partner • Long-term partnership

– e.g. subcontractor, raw material producer, long-term customer

• Transfer of Finnish technology• Significant positive environmental impacts

– e.g. renewable energy and energy efficiency• In low-income countries also cofinancing with other

development finance institutions

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What is Finnfund’s role?

• Financial investor with minority stake, EUR 1 - 10 million • Long-term investor• Sharing country risks • Sharing political risks • Expert of development financing• Partner of the project sponsor with industry knowledge

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Financial instruments

• Equity - risk-sharing as a minority shareholder

• Mezzanine - subordinated and convertible loans

• Loans - medium to long-term investment loans

• Guarantees to local financiers

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Environmental and social policy

Key issues when assessing potential investments

• Economic, environmental and social sustainability

• Creation of positive environmental and social impacts

• Respect and promotion of human rights

Benefits of environmental and social sustainability

• Improved operational and financial performance

• Guard against unforeseen risks and impacts

• Competitive advantage• Enhanced community support

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Assessing E&S impacts and risks

Tools– Finnfund’s E&S expertise – National legislation– International standards (IFC

Performance Standards and the related Environmental, Health & Safety Guidelines)

– Other relevant sector specific standards (e.g. ISO, FSC)

– Common guidance developed by European DFIs

– E&S site visit (due diligence)– Information and materials provided by

the client– Support during implementation

Client to commit to– Developing adequate E&S

assessments– Implementation of an E&S Action Plan,

when necessary– Providing adequate E&S information– Obtaining a good understanding of the

applicable international E&S standards, as well as national and local legislation

The aim is to develop the project in line with international standards and guidance.

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Environmental and social sustainabilityin the financing process

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Familiarisationwith the project

• Finnfund introduces its environmental and social principles to the project company

• The project company provides the initial information used inthe assessment of the project

• Finnfund plans the environ-mental and social due diligence taking into account the anticipated impacts and risks.

Preparing the investmentproposal

• Obtaining additional informa-tion (e.g. with questionnaires) and site visits

• Finnfund’s advisers analyse the information, compare the project to the requirements of international guidelines and standards, and identify possible areas of improvement

• Finnfund’s advisers discuss the results of their assessment and, where necessary, draft a corrective action plan together with the project company.A review is prepared to support the investment proposal.

Legal agreements and disbursement

• Environmental and social covenants and undertakings are agreed upon (including conditions precedent for disbursement)

• Environmental and Social Action Plans as well as reporting formats are annexed to the legal agreements.

Monitoring

• Annual reporting, including a description of the implementa-tion of the action plan

• Notification requirement of unusual events, incidents and accidents

• Monitoring visits

• If needed, discussions on possible corrective actions and improvements.

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IFC Performance Standards1 Assessment and management of environmental and social

risks and impactsUnderscores the importance of identifying E&S risks and impacts, and managing E&S performance throughout the life of a project.

5 Land acquisition and involuntary resettlementApplies to physical or economic displacement resulting from land transactions such as expropriation or negotiated settlements.

2 Labor and working conditionsRecognizes that the pursuit of economic growth through employment creation and income generation should be balanced with protection of basic rights for workers.

6 Biodiversity management and sustainable management of living natural resources

Promotes the protection of biodiversity and the sustainable management and use of natural resources.

3 Resource efficiency and pollution preventionRecognizes that increased industrial activity and urbanization often generate higher levels of air, water and land pollution, and that there are efficiency opportunities.

7 Indigenous peoplesAims to ensure that the development process fosters full respect for Indigenous Peoples.

4 Community health, safety, and securityRecognizes that projects can bring benefits to communities, but can also increase potential exposure to risks and impacts from incidents, structural failures, and hazardous materials.

8 Cultural heritageAims to protect cultural heritage from adverse impacts of project activities and support its preservation.

What are the benefits of the Performance StandardsGuard against unforeseen risks and impactsImplementing the Performance Standards helps companies identify and guard against interruptions in project execution, legal claims, brand protection, and accessing international markets.

Improve financial and operational performanceMeeting the Performance Standards can help clients improve their bottom line. Implementation of the Standards can help optimize the management of inputs such as water and energy, and minimize emissions, effluents, and waste, leading to a more efficient and cost-effective operation.

Social license to operateThe Standards help clients find ways to maximize local development benefits and encourage the practice of good corporate citizenship. This often results in greater acceptance of the project by local communities and governments, allowing companies to acquire a social license to operate. Enhanced brand value and reputation may also be attractive to new investors or financiers.

Gain an international stamp of approvalThe ”Equator Principles”, which have been adopted by more than 70 of the world’s leading investment banks in developed and developing countries, are based on IFC’s Performance Standards.

Finnpartnership - Finnish Business Partnership Programme

• Financed by the Ministry for Foreign Affairs, operated by Finnfund

• Goal to increase business cooperation between companies in Finland and developing countries

• New business opportunities and partners (Matchmaking)• Advisory services and Business Partnership Support Facility

(grant) for Finnish companies

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www.finnpartnership.fi

European Development Finance Institutions

Norway Sweden

the Netherlands Germany

ItalyDenmark

Spain

Belgium

United Kingdom

Belgium

Portugal

France

Switzerland

Finland

Austria

European Financing Partners

• Co-financing for large projects in Africa, the Caribbeanand the Pacific

• Way for an EDFI member to arrange financing for its clients

• Financiers other development finance institutions and EIB• 1 € → 4 €• Loans, equity, mezzanine financing or guarantees

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Portfolio and commitments - geographical distribution(at original value, total EUR 602 million)

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0 50 100 150 200 250 300

The Mediterranean

Eastern Europe & Central Asia

International

Latin America

Asia

Africa

Portfolio and commitments by sector (at original value, total EUR 602 million)

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0 25 50 75 100 125 150 175

Health services

Telecommunications

Hotels

Manufacturing

Other infrastructure

Resource based industries

Financial

Forestry

Funds

Energy and environment

Investment portfolio (EUR million)

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50

100

150

200

250

300

350

2009 2010 2011 2012 2013 2014 2015

Equity Funds Loans

Portfolio and undisbursed investmentdecisions (EUR million)

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0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014 2015

Portfolio, EUR million Undisbursed investment decisions

Contacts

• www.finnfund.fi

• firstname.lastname@finnfund.fi

• tel. +358 9 348 434address Uudenmaankatu 16B, Helsinki

@Finnfund

http://team.finland.fi/en/frontpage

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