Finland–IFC Blended Finance for Climate Program
Finland and the IFC (International Finance Corporation) together set up a joint climate fund in October 2017 that will support renewable and clean energy solutions and climate projects in developing countries.
Finland will channel a total of EUR 114 million into the Fund, whose duration is 25 years. The funds will be invested in climate projects during the next five years.
This will be the largest funding ever targeted at international climate work in Finland. With the investment, Finland will fulfil the promise it gave at the United Nation’s Climate Change Conference in Paris for directing a significant part of its development policy’s financial investments to climate actions. This will also help create markets for climate change solutions in countries where no investments are available or investing is very difficult due to a challenging operational environment and lagging market development.
In return for Finland’s financing, the IFC, which is part the World Bank Group, will also invest its own capital in all of the projects. The aim is also to attract a large amount of other private and public capital.
Renewable energy for developing countries
Money from the Fund will only be invested in developing countries. In addition to climatic effects, the purpose of the funding is to promote development impacts, such as increasing the number of jobs and tax revenue and thereby reducing poverty. The funding is primarily targeted at the least developed countries, other lower income countries and lower middle income countries. For instance, all of the partner countries with whom Finland has pursued long-term development cooperation, except for Kenya, are classified as least developed countries.
The IFC will make investment decisions in accordance with the terms and conditions specified together with the Ministry for Foreign Affairs and annually report to the Ministry on the programme’s development impacts.
The funding instruments of the programme comprise loans granted for companies operating in developing countries, capital investments and guarantees, for instance. Accepted sectors include energy efficiency, renewable energy, sustainable forestry and land use, meteorology, and water and wastewater solutions. Among other things, the projects implemented under a corresponding IFC programme in Canada have funded hydroelectric power in Nepal, solar energy in India, waste management in Nepal and Uganda, and energy efficiency projects in Bangladesh.
Cooperation with the world’s largest private sector development financier can also open up new opportunities for Finnish companies, of which many have strong climate competence and expertise in the sectors emphasised in the fund. However, the participation of Finnish companies is not a precondition for project funding, i.e. the question is not of a tied form of support.
Keeping the rise of the globe’s temperature under two degrees Celsius requires that climatically sustainable, low-carbon investments are made with unprecedented speed and scope in the future. Costs cannot be covered by public funding alone. With the investment decision, Finland supports both the Paris Climate Agreement and the broader sustainability goals set in Agenda 2030. The programme seeks to address UN goals related to the sustainability of food security and agriculture (SDG 2), the sustainable use of water (SDG 6), supporting sustainable energy (SDG 7) and combating climate change (SDG 13).