Finland to fund climate work in poor countries

Finland and the International Finance Corporation (IFC), a wing of the World Bank Group, will set up a joint climate fund to support renewable and clean energy solutions and other climate projects in the developing countries.

Finland will channel EUR 114 million into the Finland-IFC Climate Change Programme, whose duration is 25 years, said an official press release.

The funds will be invested in climate projects during the next five years. This will be the largest funding ever in Finland targeted at international climate work.

“With this 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 funding to climate actions. At the same time, establishing a joint fund with the world’s largest development financier will open for Finnish companies a door to the growing clean energy solution markets in developing countries,” said Minister for Foreign Trade and Development Kai Mykkänen.

Compared with the IFC’s usual practices, the Finnish fund allows for directing investments to poorer countries than before and focusing on earlier phase investments. Funds will only be invested in developing countries.

Financial investments differ from grant-based aid in that the capital invested will be returned and can be reused. In return for Finland’s financing, the IFC will also invest its own capital in all the projects. The aim is also to attract a large amount of other private and public capital.

Funding targets comprise, for instance, loans granted for companies operating in developing countries, capital investments, and guarantees.

Acceptable sectors include energy efficiency, renewable energy, sustainable forestry and land use, meteorology, and water and wastewater solutions. In addition to climatic effects, the investments will also target development effects, such as increasing the number of jobs and tax revenue.

The IFC is the world’s leading private sector development financier. IFC CEO Philippe Le Houérou pointed out that trillions of dollars are needed for the world to transit to a low-carbon economy.

“This represents a significant investment opportunity for the private sector. But it requires a coordinated approach by governments and businesses—to remove barriers to the adoption of low-carbon technologies, strengthen policy and regulatory frameworks, and overcome investor perceptions of high risk. Our partnership with Finland is an important step toward those goals.”

New opportunities for international cooperation will open up for Finnish companies, because many of them have strong climate competence and expertise in the sectors emphasised in the fund.

Houérou said, “We need not leave the energy and water solution markets in developing countries to the Danish or other players who traditionally have a strong presence in the area. In December, we will start a tour in Finland to share information on the opportunities offered by the IFC Fund and our other new development funding instruments.”