1 Annual Review 2019

2019 Annual Review Annual Review 2019 1 Content Year 2019 3 Finnfund in brief 4 Chief Executive Officer’s review 6 Summary of the year 2019 8 Key figures and highlights 11 Investments 14 Sustainability 26 Sustainability of Finnfund investments 27 Human rights report 34 Finnfund’s own sustainability 38 Impact 45 Driving impact throughout the investment cycle 46 Renewable energy curbs climate change and creates prosperity 48 Sustainable forestry protects the climate and creates rural jobs 50 Agriculture continues to drive development 52 Financial services empower people to invest in their future 54 Climate impact of Finnfund’s investment portfolio 56 Good jobs create a path out of poverty 58 How sustainability creates impact 60 Tax revenue for building stronger societies 62 Empowering women through investments 64 Summary table 66 Theories of Change 68 Corporate governance 73 Owners and shareholders 74 Governing bodies 74 Remuneration 75 Members of the Supervisory Board, Board of Directors and Audit and HR Committees 78 Financial statements 80 Board of Director’s report 2019 81 Profit and loss account 94 Balance sheet 95 Cash flow statement 97 Accounting policy 98 Signatures of Board of Directors’ report and financial statements 109 Cover photo: Annapurna Finance Auditor’s report 110 Private Limited, India Statement of the Supervisory Board 112 Annual Review 2019 2 Year 2019 Annual Review 2019 3 Finnfund in brief Professional impact investing The Finnfund strategy sustainable projects in developing in developing countries stresses: countries. Returns are channelled back into new Finnfund investments. Finnfund is a Finnish development Generating, analysing and Finnfund’s shareholders are the financier which builds a sustainable • communicating development State of Finland (94.1%), Finland’s world by investing in responsible and impact. export credit agency Finnvera (5.8%) profitable businesses in developing Doubling operational volume and and the Confederation of Finnish countries. • focusing funds on responsible Industries (0.1%). We currently have We provide companies operating and profitable projects with 81 employees, all based in Helsinki. in developing countries with long- potential for high impact. Finnfund’s owners set annual term risk-financing and expertise Mobilising additional funding and targets for the company. They deal required for sustainable invest- • convincing private investors to with financial result, development ments. We expect our projects to be take on co-financing opportuni- impact, geographic focus and profitable, sustainable and generate ties. operational efficiency. The goals are positive development impacts in Improving operational proce- documented in the Foreign Minis- their target country. • dures and respecting the work try’s annual Ownership Steering Finnfund puts special emphasis of the company’s staff and Memorandum. on sectors critical to sustainable external partners. The company’s share capital on development, such as clean energy, 31 December 2019 was 196,988,860 sustainable forestry, sustainable ag- All Finnfund operations are guided euros. riculture and financial services, but by four principles: Impact, sustain- Finnfund is the administrator we invest in other sectors as well. ability, profitability and profession- of the Finnpartnership Business Our strategy for 2018−2025 sets alism. Partnership programme funded by the company’s operational guidelines Finnfund gets its financing from the Ministry for Foreign Affairs. Finn- until 2025. Finnfund’s vision is to be the Finnish state, private capital partnership offers advisory services a valued partner and impact leader markets and return on its invest- and Business Partnership Support to among European development ments. We leverage state capital Finnish companies. finance institutions. to mobilise private investments in Guiding principles: impact, sustainability, profitability and professionalism Year 2019 | Annual Review 2019 4 Kuva EthioChicken improves food security and living standards in Ethiopia. Year 2019 | Annual Review 2019 5 Chief Executive Officer’s review Jaakko Kangasniemi he world is falling far Finnfund is playing its part in this ment assets grew by 13% and we kept behind its global climate transformation. We had a record year investing in low-income countries, and development targets. in terms of investments, 49% of which we were able to improve our profit However, the year 2019 targeted climate change mitigation margin and lower the portfolio’s level showed glimmers of hope. and adaptation. of risk. TThe International Energy Agency We were among the first adopt- We passed the European Com- reports that global energy-related ers of IFC’s Operating Principles for mission pillar assessment, which CO2 emissions flattened in 2019. Re- Impact Management and we are makes Finnfund eligible for managing newable energy sources are gaining mobilising private financing for the EU guarantees. We are now work- momentum around the world. Sustainable Development Goals. We ing with the Commission and other Another encouraging trend is are partnering with Finland’s largest European DFIs to make sure EU funds the rapid growth of impact investing financial services group, OP, which is are deployed for maximum impact and green finance. Global Impact setting up Finland’s first impact fund in developing countries around the Investing Network GIIN estimated investing in developing markets. globe. the market to already be some 500 Finnfund continued to implement What I am most proud of, though, billion euros. Major asset managers its strategy of high impact invest- is our recent work on gender in- and multinational corporations from ments in low income countries, with vesting. Finnfund adopted a gender Blackrock to Microsoft announced 78% of investments targeting the statement to guide our investment decisions to pivot from fossil invest- three lowest country categories decisions to better promote gender ments to greener ones. (OECD/DAC). Although our invest- equality and women’s economic em- Year 2019 | Annual Review 2019 6 Finnfund’s new gender statement guides future investment decisions powerment. We joined the 2X Chal- Emirates have been holding their own Cyclones in Mozambique, drought in lenge, which aims to collectively mo- investment summits with African Zimbabwe, prolonged rains in East bilise USD 3 billion in commitments nations. Africa and locust invasions in Soma- for women’s economic empowerment That is no wonder. Six out of the lia, Kenya and elsewhere are worrying in developing countries. 15 fastest-expanding economies are signs of things to come. That is why We have trained our staff on in Africa, with Ethiopia and Rwanda we urgently need more investments in gender investing and made high-im- being at the top of the list. Africa’s developing countries. pact investments in companies population is growing rapidly, which In the short term, the coronavirus like Annapurna, which is an Indian presents enormous challenges but pandemic is likely to put a serious company that offers microloans and also opportunities. strain on developing countries. Peo- related financial literacy education This high interest in Africa also ple, economies and businesses will be primarily to economically disadvan- generates opportunities for Finn- badly hit. As I am writing this, it is still taged women. fund. At present, almost half of our unclear how severe the impact will be. Looking ahead, I expect to see investment portfolio is comprised of I would like to thank Finnfund’s continued strong interest in Africa. business projects in Africa. We see customers, staff and other stakehold- The European Union has come out growth potential, especially in the ers for their support in 2019. with a new Africa strategy and is forestry, agribusiness, education and working on an external investment health sectors. plan to boost it. Other players from The biggest threats to this poten- Jaakko Kangasniemi China to Russia and the United Arab tial are presented by climate change. Chief Executive Officer Year 2019 | Annual Review 2019 7 Summary of the year 2019 n 2019, Finnfund continued to ex- of investment assets remained well pand its portfolio while maintain- 29 new investment under the two per cent goal. ing a tight focus on high-impact In spring 2019, the Finnish state investments in low-income coun- decisions, a total provided Finnfund with a 40-year tries. We made significant strides value of 237 million loan of 210 million euros. Finnfund Itowards our strategic goal of tripling pledged to invest one half of it in busi- euros impact by 2025 without compromis- ness projects which advance gender ing the profitability or sustainability of equality and the other half in climate our investments. change mitigation and adaptation Our investment assets grew by projects. By the end of 2019, we 13% to 557 million euros. We made a already committed 57 million euros record 29 investment decisions with a to seven gender investments and 49 total value of 237 million euros. million to seven climate investments. Net financial income grew 29% Our funding base was further from the year before to 23.7 million reinforced by a 10-million-euro capital euros and we were able to reduce injection from the Finnish state and the average risk level of our portfolio. a 40 million US dollar loan from the Finnfund’s operating costs as share Nordic Investment Bank. Annual investment decisions by country category (OECD, DAC) EUR million 250 200 150 100 50 EUR million 0 2013 2014 2015 2016

Load more