Nordic Annual Environment Review Finance 2018 Corporation Contents

4 About NEFCO 6 Review by the Managing Director 8 Small steps to create greater impact 10 Highlights from our activities in 2018 14 Mobilising green finance 16 Key figures 2018 20 Environment & Sustainability

22 Green Growth in 2018 24 Climate in 2018 28 Arctic & Barents in 2018 32 Baltic Sea in 2018

34 Financing Options 36 Governance

Editor: Josefin Hoviniemi Design: Staart / Annika Tenho

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3 Photo: Tero Pajukallio Photo: Tero About NEFCO

The Nordic Environment Finance own investment activities. Our financing Corporation (NEFCO) is an inter- has a catalytic role and high additionality, national financial institution (IFI) helping the Nordic governments and our established in 1990 by the five Nor- partners to reach their environmental and dic countries: Denmark, Finland, sustainability goals. Iceland, Norway and Sweden. We All our financing and We provide added value We help Nordic We offer risk capital for green invest- finance exclusively green growth ments to supplement other sources of activities are aimed to our stakeholders governments and our and climate projects in order to financing and create blended finance at green growth and through our focus on partners to reach their generate positive environmental opportunities through a combination climate action globally, small and medium-sized environmental and impact of interest to the Nordic of grants, loans and equity. Combined with particular focus projects sustainability goals governments. By focusing on small with hands-on environmental expertise, on Eastern Europe, the we help customers to build capacity and and medium-sized environmental Baltic Sea, and the Arctic mobilise additional financing for their projects and on achieving tangi- and Barents regions projects. ble and cost-efficient results, we Over the years, we have financed a to- provide added value to our owners, tal of about 900 small and medium-sized, partners and customers. private and public sector projects across different sectors in 51 countries. In ad- Our extensive network within the green dition, since the administration of the community and our proven ability to con- fund was transferred to NEFCO in 2014, nect stakeholders and financiers to rele- the Nordic Project Fund (Nopef) has pro- vant projects support NEFCO’s role as fund vided support to 356 green sector projects manager and implementing agency for a to help the companies undergo interna- number of trust funds in addition to our tionalisation across 56 countries. 5 Photo: Patrik Rastenberger for NEFCO for Photo: Patrik Rastenberger A new Swedish initiative for the development of long- term sustainable district heating systems in Ukraine was announced at the Nordic Green to Scale seminar in Kyiv in September 2018 by Magnus Rystedt, NEFCO's Managing Director, and Martin Hagström, the Ambas- sador of Sweden to Ukraine.

Review by the Somerpuro Photo: Veikko

In 2018, we saw some remarkable devel- global mandate has now also started to us for some time and is familiar with our opment in NEFCO’s operations. We are on take off. This allows us to build on our mandate, activities and organisation, I managing director track in terms of our environmental ob- financing activities through Nopef and am confident that he will continue the jectives, and our financial result was also facilitate the implementation of Nordic positive development of NEFCO’s financ- strong, partly thanks to profitable sales of smart and green solutions in their critical ing operations and lead the organisation shares in two companies and partly due to growth phase on global markets. to new success stories. improvements in the economic situation In October, the Green Climate Fund To wrap up, I believe the success of in Ukraine, one of our core countries of (GCF) decided to include NEFCO as one of NEFCO boils down to three major fac- operation. its accredited entities. We believe this is tors. First, we have managed to achieve We managed to increase our invest- an acknowledgment of our ability to man- good environmental results through our ment activities and approved a larger age funds efficiently and deliver results, projects. Second, our operations have re- number of investments than ever before while at the same time adopting and de- mained profitable despite some difficult in both the public and the private sector. manding the highest standards, policies times during the financial crisis in 2008 Our consistent work for many years with and routines in our activities. The accred- and the more recent crisis in Ukraine. municipalities in Eastern Europe is pay- itation to the world’s largest climate fund Third, and probably the most important ing off. Today, NEFCO is a sought-after -fi will allow us to scale up projects further reason, we have managed to create high nancing partner in this sector, and several and deliver results with greater impact. additionality to our owners, financiers new funds or initiatives for public projects A positive outlook on the future and customers with our catalytic early-­ were set up and assigned to NEFCO during stage financing and ability to find and the past year. After 19 years at NEFCO, the last 13 of implement projects in an agile and cost-­ From local environmental projects which as Managing Director, it is time efficient way. to combatting the global climate for me to hand over the role to my suc- crisis cessor Trond Moe. He was chosen from several candidates by the Board in Feb- Magnus Rystedt NEFCO has an important role in financing ruary 2019 and will take office on 1 June Managing Director green projects in Eastern Europe. The new 2019. As Trond has already worked with 7 Photo: NEFCO Green growth Baltic Sea

Focus on projects with high We facilitate green growth by provid- The reduction of pollutants affecting Small steps to create demonstration value impact ing risk capital, grants and environ- the Baltic Sea has been a key priority mental expertise. Our objective is to for us from the very beginning. We NEFCO’s financing is targeted at small support the scaleup of Nordic smart, finance both public and private sector and medium-sized private and public green solutions globally and to create projects related to agriculture, waste- projects (SMPs) with demonstration val- positive environmental impact. water treatment and hazardous waste greater impact ue. Many of the numerous SMPs financed within the Baltic Sea catchment area by us are at the forefront of technological See more on pages 22–23. through our various programmes. innovation and aimed at testing the ap- plication of Nordic green solutions, with See more on pages 32–33. up-scaling possibilities in local, non-Nor- dic circumstances. Projects with a high demonstration value have the potential to grow and generate environmental im- pact that is orders of magnitude greater than our investment. The ultimate goal 3.9 million tonnes 979 tonnes P-tot of our activities is to successfully imple- ment solutions that benefit the environ- CO2 direct + CER 4,498 tonnes N-tot ment and climate in a cost-efficient way. reduced reduced Providing high additionality Climate Arctic & Barents = 3.6 million people flying from = annual untreated wastewater from By connecting stakeholders and various financiers to relevant projects, we provide To support climate change miti- We provide financing for project Helsinki to Bangkok and back all inhabitants in Copenhagen high additionality and help our partners gation and adaptation initiatives, preparation activities, studies and to reach their environmental and sustain- we mobilise new investments and demonstration projects with the aim ability goals. funding for projects related to re- to further develop and disseminate Our risk financing for small projects, newable energy, energy efficiency the best available technologies and growth companies and challenging geo­ and the reduction of short-lived practices that contribute to energy ef- graphical regions supplements financ- climate pollutants and greenhouse ficiency, sustainable use of resources ing offered by the larger IFIs and other gas emissions in close co-operation and pollution mitigation, and a pos- financiers. We also offer hands-on envi- with governments, municipalities, itive impact on communities in the ronmental advice and capacity building companies and other organisations. Arctic and Barents regions. to enable smaller customers and bene- ficiaries to become better at mobilising See more on pages 24–27. See more on pages 28–31. additional financing.

9 Highlights from

our activities in 2018 The year 2018 was very successful First Nordic institution to be Adoption of a new Gender Policy for us, with several remarkable accredited by the Green Climate The NEFCO Gender Policy was launched steps. Fund in February, with the aim of emphasising At its 21st Board meeting in October, the NEFCO’s commitment to the shared goals A major achievement was that NEFCO Green Climate Fund (GCF) decided to in- and objectives of its owner countries in was the first Nordic institution to receive clude NEFCO as one of its accredited en- promoting gender equality and the Nordic Green Climate Fund (GCF) accreditation in tities. GCF is a global fund created by the countries’ role as a leading example of de- October 2018. United Nations Framework Convention on livering on the Sustainable Development In our focus countries, Ukraine, Be- Climate Change (UNFCCC) to support the Goals, including, in particular, Goal 5 – Global mandate Accredited by the Strong Nordic Adoption of new larus and Russia, the situation was suf- efforts of developing countries to respond Achieve gender equality and empower ficiently stable for investments over the to the challenge of climate change. The all women and girls. While NEFCO’s fi- taking off Green Climate presence in Gender Policy past year. Despite the high levels of risk accreditation offers new opportunities for nancing – due to its specific environmen- Fund (GCF) Ukraine and the continuation of the armed con- NEFCO to blend its financing with GCF tal mandate – is not targeted at enabling flict in eastern Ukraine, the economic and other accredited entities’ funds and implementation of projects based on their situation has stabilised somewhat. The further increase the capabilities of devel- potential to contribute to achieving gen- hope now is that this stabilisation can oping countries to grow in a sustainable der equality, proactive action means that continue and that the 2019 elections in way. the gender perspective is evaluated in all Ukraine will not create new uncertainty. of NEFCO’s financing activities. Our renewed global mandate has also opened up new financing opportunities within green growth outside Eastern Eu- rope and further developed during the past year. 11 Photo: Patrik Rastenberger for NEFCO for Photo: Patrik Rastenberger CASE: Electricity from geothermal and waste heat

Swedish Baseload Capital is an invest- Asia and North America. The technolo- ment entity established by three Swedish gy generates electricity from waste heat venture capital companies and Climeon, and geothermal heat at low temperatures a Swedish cleantech vendor, for the de- in a cost-efficient way, ensuring a 24/7 velopment of renewable energy projects. supply of clean energy. Each power plant Stronger Nordic presence in Scaling up Nordic green solutions Financing under the global Breakthrough Energy Ventures, which deployment will result in significant CO2 Ukraine on global markets mandate is aimed at: is backed by some of the world’s leading reductions as well as economic bene- business executives, including Bill Gates, fits and contribute to scaling up Nordic The Nordic financing initiatives, En- During 2018, we actively developed pro- • Supporting the internationalisation Jeff Bezos and Richard Branson, has been green technology on global markets. ergy Saving Credits (ESC) and Nordic ject opportunities in line with the new of Nordic SMEs and mid-cap compa- a shareholder of Baseload Capital since Both Baseload Capital and Climeon have Initiative for Energy Efficiency and Hu- global mandate that was approved in June nies and their green solutions early 2019. also received financial support for early manitarian Support (NIU), have so far 2017. The global mandate enables us to • Enabling green investments in equip- In 2018, Baseload Capital received stage market exploration from the Nordic enabled the public sector to implement finance green investments beyond East- ment, technology or capacity needed loan financing from NEFCO to expand Project Fund (Nopef), providing a further energy-efficiency measures in more ern Europe, thus creating synergies with for production or international busi- Climeon Heat Power technology on glob- boost to international growth. than 400 schools, day-care centres and the Nordic Project Fund (Nopef), which ness development al markets, in particular Eastern Europe, hospitals, as well as in municipal street supports the early stage internationali- • Providing catalytic funding through lighting in southeast Ukraine. The aim sation of Nordic small and medium-sized loans or equity-type financing is to strengthen the demonstration value enterprises (SMEs). The aim is to facilitate and provide leverage of donor funds with the scaleup of Nordic companies and solu- credit financing. During 2018, 29 projects tions on global markets by offering financ- were under implementation. The pro- ing in the critical growth phase and when grammes have proven highly relevant other types of financing are not available. and effective. Not only have the munici- Four Global projects were approved in 2018 palities been able to save energy and costs and more are underway. and reduce their carbon footprint but over 170,000 children and staff have also ben- efitted from better comfort. Building on the experience and posi- tive impact of these projects, the Nordic countries have further developed addi- NEFCO financing tional initiatives to support climate ac- tion in Ukraine. In 2018, Sweden decided enables us to access to scale up its support for the develop- a valuable network, ment of district heating, and Finland especially in Eastern launched its funding programme for re- newable energy development in Ukraine. Europe where the Norway aims to increase its support for potential for Heat municipal energy-efficiency projects, and Power is big.” Denmark is financing private sector pro- jects, in particular, related to renewable Alexander Helling, energy. Denmark has also been involved CEO, Baseload Capital in the first public sector investment by Photo: Patrik Rastenberger for NEFCO for Photo: Patrik Rastenberger NEFCO in Georgia. 12 13 Photo: Baseload Capital/Climeon Photo: Jason Mulikita for REEEP green finance Mobilising in ownequity 165 m€ ­assignments trust fund 39 39 assignments bythe value oftrustfund 352 m€ end of2018 ground. cities andproject developers onthe companies, tential –bysupporting creating impact–andpo weEverything doishands-on, tion ofgreen financingatscale. new investments andmobilisa- stream andopendoorsfor larger aim toinspire replication, main- tive demonstrationprojects, we ples. Through ourmany innova- lead theway byconcrete exam- the Nordic countries. We aimto value ofrelevance andinterest to additionality anddemonstration medium-sized projects withhigh public andprivate, smalland NEFCO’s objective istofinance trust fromthe Nordic governments and bankable. leverage andmakeprojects feasibleand funds andwe holdintrust–we financing sources available tous–our own the investment. Bycombiningdifferent vestments, softenourloansandde-risk develop and preparenew public greenin with financingprovidedthroughusto started. We blendourownloanfunds assistance andprojectsupport,toget ing options, including grants, technical For public projects, we offer softer financ markets throughtheNordicProjectFund. to growNordicgreensolutionsonglobal companiesWe helpSMEsandmid-cap NEFCO holds substantial fundsin - - - • • • • started duringtheyear: Seven newtrustfundassignmentswere New fundassignmentsin2018 EUR 352million. fund assignments with a total value of tial trustfundassignments. tence andprocedurestohandlesubstan- have experience,compe thenecessary standards,and we the highestfiduciary trust fundmanagementcomplieswith Union andtheGreenClimate Fund.Our and isaccreditedbyboththeEuropean Arctic Council members,amongothers, lation toenergyefficiency inUkraine Environment Partnership (E5P)inre Eastern EuropeEnergyEfficiency and municipal projectsfinancedsby the The implementation ofthreenew scale, distributedover two funds of theParis Agreement onabroader (NICA) tosupporttheimplementation tiative for Cooperative Approaches’ in connectionwiththe ‘Nordic Ini- Swedish initiative tosupportactivity The establishmentofajointFinnish- gy efficiencyinUkraine Efficiency Initiative, tosupportener- initiative, Norway-Ukraine Energy The establishmentofaNorwegian focus onrenewablefuelsinUkraine districtheatingergy-efficient witha the development ofmodernanden- Heating inUkraineFund,tosupport initiative, Sweden-NEFCO District The establishmentofaSwedish At the end of 2018, NEFCO had 39 trust At theendof2018,NEFCOhad39trust - ­ - Efficiency Partnership(REEEP). the RenewableEnergyand with implemented inco-operation facility andtheprogrammewill be six years. NEFCOwillmanagethe contribute EUR50millionduring early 2019withSweden that will agement agreementwassignedin BGFA programme.Thefacilityman expansion andestablishthenew (Sida) requestedNEFCOtoleadan al Development Cooperation Agency (see pictureontheleft). which Sweden commenced in 2016 the GridFundfor Zambia(BGFZ), positive experiencesoftheBeyond areas. Theprogrammebuildsonthe ple living in rural and peri-urban clean energyaccessat scaletopeo private sectortoofferaffordableand business models to incentivise the accelerating theemergenceofnew duce this gap by stimulating and Fund for Africa (BGFA) aimstore or longer. TheBeyond theGrid not likely to happenfor decades, people, connectiontothegridis electricity today. Formostofthese haran Africa live withoutaccessto - Over 600millionpeopleinsub-Sa Fund for Africa Beyond theGrid CASE: In 2018,theSwedish Internation - - - - 15 NEFCO agreed and approved NEFCO agreed and approved investments in 2018 by location investments in 2018 by sector

Ukraine 11 (52%) Energy 17 (81%)

Global 4 (19%) Industry 3 (14%)

Estonia 2 (10%) Other 1 (5%)

Looking at NEFCO’s project activity Russia 2 (10%) as a whole, 124 projects, worth EUR 64.6 million, were approved during Georgia 1 (10%) the year. Within the Investment Belarus 1 (5%) Key figures 2018 Fund, NEFCO’s authorised capital, 15 new investments worth a total

of EUR 50.2 million were approved, NMF and NMF Credits agreed and NMF and NMF Credits agreed and and by the end of the year, the approved projects in 2018 by location approved projects in 2018 by sector 124 corporation had a total of 65 on- Result of the year going projects, equating to a total new projects of 7 commitment of EUR 211.6 million in new Trust Fund Ukraine 22 (85%) Energy 22 (85%) EUR 8.55 EUR 64.6 funding. assignments Belarus 2 (8%) Industry 3 (14%) million million achieved From an environmental perspective, approved Eastern Europe 1 (4%) Other 1 (5%) climate-­related investments and pro- jects continue to dominate. As in previ- Global 1 (4%) ous years, energy-efficiency measures make up the largest single category, but

there has also been a high project activity Approved Nopef projects Approved Nopef projects related to renewable energy production, in 2018 by location in 2018 by sector cleaner technology innovations and re- source efficiency measures. According to NEFCO’s financial results Asia 35 (49%) Energy 32 (45%)

for the year, the Corporation made a profit North America 12 (17%) Industry 14 (20%) of EUR 8.55 million. This healthy result

is largely due to sales of shares in two South and Central America 12 (17%) Agriculture 11 (15%) companies, as well as to improvements

in Ukraine’s economic situation over the Africa 9 (13%) Water 10 (14%) year. The majority of the shares sold were

in a wind power operator in the Baltic Eastern Europe 2 (3%) Waste 4 (6%) States. Following an improved stability in Ukraine, a number of reservations made Australia 1 (1%) due to the crises in 2014–2015 were not realised and could instead be reversed. 17 Complete Financial Statements are available in our Annual Report 2018 www.nefco.org

Funds managed by NEFCO

Since the establishment of NEFCO in 1990, the number of trust fund assignments has increased steadily. Altogether NEFCO has had fund assignments for a total of EUR 730 million.

Funds excluding NEFCO equity NEFCO equity (incl. committed paid-in capital) No of Trust Funds assignments

Funds m€ No of fund assignments

600 60

500 50

400 40

300 30

200 20

100 10 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

18 19 Photo: Tero Pajukallio Photo: Tero NEFCO works primarily on contribut- ing to the following U N Sustainable sibility studies and demonstration projects Our environmental status Development Goals (SDGs): in the Arctic and Barents regions, we pave the way for the implementation of BAT-BAP report is available in the Goal 6: Clean Water and Sanitation policies and larger-scale­ impact. Annual Report 2018 NEFCO has financed a number of projects www.nefco.org related to wastewater management through Goal 17: Partnership for the Goals its Investment Fund and dedicated trust NEFCO works in close co-operation with funds, primarily projects that reduce dis- donors, other financial institutions and charges of nutrients into the Baltic Sea. customers to create blended finance oppor- ble municipalities and cities to utilise Nordic Apart from addressing the removal of nu- tunities, catalyse funds and projects, and solutions based on best practices and tech- trients from wastewater, NEFCO assesses enable projects to be implemented utilising nologies. other environmental threats such as the best practices from the Nordic countries. abundance of pharmaceuticals and persis- We provide risk financing for small pro- Goal 12: Responsible Consumption tent organic pollutants and how to reduce jects, growth-phase companies and risky and Production such substances in wastewater. geographical areas, thus supplementing The Cleaner Production Facility (CPF) facili- Environment & financing offered by the larger IFIs and tates projects to reduce industrial pollution Goal 7: Affordable and Clean Energy other financiers. We connect stakeholders through efficient resource and energy uti- A significant part of our financing operations and various financiers such as the EU, E5P, lisation in both the public and the private relates to energy efficiency and renewable NDEP and Nordic governments to relevant sector in Eastern Europe. The on-lending energy. We have facilitated and implement- projects. In 2018, NEFCO became the first programmes for the banking segment pro- Sustainability ed various projects in Eastern Europe in Nordic institution to be accredited by the mote more sustainable habits among con- particular, improving energy security and Green Climate fund (GCF). sumers. We have also financed many Nordic helping the countries reach their emission Additionally, NEFCO’s activities companies going global with solutions for targets. Energy-related projects have also contribute to the following goals: more sustainable production methods and been realised through the Nopef funding use of natural resources in various industry programme, the Climate Funds, and the Goal 8: Decent Work and Economic segments, e.g. the food industry and plastic Arctic and Barents regional programmes. Growth recycling. Internationalisation of Nordic small and Goal 9: Industry, Innovation and medium-sized companies contributes to Goal 14: Life Below Water Infrastructure green growth and increased employment. The ecological state of the Baltic Sea has been NEFCO enables the internationalisation We emphasise Nordic values, company cul- a main priority since NEFCO was established and scaling up of Nordic green companies ture, CSR regulations and equality in the by the Nordic countries. BSAP Fund projects through both Nopef and its global mandate. project countries. Climate-related projects in are aimed at reducing discharges of phos- These projects focus on innovative solutions emerging markets help to improve working phorus and nitrogen mainly from wastewa- that help industries or service providers to conditions and economic growth. Through ter treatment plants and agriculture. NEFCO save or utilise resources more efficiently and our global mandate, we can offer risk capital has obtained Observer status at HELCOM. reduce pollution. In industrial projects, NEF- to Nordic companies seeking to scale up their Investment projects related to fish farming CO attaches great importance to resource operations globally. and new ways of protein production contrib- efficiency that can translate into efficient use ute to combatting overfishing and pollution. of raw materials such as metals, chemicals Goal 11: Sustainable Cities and Commu- and water. nities Goal 15: Life on Land Investments in the public sector, e.g., in By facilitating and implementing environ- Goal 13: Climate Action energy efficiency, district heating and street mental projects such as waste management, NEFCO contributes to climate mitigation lighting, as well as water and waste man- pollution reduction and improved forestry and adaptation in many of its activities. Our agement contribute to the goal of creating management, NEFCO also contributes to energy-efficiency, renewable energy and Cli- safer, healthier and more sustainable cities improved conditions for life on land. Several mate Fund projects have a direct impact on and communities and prosperity for their projects in the Arctic region have a strong greenhouse gas emissions. By financing fea- inhabitants. NEFCO-financed projects ena- emphasis on biodiversity. 21 Photo: Joel Sheakoski for NEFCO Photo: Joel Sheakoski for Photo: Joel Sheakoski for NEFCO Photo: Joel Sheakoski for

Focus area Green Growth in 2018 CASE:

NEFCO facilitates green growth by Small steps can businesses that have a big environmental providing risk capital, grants and impact. NEFCO’s financing will be used environmental verification through lead to giant leaps to accelerate growth outside Europe of its Investment Fund, the Nordic Loudspring’s selected portfolio companies Project Fund (Nopef) and dedicat- active in the areas of energy and resource During the year, we have increased ed instruments such as the Cleaner efficiency. Another project developed dur- our outreach to promising Nordic 71 Nordic SMEs Nopef projects 4 new global Production Facility in certain seg- ing the year with the Swedish investment technology and energy companies entity Baseload Capital is a financing pro- in the green sector. At the UN’s cli- granted funding creating 400 new investments ments and geographical areas. The gramme to accelerate the building and de- mate conference COP 24 in Katow- for internationali- jobs annually approved objective is to support the scaleup ployment of heat power plants on a global ice, we hosted a side event on the sation of Nordic smart, green solutions globally and to create positive envi- scale (see case on page 13). These projects Nordic Finance day under the theme are expected to result in significant CO2 re- ‘Small steps can lead to giant leaps – ronmental impact. ductions as well as economic benefits and Scaling up green investments in the to contribute to scaling up Nordic green energy field’. We have also promot- In the beginning of 2018, NEFCO estab- technology on global markets. ed our services and role in scaling lished the financing scheme NEFCO Glob- Nopef, funded by the Nordic Council up Nordic green solutions at various al under its Investment Fund activities. of Ministers and managed by NEFCO, is conferences and events during the The objective of this financing, aimed also an important instrument for green year, including at the Nordic Clean primarily at Nordic SMEs and mid-cap growth. In 2018, the fund approved fi- Energy Week in Copenhagen and companies, is to support the interna- nancing to 71 new feasibility studies that Malmö; the Green to Scale event in tionalisation of Nordic environmental will be carried out in 30 countries across Kyiv, Ukraine; the start-up and in- technologies and climate solutions by all the continents by Nordic SMEs. The vestor event SLUSH in Helsinki and providing loans or equity-type financing approved projects aim to facilitate the the Cleantech Venture Day in Lahti.

for business development and expansion internationalisation of Nordic green in- Photo: Benedikt Stefansson, Business Director at on global markets. novations and climate solutions, with Carbon Recycle International, Iceland, speaking at The first projects approved under potential future green investments in NEFCO’s event on the Nordic Pavillion at COP24. See video on www.nefco.org NEFCO Global include Loudspring Plc, the targeted project countries totalling an industrial group focused on invest- EUR 200 million. ments and ownership in Nordic growth 23 Focus area Climate in 2018 To support climate change miti- approved the merger. Prior to the acqui- The Norwegian Carbon Procurement Fa- gation and adaptation initiatives, sition, Nelja Energia was owned by Var- cility (NorCaP) was set up using Norwegian NEFCO mobilises new investments dar Eurus AS, in which NEFCO had a 10% funding in 2013 and is primarily aimed and funding for projects related to equity share, and minority shareholders. at procuring emission rights during the renewable energy, energy efficiency This investment contributed a large share second commitment period of the Kyoto and the reduction of short-lived of the environmental impact in our pro- Protocol (2013–2020) from UN-approved climate pollutants and greenhouse ject portfolio and, as a result of the exit, projects that are at risk of being stopped gas emissions in close co-operation total emission reductions will decrease due to the low market prices for carbon 3.9 million tonnes 400 schools, Benefitting directly with governments, municipalities, somewhat from 2018 onwards. credits. NorCaP reached its goal of 30 mil- In 2018, climate-related investments lion credits at the end of 2015. At the end direct CO + CER ­day-care centres over 170,000 companies and other organisations. 2 led to reduced carbon dioxide emissions of 2018, NorCaP delivered 2.3 million car- reduced and hospitals ren- people in Ukraine by 1.26 million tonnes of CO2 direct- bon credits to Norway through its active ovated in Ukraine since 2010 Energy-efficiency measures make up ly, of which NEFCO’s share was 12% or projects. the largest single category of NEFCO’s 154,694 tonnes. During 2018, NEFCO managed a total climate-­related investments. There has Climate Funds portfolio of 21 active climate fund projects also been a positive increase in the num- within different sectors across nine coun- ber of projects related to renewable energy Since 2003, NEFCO has administered car- tries. These projects delivered 2.6 million production, resource efficiency and cir- bon credit funds worth a total of about carbon credits to investors. Whilst one cular economy. Moreover, public energy-­ EUR 300 million, for both private and CER equals one tonne of CO2, the total efficiency projects generate not only en- public sector contributors. Currently, emission reductions in 2018 correspond vironmental benefits but also positive NEFCO manages two climate funds for to 2,611,589 t/CO2. Since NEFCO’s climate economic returns to the municipalities the purchase of carbon credits. The pur- fund work began, a total of 21.3 mil- and prosperity for their inhabitants. pose of the NEFCO Carbon Fund (NeCF), lion carbon credits have been delivered In November 2018, the sale of Nelja in operation since 2008, has been to fund through these funds. Energia AS, a Norwegian renewable en- environmental projects that meet Kyoto To continue Nordic climate collabora- ergy producer and developer in the Baltic Protocol joint implementation or Clean tion, a new Nordic Initiative for co-oper- countries, was finalised. Enefit Green, Development Mechanism (CDM) require- ative approaches (NICA) was established the renewable energy arm of the Estonian ments. Through its ongoing projects, the in 2018. The aim of NICA is to contribute state-owned energy group Eesti Energia, fund delivered 0.3 million carbon credits to ongoing efforts in order to develop and completed its acquisition of Nelja Ener- to its investors in 2018. possibly test ways to implement Article 6 gia after the competition authorities had of the Paris Agreement. 25 Photo: Patrik Rastenberger for NEFCO for Photo: Patrik Rastenberger Photo: Tim Bird

Emission reductions tCO2 NorCaP NeCF

4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000

0 2014 2015 2016 2017 2018

Project types based on CER volumes Includes also projects that have ended but still leverage CERs (Certified Emission Reductions) CASE

Support to develop the waste management sector in Peru Waste handling and disposal 19 046 756 CER (71%), 4 projects Within the framework of the Nordic Part- The project completed its first phase in and trends in terms of waste and emis- Chemical industries nership Initiative on Upscaled Mitigation August 2015. The second phase, involving sions, mitigation potential and costs, 4 050 000 CER (15%), 7 projects Action (NPI), we have worked on Nation- several smaller consulting assignments and barriers to action. Mitigation plans ally Appropriate Mitigation Actions (NA- supporting the implementation of the for landfills were prepared, a robust in- Energy industries MAs) to support developing countries in sector programme and the Paris Agree- formation system developed, and policy 1 960 136 CER (7%), 12 projects designing and implementing mitigation ment in the waste sector in Peru, started reforms introduced for recognising waste actions and attracting funding from in- in 2016 and was completed in 2018. The as a valuable raw material. The NPI re- Metal production ternational climate finance and carbon work was financed by NEFCO, Norway, sults have been integrated into national 1 180 000 CER (4%), 1 project markets. Sweden, Finland and Denmark with a and local development plans and serve In Peru, the initiative focused on build- local in-kind contribution. as valuable building blocks in the design Energy demand ing readiness for mitigating greenhouse The initiative generated comprehen- and implementation of Peru’s mitigation 644 076 CER (2%), 2 projects gas emissions in the solid waste sector. sive information on the sector’s status pledges under the Paris Agreement. 26 Focus area Arctic & Barents in 2018

In the Arctic and Barents regions, gram (ACAP) and related to the project Special focus areas for the BHSF dur- NEFCO provides financing mainly ‘Mitigation of black carbon and methane ing 2018 have been municipal waste through four different instruments emissions from APG flaring in the Arctic and remediation of oil-contaminated for project preparation activities, Zone’ was completed. The following phase land, as well as issues concerning for- feasibility studies and demonstra- aims to demonstrate the best available ests, biodiversity and specially protect- tion projects. The aim is to further technologies and practices (BAT-BEP) to ed territories. NEFCO also follows the One Arctic project 12 projects related develop and disseminate the best reduce short-lived climate pollutants (SL- development very closely in Northwest CP) from APG flaring. Another study, ini- Russia to promote pilot actions in the completed, five to the Barents available technologies and practic- tiated by Conservation of Arctic Flora and region linked to, for instance, the newly under implemen- region completed es that contribute to energy effi- Fauna (CAFF), will look into the effects of established regional systems for munic- tation ciency, sustainable use of resourc- es, pollution mitigation, enhanced plastic pollution on Arctic seabirds (see ipal waste management as well as the case story on page 31). National Project ‘Ecology’ and the list biodiversity and a positive impact The main aim of the Barents Hot of 300 ‘Category-1’ main polluters that on communities in these regions. Spots Facility (BHSF) is to promote rel- were defined at federal level in 2018. In In the long run, these measures are evant actions and investments at the addition, BHSF-funded seminars were expected to lead to larger projects environmental ‘hot spots’ identified held in Moscow and Syktyvkar on the and greater impact. in north-west Russia. NEFCO works in theme of the introduction of BAT (Best close collaboration with the responsible Available Technology) in Russia for de- Russian authorities, the project owners cision-makers, managers and experts The Arctic Council Project Support In- and the Swedish Chair of the Barents linked to ‘hot spots’. ‘Hot spots’ are ex- strument (PSI), a grant-funding mech- Working Group on Environment (WGE) cluded every second year and therefore anism managed by NEFCO, is available and its Subgroup on Hot Spot Exclusion none was excluded in 2018. to projects by all of the Arctic Council’s (SHE). Funds are allocated primarily to NEFCO also acts as implementing working groups in the fields of reducing expert and feasibility studies, and other agency for the Northern Dimension Envi- black carbon and CO2 emissions, hazard- technical assistance. The Facility also ronmental Partnership (NDEP) initiative, ous waste management, and enhancing co-finances the adviser on issues of cli- which provides grant funding for projects biodiversity, among others. mate, environment and ‘hot spots’ at in waste management and soot emissions In 2018, an evaluation study initiated the International Barents Secretariat in in Northwest Russia. by the Arctic Contaminants Action Pro- Kirkenes. 29 30 ish: one each. In terms of the types of ish: oneeach.Intermsofthe types of Swedish three,andNorwegian andDan Finnish organisations had four projects, of 2018. implemented andcompletedbytheend Russia. Thefirstnine PECC project were regional andlocallevels in Northwest addressing environment andclimate at projects co-operation non-commercial courage andpromoteNordic-Russian requirements,toen with co-financing by NEFCO, providesgrantfinancing, Climate (PECC), Co-operation managed The Programme for Environment and Nine PECCprojects were completedin2018 CASE Among the Nordic Lead Partners, Copenhagen Bergen Alnarp - - counterparts. The main success criteria counterparts. Themainsuccess criteria between relevant NordicandRussian building upandmaintainingnetworks practical resultsofhighvalue, while portant reportsandscientific as well as jects hasresultedinanumberofim the Russianside. burg. Several NGOstookactive part on the RepublicofKarelia,andinStPeters Leningrad Oblast,Murmansk Arkhangelsk Oblast, the Komi Republic, Project activitieswere carriedoutin stitutions were the most common types. entities, universities andresearchin The implementation ofthePECC pro Sävar Luleå Helsinki Kuopio Lehtoi Pskov Vyborg Murmansk StPetersburg Lovozero - - - - Petrozavordsk for a possible “PECC-2” have started. illustrated inthepicture.Preparations ing aspectsofthePECC activities are The geographic focus andthenetwork • • • Ministers have thusbeenmet: as stipulated bytheNordicCouncil of lished orstrengthened. Relevant networks becomeestab are involved intheco-operation; including authorities andNGOs, countries andNorthwest Russia, Relevant partnersoftheNordic provements inNorthwest Russia; mental andclimate-related Im- The projectscontributetoenviron- Arkhangelsk Syktyvkar - - polar SeabirdExpertGroup(CBird), that withtheCircum project, inco-operation ment (PSI)approved fundingfor an AMBI the Arctic Council Project SupportInstru birds focusing onfour flyways. In2018, ic threats to Arctic-breeding migratory working groupseeks to address specif vation of Arctic FloraandFauna (CAFF) (AMBI) ofthe Arctic Council’s Conser yet beenwidelystudied. Arctic environments andspecieshave not but the impacts of plastics pollution on been found in Arctic waters andseaice, have andmicro-plastics tions ofmacro- across theplanet.Increasingconcentra- and seaduckspecies,butalsofor people many ecosystems,notonlyfor theseabird cern andreflectsthedecliningqualityof Their rapiddeclineisanalarmingcon tems inthe Arctic andaroundtheworld. oceans, lands,coastsandfreshwater sys Seabirds canindicate thehealthof on cliffinsnow fulmar Northern Studying theeffectsofplasticpollutiononArctic seabirds CASE: The ArcticMigratory BirdsInitiative ------and the Arctic Council Observerstates. co- tant mechanismfor strengtheningthe Migratory BirdsInitiative isanimpor Flyway.the African-Eurasian The Arctic is themostthreatened flyway, as well as East Asian-Australasian Flyway, which supports ongoingwork byCAFFinthe seabirds asindicator species. pollution monitoringprogrammeusing Flyway, andinform aPan-Arcticplastic up existingwork in AMBI’s Circumpolar Arctic and inparticular, will aimto scale mitigation ofhabitat degradation inthe will supportimprovingknowledgeonthe than north-south.Theapproved funding in the Arctic, migrating east-west rather eider, which spend most of their lifecycle mar, Thick-billed murre,and Common Arctic seabirdssuchastheNorthernful- studies theeffectsofplasticpollutionon Through the PSI, NEFCO currently also ­operation between the Arctic States - CAFF Executive Secretary Tom Barry the Arctic andbeyond.” and pollutionissuesacross biodiversity conservation ground impactstoaddress activities andhave on-the- work togethertoscaleup example ofhowwe can with thePSIare agreat AMBI andtheco ­-operation 31

Photo: Mark Mallory Focus area Baltic Sea in 2018

The reduction of pollutants affect- assistance to projects that support the prepared. The study had no direct environ- ing the Baltic Sea has been a key implementation of the HELCOM Baltic mental impacts as it only included anal- Five projects Reductions of priority for NEFCO since its very Sea Action Plan (BSAP). A key purpose ysis and planning activities. However, completed 979 tonnes P-tot beginning. We finance both public of the fund is to facilitate and speed up the project provided a sound knowledge and 4,498 tonnes and private sector projects related the preparation of bankable projects in base for the preparation of an investment N-tot in 2018 to agriculture, wastewater treat- the Baltic Sea catchment area. In 2018, plan to address the environmental issues ment and hazardous waste within three projects ended and two projects were related to the Krasnyi Bor landfill. the Baltic Sea catchment area under implementation. The Kohila Maja As a result of the work done around through various programmes. project led to wastewater infrastructure the Baltic Sea region, the projects have investments in Aespa and the Vilivere led to reduced discharges of phospho- village area in Estonia. rus from wastewater treatment plants Through our own Investment Fund and The clean-up project of the hazardous by 941 tonnes in 2018, when taking into the Cleaner Production Facility, we in- waste landfill Krasnyi Bor, a HELCOM Hot account the whole projects, and phos- vest in projects that are mainly related Spot, in the Leningrad Region some 30 km phorous discharges removed from agri- to agriculture, fishery, wastewater treat- from St Petersburg, took a step forward culture by 38 tonnes. The total phospho- ment and hazardous waste management. in 2018. In February, samples were taken rous discharge reduction of 979 tonnes Two projects were completed in 2018: the for analysis from the lagoons, which are translates into discharges of untreated wastewater treatment plant OKOS in Ka- currently at acute risk of pollution. Based wastewater from approx. 1.34 million liningrad and an oat mill farm operated by on this, a study including an assessment people. NEFCO’s pro rata share of the Finnish company Myllyn Paras in Russia. of the current status of wastewater treat- reduction is 194 tonnes P/year equalling Another programme, the Baltic Sea Ac- ment at the site and recommendations wastewater from approx. 267,000 people. tion Plan Fund (BSAP Fund), jointly man- on potential treatment options and next The corresponding figure for nitrogen was aged by the Nordic Investment Bank (NIB) steps was made. Moreover, a preliminary 4,498 tonnes N/year and NEFCO’s share and NEFCO, provides grants for technical plan on how to close the entire site was 890 tonnes N/year. 33 Photo: Dennis Hamro-Dotz Main Arctic & Barents related Financing options offered by NEFCO: Main climate-related financing instruments: financing instruments:

• Loans and equity – up to EUR 5 million to public and NEFCO Investment Fund and Nordic Environmental Devel- Arctic Council Project Support Instrument (PSI) private sector projects in our core countries of operation opment Fund (NMF) • Contributors: Finland, Iceland, Norway, Russia, Sami Par- (Armenia, Belarus, Estonia, Georgia, Latvia, Lithuania, • Contributors: the Nordic countries (Denmark, Finland, Ice- liament of Norway, Sweden, the USA and NEFCO Moldova, Poland, Russia and Ukraine) land, Norway and Sweden) • Loans and equity-type ­financing – up to EUR 2.5 million • Loan and equity-type financing for public and private projects Barents Hot Spots Facility (BHSF) to Nordic SMEs and mid-caps for green projects carried out mainly related to energy efficiency and renewable energy in • Contributors: Finland, Iceland, Norway, Sweden and the on global markets outside the Nordic countries Eastern Europe and on global markets, outside the Nordic Nordic Environmental Development Fund, which include • Buyer credits – up to EUR 5 million for delivery of environ- countries contributions from all Nordic countries, the Nordic Council mentally sustainable products, machinery or services to • Energy Savings Credits (ESC) – soft loans for energy-savings of Ministers and NEFCO Eastern Europe measures in public buildings such as schools and hospitals, • Soft loans – approx. EUR 100,000 to EUR 400,000 to public and street lighting in Eastern Europe Programme for Environment and Climate Co-operation sector projects in Eastern Europe • Can be blended with dedicated grant funding from, e.g. the (PECC) • Grants – currently provided through 39 trust funds EU, E5P, and the Nordic countries • Contributors: Nordic Council of Ministers and the BHSF fund Financing • Grants for internationalisation – up to EUR 50,000 to The Nordic Energy Efficiency and Humanitarian Support Nordic SMEs and mid-cap companies for feasibility studies Initiative for Ukraine (NIU) Northern Dimension Environmental Partnership (NDEP) outside the EU/EEA area • Contributors: the Nordic countries • Contributors: Belarus, Belgium, Canada, Denmark, Finland, • Primarily grant financing for the refurbishment and recon- France, German, Netherlands, Norway, Russia, Sweden and struction of municipal buildings in the war-torn, vulnerable the United Kingdom options Main green growth-related areas of eastern and southern Ukraine. financing instruments: Climate funds Main Baltic Sea -related NEFCO finances green growth and climate-related NEFCO Investment Fund and the Nordic Environmental NEFCO Carbon Fund (NeCF) financing instruments: projects all over the world. Our financing options in- Development Fund (NMF): • Investors: Danish Energy Agency, Ørsted A/S (DK), Eesti clude loans, grants, equity-type financing and buyer • Contributors: the Nordic countries (Denmark, Finland, Ice- Energia (EE), Electrabel (BE), EPV Energy (FI), the Finnish NEFCO Investment Fund and the Nordic Environmental credits, depending on the scope and the location land, Norway and Sweden) Ministry of Foreign Affairs, Industrialiseringsfonden for Development Fund (NMF) of the project. We manage several trust funds and • Loan and equity-type financing for public and private projects, Udviklingslandene (IFU) or the Industrialisation Fund for • Contributors: Denmark, Finland, Iceland, Norway and Sweden initiatives funded by the Nordic governments, the mainly related to energy efficiency and renewable energy, or Developing Countries (DK), Kymppivoima (FI), the Norwegian • Loan and equity-type financing for public and private pro- Nordic Council of Ministersand Arctic Council mem- cleaner industrial processes Ministry of Climate and Environment, Vapo (FI) and NEFCO jects, mainly related to agriculture, fishery and wastewater bers. NEFCO is also an accredited implementing • For investments in Eastern Europe and on global markets, • For environmental projects that meet Kyoto Protocol joint treatment, as well as efficient resource and energy utilisation, agency for, among others, the European Union, E5P, outside the Nordic countries implementation or Clean Development Mechanism (CDM) to help reduce pollution of the Baltic Sea the Northern Dimension Environmental Partnership • Buyer credits to Nordic companies for delivery of environmen- requirements • In the Baltic Sea catchment area and the Green Climate Fund. By combining different tally sustainable products, machinery or services to Eastern • Currently, 12 projects in China, Indonesia, Vietnam, Ethiopia Europe and Mozambique Baltic Sea Action Plan Fund (BSAP Fund) financing sources available to us, we leverage and • Cleaner Production Facility (CPF) – loan financing for effi- NEFCO Norwegian Carbon Procurement Facility (NorCaP) • Contributors: Finland and Sweden make green projects feasible and bankable. cient resource and energy utilisation in industrial plants in • Investors: Norwegian Ministry of Climate and Environment • Grants for technical assistance to projects that support the Eastern Europe • For UN-approved projects that contribute emission rights implementation of the HELCOM Baltic Sea Action Plan (BSAP) • Currently, nine projects in Brazil, South Africa, Colombia and contribute to project development and implementation, Nordic Project Fund (Nopef) and Mexico e.g. in the agricultural, wastewater or hazardous waste sec- • Contributor: Nordic Council of Ministers tors to catalyse larger projects • Grants for feasibility studies for the internationalisation of Read more about our financing and fund Nordic SMEs mobilisation on www.nefco.org • Outside the EU/EEA region

35 Board of Directors

Board of Directors 2018

DENMARK Søren Bukh Svenningsen Vice Director, Environmental Protection Agency/Ministry of Environment and Food

Alternate Morten Kruse Global Anchor – Financing and High Value Projects, Ministry of Foreign Affairs (from April 2018)

FINLAND Ann-Britt Ylinen

Director, Ministry of the Environment NEFCO for Somerpuro Veikko Photo: (until August 2018)

Ismo Tiainen Member countries Governance Director General, Ministry of the Control Committee ­Environment (from September 2018) Board of Directors NEFCO is an international financial institution es- tablished in 1990 by the governments of Denmark, Alternate Kristiina Isokallio Management Managing Investment Finland, Iceland, Norway and Sweden. The structure Committee Director Committee Director, Ministry of the Environment of the Board of Directors and Control Committee (until September 2018) reflects the ownership of NEFCO. NEFCO staff Alternate Sannamaaria Vanamo Deputy Director General for Eastern ­Affairs, Ministry for Foreign Affairs Agnethe Dahl Alternate (from October 2018) Deputy Director General, Ministry Gabriel Hjort ICELAND of Climate and Environment (from Desk Officer, Ministry for Foreign Danfríður Skarphéðinsdóttir October 2018) ­Affairs Head of Division, Ministry for the Alternate ­Environment and Natural Resources Observers Ingrid Lillehagen Alternate Senior Adviser, Ministry of Climate Björn Fritjofsson Íris Bjargmundsdóttir and Environment (during April–­ Senior Adviser, Nordic Council Head of Division, Ministry for the September 2018) of Ministers (until March 2018) ­Environment and Natural Resources Alternate Anders Hedberg NORWAY Jon Opem Senior Adviser, Finance, Nordic Council Harald Rensvik Senior Adviser, Ministry of Climate of Ministers (from April 2018) Secretary General, Ministry of Climate and Environment (from September 2018) and Environment (until March 2018) Søren Kjær Mortensen SWEDEN Senior Director, Head of Origination, Anne Berteig Jessica Andersson, Chair Nordic Investment Bank Senior Adviser, Ministry of Climate and Senior Advisor, Ministry of the Environment (during April–October 2018) Environment and Energy

37 Control Committee 2018 Personnel 2018 Andriy Katashov Bill Fransson Magnus Rystedt Technical Adviser – Representative Chairman Managing Director Office in Kyiv, Ukraine Director (until 7.3.2018) (until the end of May 2019) Ritva Kauppi Jan-Erik Enestam Husamuddin Ahmadzai Senior Legal Counsel Chairman Special Adviser, Environment and Minister, Independent Technology (until March 2019) Helle Lindegaard Consultant (from 8.3.2018) Vice President, Head of Trust Funds Mia Alén and Climate DENMARK Financial Controller Sjúrður Skaale Iryna Fedorenko Tita Anttila Member of Parliament Investment Adviser – Vice President, Head of Legal and Representative Office in Kyiv, Ukraine FINLAND Project Administration, Chief Counsel Arto Pirttilahti Tetiana Lyvtyn Vivi Avikainen Member of Parliament Investment Specialist – Project Officer Representative Office in Kyiv, Ukraine ICELAND Amund Beitnes Vilhjálmur Árnason Helena Lähteenmäki Senior Investment Manager Member of Parliament Senior Investment Manager Ulf Bojö NORWAY Trond Moe Senior Investment Manager Michael Tetzschner Executive Vice President, Member of Parliament Nelly Eriksson Head of Investment Operations Assistant (from February 2019) SWEDEN Ronny Nilsson NEFCO’s personnel during an Søren Rasmussen Heli Sinkko internal meeting in April 2018. Staffan Danielsson Aliona Fomenco Senior Adviser Project Officer Project Manager Member of Parliament ­(until 26.12.2018) Project Manager Tina Nyberg Mikael Reims Tua Skand Johan Andersson Henrik Forsström Project Officer Senior Manager, Head of Origination Financial Controller Member of Parliament (from 27.12.2018) Senior Adviser Bo Eske Nyhus and Communications Mia Ståhle-Lauritzon AUDITORS Dennis Hamro-Drotz Senior Investment Manager Bia Saarinen Financial Controller / Financial Analyst Terhi Mäkinen Investment Manager Anja Nystén Assistant / Paralegal Secretary to the Control Committee, Thor Thorsteinsson Josefin Hoviniemi Senior Manager, Partner, Authorised Public Accountant Maija Saijonmaa Senior Financial Manager Communications Manager Head of Environment and Technology Ernst & Young, Finland Project Manager (since April 2018) Marina Westerholm Lia Oker-Blom Mona Alfredsson Julia Shevchuk Executive Assistant to Kari Hämekoski Communications and Administration Partner, Authorised Public Accountant Chief Investment Adviser – the Managing Director Manager Officer Ernst & Young, Sweden Representative Office in Kyiv, Ukraine

38 39 NORDIC ENVIRONMENT FINANCE CORPORATION

Street address: Fabianinkatu 34 Postal address: P. O. Box 241 FI-00171 Helsinki, Finland tel: +358 10 618 003 www.nefco.org / [email protected] twitter.com/NefcoNordic