How we finance

Nefco is owned by the five Nordic countries: Denmark, Finland, Iceland, Norway and Sweden. Nefco was established in 1990 with paid-in capital from all five countries. Today, Nefco finances green projects with both its own capital and trust funds financed by various contributors.

Nefco uses several fund sources to finance projects

Nefco’s task is to accelerate the green transition. To fulfil our task, we work in three business areas, where we

  • provide financing to small and medium sized enterprises (SMEs) based in the Nordics whose green solutions have the potential to scale globally
  • help municipalities in Eastern Europe to become greener, in Ukraine in particular
  • seek to protect and improve the ecological status of the Baltic Sea through piloting new technologies, solutions or concepts, and
  • incentivise business models to increase access to clean off-grid energy and modern cooking solutions in Sub-Saharan Africa.

Nefco uses several fund sources to finance projects. Project types are therefore divided into:

  • Investments, which are financed with loan and equity from Nefco’s paid-in capital, the Investment Fund established in 1990.
  • Trust fund projects, which are financed with soft loans, grants and results-based financing through fund assignments by various donors.

Investments through Nefco’s paid-in capital

Nefco is owned by the five Nordic countries: Denmark, Finland, Iceland, Norway and Sweden. In 1990, when Nefco was established, all five owners paid in capital to the Investment Fund, Nefco’s own equity. Nefco’s Investment Fund is a for-profit revolving fund operating on market terms. The fund provides high-risk loan and equity-type financing when there is a green upside to a project. All earnings are retained for new investments. The paid-in capital reached its full amount of EUR 113.4 million in 2007. Through accumulated profits, Nefco has to date been able to invest EUR 375.5 million, i.e. 3.3 times its authorised capital.

At the beginning of 2023, Nefco’s equity amounted to EUR 119.3 million and at the end of the year EUR 130.0 million.

Nefco’s own capital is primarily used for financing the international scale-up of Nordic SMEs and, to some extent, municipal projects in Eastern Europe.

Nefco as trust fund manager

In addition to its own paid-in capital, Nefco manages trust funds and initiatives on behalf of various donors, including the Nordic governments (Denmark, Finland, Iceland, Norway and Sweden), the Nordic Council of Ministers and the European Union, to support their goals. At the end of 2023, fund assignments had a total value of EUR 653 million, a significant increase from the previous year (EUR 498.3 million in 2022). See an overview of Nefco Fund Assignments in end of 2023.

Trust funds are often used for feasibility studies and technical assistance. This means they often do not lead to immediate environmental impacts but rather facilitate project implementation in the near future.

Trust funds are also dedicated to capacity building and incentivising the development of sustainable businesses and solutions in new markets, like the results-based programmes for clean energy and modern cooking in Africa.

In some projects, particularly the municipal sector in Eastern Europe, market-based or subsidised loan financing is blended with financial support from a trust fund. The new Green Recovery for Ukraine programme currently provides solely grant financing from various contributors.

In addition to environmental and climate aspects, trust fund projects have a strong focus on social impacts such as job creation, gender equality, and improved resilience and safety for citizens.

Nefco as implementing agency

Nefco also acts as an implementing agency for several multinational partnerships and global organisations to take concrete action in accelerating the transition to green.

The European Union

Nefco has a long history of implementing environmental projects with EU co-financing. In 2016, our high fiduciary standards were formally recognised when we passed the European Commission’s Pillar Assessment, enabling us to indirectly manage EU funds and implement actions defined in the EU budget. In 2022, Nefco passed the assessment of the four new pillars defined by the EU Financial Regulation in 2019.

Bundling EU funds with our own loans has enabled us to help smaller and financially weaker cities in Eastern Europe become greener and more sustainable. EU-funded actions contributing to a green recovery in Ukraine are solely based on grant funding.

The Eastern Europe Energy Efficiency and Environment Partnership (E5P) is a multi-donor fund initiated during the Swedish Presidency of the European Union in 2009 to encourage municipal investments in energy efficiency and environmental projects in the Eastern Partnership region, i.e., Armenia, Georgia, Moldova and Ukraine.

E5P participates in projects as a co-financier. The grants from E5P are used as an incentive for municipal clients to take loans provided by participating Implementing Agencies, for example when borrowing from Nefco or one of the other International Financial Institutions participating in E5P.

The Green Climate Fund

The Green Climate Fund (GCF) is the world’s largest climate fund, created to support the efforts of developing countries to respond to the challenge of climate change. It seeks to promote a paradigm shift to low-emission and climate-resilient development, taking the needs of nations that are particularly vulnerable to the impacts of climate change into account.

In September 2018, Nefco was accredited by the Green Climate Fund. This accreditation has offered opportunities for us to blend our own financing and other funds we hold in trust, including funds from the Green Climate Fund. We are also able to create new innovative financing packages together with other accredited entities to further accelerate the capabilities of developing countries to grow in a sustainable way.

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