09.03.2023 | News
Nefco, the Nordic Green Bank owned by the five Nordic countries, has published its annual results from 2022, including the financial statements and non-financial reporting, i.e. the impact report and the ethics and compliance report.
Nefco’s task is to accelerate the green transition by financing the initial scale-up of Nordic green solutions and technologies that have the potential to grow on global markets. Nefco’s green financing activities are organised in three business units: Nordic small and medium-sized companies (SMEs), Eastern Europe and Special Funds.
“Two major themes characterised Nefco’s operations in 2022: the substantial growth in the Nordic SME business area and Russia’s brutal, illegal and unprovoked full-scale invasion of Ukraine,” says Trond Moe, Managing Director of Nefco.
Total income, excluding net equity valuations, was EUR 10.2 million. This includes interest income from lending activities using Nefco’s own capital and fee income from the management of trust funds on behalf of others.
Net interest income increased to EUR 6.8 million in 2022 from EUR 6.0 million in 2021, mainly due to increased lending activities in the Nordic SME business.
Fee income from the management of trust funds on behalf of others decreased to EUR 3.1 million from EUR 3.8 million in 2021 due to the ending of some trust fund activities and the start-up of new ones, for which the full effect will be seen in later years.
Small and medium-sized companies (SMEs) have significant difficulties obtaining debt financing in the early growth phase due to perceived risks and a lack of assets to secure loans. Nefco solves this market failure and successfully finances a rapidly increasing portfolio of exciting Nordic green scale-up companies. This can be accelerated further by increasing Nefco’s financing capabilities and demonstrating that its financing model can be scaled up in financial markets.
Nefco’s project portfolio in the Nordic SME business grew substantially, with 19 new loans agreed for EUR 40.2 million (up from a corresponding EUR 18.5 million in 2021). By the end of 2022, Nefco was actively financing 62 Nordic SMEs with loans or equity.
Russia’s war on Ukraine casts a shadow over the otherwise positive development of Nefco in 2022. Lending to Ukraine had to be put on hold. Activities resumed later in the year with grant financing managed by Nefco on behalf of various donors. Active physical work was ongoing to varying degrees in 23 projects at the end of the year. Nefco also decided to stop financing activities in Russia and Belarus.
Due to the war, and as part of its risk management, Nefco has made substantial provisions in its Eastern European business for possible losses on loans and written down the value of equity investments. At the end of the year, Nefco had 67 outstanding loans (up from 53 in 2021), with a book value of EUR 55.9 million (down from 96.5 in 2021, due to write-downs in Ukraine) and 12 equity investments (same as in 2021), with a book value of EUR 13.4 million (down from EUR 15.3 million in 2021, due to write-downs in Ukraine).
Nefco’s total comprehensive income, showing the result of the year after the write-downs in Ukraine, is therefore negative EUR 53.5 million.
The underlying result, excluding impairments of loans and equity valuations, was EUR 1.7 million.
Building back greener and better in Ukraine
The Russian invasion has caused severe damage to the people, infrastructure and environment in Ukraine. While the need for reconstruction is immense, it presents an opportunity to build back better in a sustainable way towards a carbon-neutral and nature-positive future for Ukraine. To support Ukrainian municipalities, Nefco launched a multi-donor grant programme, Green Recovery for Ukraine, in July 2022, with initial contributions from the EU, Denmark, Finland, Norway and Sweden.
Nefco has collaborated with Ukrainian municipalities for more than ten years. The current focus is on restoring critical infrastructure and building sustainable housing for internally displaced people.
“Municipalities are key when it comes to rebuilding Ukraine. We work with them on the ground and have already started the first projects within the programme. In all our projects, we want to demonstrate that Ukraine can be built back greener and better,” Moe says.
Increased activities in other fund assignments
The Special Funds business saw positive progress. The unit works with trust funds and multi-donor programmes focusing on climate change mitigation or pollution reduction and on mobilising new private investments in line with the Paris Agreement.
During 2022, the Beyond the Grid Fund for Africa programme, which aims to incentivise clean and affordable off-grid energy in Africa with results-based financing, expanded to new countries. Norway joined the existing contributors of Denmark, Germany and Sweden. The first 13 projects were contracted, and before year end these had generated 38,519 new energy service subscriptions benefiting 200,395 people. The goal is to establish up to 1.44 million energy connections by 2028, benefiting more than 6.5 million people in Sub-Saharan Africa.
A new programme, Modern Cooking Facility for Africa, which aims to provide over 3 million Africans with access to clean cooking solutions, improve overall health and increase economic growth, was launched in 2022, and the first funding round is expected to be finalised during 2023.
The Baltic Sea Action Plan Fund approved nine new projects for EUR 1.08 million to keep improving the environmental health of the Baltic Sea.
Biodiversity, climate change mitigation and circular economy are high on the agenda
At the end of 2022, the majority of the projects in Nefco’s portfolio were related to climate change mitigation. The share of projects related to circular economy is increasing. The most common sectors are energy, construction and real estate, manufacturing and transport.
In terms of environmental impact, mitigating biodiversity loss and creating nature-based solutions have become a top priority for the Nordic countries. The Kunming-Montreal Global Biodiversity Framework adopted in December 2022 also emphasises the role of financial institutions. Nefco launched a Biodiversity Pilot Programme for Nordic SMEs to address these needs in autumn 2022. The objective is to help companies learn about biodiversity-related risks and opportunities for their businesses and to test scalable, nature-positive solutions.
“Our work to finance Nordic small and medium-sized companies has resulted in many inspiring growth stories. We also expect the new Biodiversity Pilot Programme to provide exciting learning opportunities as we test and develop concrete nature-based solutions in collaboration with companies,” Moe says.
During 2022, Nefco actively used the EU Taxonomy assessment methodology when evaluating projects. Nefco also introduced an exclusion list, setting clear boundaries for activities to which it is unwilling to make commitments. These include fossil fuels, forestry and husbandry, as well as exclusions determined on the basis of ethics, laws and conventions.
Implementing the Nordic Vision 2030
The common Nordic ambition is to be a global frontrunner in the green transition and sustainability, and to increase the competitiveness of Nordic businesses. As a green financier filling a critical financing gap for small and medium-sized Nordic companies, Nefco plays a key role in implementing the Nordic Vision 2030 and in making the region the most sustainable and integrated in the world. Nordic cooperation is essential not only for the internal Nordic region but also for Europe and the rest of the world.
“In turbulent times, Nefco’s purpose to accelerate the green transition is more important than ever,” Moe concludes.
More about the topics:
- Annual Impact Report 2022
- Report of the Board and Financial Statements 2022
- Ethics & Compliance Report 2022
For further information, please contact:
Trond Moe, Managing Director, Nefco
Trond.moe@nefco.int, +358 50 329 0860
Josefin Hoviniemi, Vice President Communications, Nefco
josefin.hoviniemi@nefco.int, +358 50 464 6995