Our own capital – NEFCO’s Investment Fund
NEFCO is owned by the five Nordic countries: Denmark, Finland, Iceland, Norway and Sweden. In 1990, when NEFCO was established, all of our five owners paid in capital to NEFCO’s Investment Fund.
NEFCO’s Investment Fund is a for-profit revolving fund operating on market terms. The fund finances sustainable green growth projects. All earnings are retained for new investments. The size of NEFCO’s Investment Fund was by the end of 2018 EUR 165 million. We can normally finance up to EUR 5 million in each project.
NEFCO is substantially fully equity funded, but has established one loan facility of EUR 30 million with the Nordic Investment Bank, for NEFCO’s on-lending to a larger public project in Ukraine. Sweden provides a guarantee facility for partial coverage of the risk exposure related to public projects financed by NEFCO’s Investment Fund in Ukraine.
NEFCO’s Investment Fund is focused on Eastern Europe, but can also offer financing to Nordic companies for green growth investments outside the Nordics, to support the global use of high-quality Nordic know-how and innovative solutions.
Funds managed by NEFCO
NEFCO manages some 15 trust funds for financing of programmes targeting a specific country, region or type of investments. Activities under these trust funds are financed separately by one or more of our Nordic owners or through our multi-donor facilities and programmes, where we also hold funds in trust on behalf of countries outside the Nordic region as well as for private investors.
To accelerate new investments and support project implementation, we have access to technical assistance means through various trust funds, financed by our owners together or individually within their respective environmental and geographic focus areas.
Also, we blend our own funds with those of other financiers and donors, to leverage, scale up and accelerate new investments.
By June 2019 the total value of all of our funds activities was EUR 390 million. Below some examples of our core fund activities and more information available also under the page Funds Managed by NEFCO.
Multi-donor facilities and programmes
Nordic Environmental Development Fund
The Nordic Council of Ministers is the official body for Nordic intergovernmental cooperation. All of NEFCO’s owner countries take part in this cooperation.
The Nordic Council of Ministers is financing the Nordic Environmental Development Fund, established and managed by NEFCO since 1996. The purpose of this fund is to support and supplement the financing activities of NEFCO’s Investment Fund: (i) by making available grant financing to prepare and implement public projects financed by NEFCO’s Investment Fund, and (ii) by creating a possibility for NEFCO to also offer smaller, concessionary loan programmes, to reach scale and open for subsequent financing of larger projects on commercial terms trough NEFCO’s Investment Fund.
The Nordic Environment Development Fund’s loan programmes are revolving, but can gradually deplete due to the concessionary type of the financing it provides. For this reason, the initial funds paid in during 1996 has regularly been replenished and stands by the end of 2018 at approximately EUR 24 million. The fund presently offers soft loans of up to EUR 500 000 for energy savings and cleaner production measures in several Eastern European countries.
Nordic Project Fund (Nopef)
The Nordic Council of Ministers is also financing the Nordic Project Fund (Nopef), managed by NEFCO since 2014. Nopef offers smaller grants for green growth internationalisation to Nordic small and medium-sized enterprises and mid-cap companies for their internationalisation. Nopef beneficiaries can also obtain limited investment loans on commercial terms through NEFCO’s Investment Fund. Nopef is funded through annual contributions from the Nordic Council of Ministers. Since 2014 the fund has received a total contribution of EUR 14 million. Grant support is available for a maximum amount of EUR 50,000, for feasibility studies aiming at evaluating a foreign business establishment or investment outside of the EU/EEA region.
Barents Hot Spot Facility (BHSF)
Since 2004, NEFCO manages the Barents Hot Spot Facility. This facility is supported by Finland, Iceland, Norway, Sweden and the Nordic Council of Ministers. It was established in continuation of international cooperation involving all of the Nordic countries as well as Russia and the EU with the aim to promote progress, actions and projects for improvement of the status of 42 acute environmental problems, “hot spots”, identified in this particular land along the coast of the Barents Sea, from Norway to Russia. Funds are still available and are offered on a modest grant basis to support project preparation in the Russian part of the Barents region.
Programme for Environment and Climate Co-operation (PECC)
Jointly with the Nordic Council of Ministers, the Barents Hot Spot Facility has also financed the recently established grant Programme for Environment and Climate Co-operation at the local level between Nordic and Northwest Russia non-commercial partners. All funds under this programme have been allocated to projects and implemented during 2018, but a new financing round is expected to start during Autumn 2019.
Baltic Sea Action Plan Trust Fund (BSAP)
The reduction of pollutants negatively affecting the Baltic Sea is and has always been a key priority for NEFCO’s Investment Fund. The Baltic Sea Action Plan Fund offers limited grant funding to accelerate and demonstrate measures, which are needed and would not otherwise happen, to meet the nutrient reduction requirements of the Baltic Sea Action Plan, signed by Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Russia, Sweden and the EU in 2007. This fund was established in 2009, is co-managed by NEFCO and the Nordic Investment Bank and supported by Finland and Sweden. Most of the funds have already been allocated to projects, but the fund might be replenished.
Arctic Council Project Support Instrument (PSI)
The Arctic Council Project Support Instrument is a multi-donor pilot facility established at the initiative of the Arctic Council and managed by NEFCO. PSI became operational in 2014 when Russia made a larger contribution to this fund. In addition to Russia, the US, Finland, Iceland, Norway, NEFCO and the Sami parliament of Norway also contributes to this fund. The purpose here is to support the environmental work of the Arctic Council. The pilot phase has focused on providing support to project preparation and demonstration activities related to the introduction of a number of environmental friendly solutions primarily in the Russian Arctic area. By June 2019, the fund stands at EUR 12 million, out of which EUR 10 million has been contributed by Russia. The fund’s environmental cooperation is unique since it involves both a number of Nordic/EU states as well as Russia and the US. Funds have so far been made available in the form of grants.
Nordic Initiative for Energy Efficiency and Humanitarian Support – Ukraine (NIU)
This NEFCO managed grant facility, the Nordic Initiative for Energy Efficiency and Humanitarian Support, was initiated by the foreign ministers of the Nordic countries in 2014 for smaller, but urgently needed investments to achieve quick and visible energy-efficiency results in public buildings within five regions in Eastern Ukraine. Funding of to date EUR 15 million comes from Finland, Norway, Sweden and the Nordic Environmental Development Fund. Under this initiative grants of between EUR 100 000 and 600 000 are also offered in combination with smaller soft loans, funded through the Nordic Environment Development Fund and in some cases additional grants funded through the Eastern Europe Energy Efficiency and Environment Fund (E5P).
NEFCO Carbon Funds (NeCF and NorCaP)
NEFCO was an early mover in the carbon market and set up already in 2003 a pioneering carbon fund, the Baltic Sea Region Testing Ground Facility. This was the first multi-donor carbon fund outside the World Bank Group. Later this fund converted itself into a Public-Private Partnership. Today NEFCO manage two carbon funds: the NEFCO Carbon Fund (NeCF) on behalf of a number of both public and private investors, and the NEFCO Norwegian Carbon Procurement Facility (NorCaP), with Norway as the only investor. At its peak, NeCF was capitalized at EUR 165 million, but due to the decline in the carbon market, the funds stands by end of 2018 at EUR 62 million.
Bilateral facilities and programmes
The Danish Ministry of Foreign Affairs is since 2015 financing an initiative for the promotion of energy-efficiency awareness and demonstration projects in Georgia. The aim of this fund is to help Georgia in delivering on its National Determined Contribution (NDC) submitted under the Paris Agreement and comply with requirements under the Association Agreement it has with EU. The initiative forms part of a larger neighbourhood support programme funded by the Danish Ministry of Foreign Affairs.
On behalf of the Ministry for Foreign Affairs of Finland NEFCO has in 2017 set-up and managed the Finland Ukraine Trust Fund, promoting cooperation between Finland and Ukraine in the fields of energy efficiency, renewable energy and waste-to-energy and smart energy systems. Limited grant funding is available for both public and private demonstration projects implemented by Ukrainian, preferably by small and medium-sized enterprises, or for technical assistance. The fund will be replenished until the end of 2021.
The NEFCO Norwegian Carbon Procurement Facility (NorCaP) was established in 2013 in response to a wish from the Norwegian government to ensure the continuation of emission reduction activities of existing, but vulnerable, carbon credit projects, since many of these projects were facing discontinuation due to low carbon prices. At the same time, this would assist Norway in meeting its climate commitments in a cost-effective way. Procurement under this fund was closed at the end of 2015, when the facility reached its target through NEFCO’s contracting of some 30 million CERs from 17 projects in Latin America and Africa. Many of these projects are still on-going. NorCaP has by end of 2018 delivered 15.2 million emission reductions to Norway.
Building on good experiences with the Nordic Initiative for Energy Efficiency and Humanitarian Support – Ukraine (NIU) and since other Nordic countries have initiated separate effort in Ukraine, NEFCO was in 2018 asked to established, the Norway-Ukraine Energy Efficiency Initiative (NUEE). This facility will offer investment grants, primarily tied to NEFCO loans, as well as project preparation and implementation support to projects in any part of Ukraine, but priority will be given to projects in the Eastern part of Ukraine.
Since 2010, Sweden is through the DemoUkraina District Heating Facility managed by NEFCO, offering grant financing in combination with soft loans financed by the Nordic Environment Development Fund to support the development and funding of a larger number of small environmental sustainable energy-efficiency demonstration projects within the district heating sector spread out in a number of Ukrainian cities. Financing is given to municipal district heating utilities with a guarantee from the city. Funds are still available under this facility.
Last year, this initiative was supplemented by the establishment of a new trust fund, the Sweden-Ukraine District Heating Fund for grant financing of project develop and investment grant co-financing for the implementation of a number of larger scale demonstration projects together with loan financing from NEFCO’ Investment Fund. Aim being to demonstrate ways to use renewable and waste heat sources, ultimately meeting EU’s requirements for efficient district heating in Ukraine.
Beginning of 2019, NEFCO established a new and larger facility for the Swedish International Development Cooperation Agency (Sida), the Beyond the Grid Fund for Africa, (BGFA) to incentivize the emergency of new private sector business models offering affordable and clean energy access at scale to people living in rural and peri-urban areas in Africa. This facility forms part of the ‘Power Africa’ initiative launched by former President Barack Obama and contributes to the Sustainable Development Goal 7 as well as the Paris Agreement on Climate. Market scoping is about to start and it is expected that a Call for Proposals targeted at possibly interested Energy Service Providers will be launched in 2020.
Accreditations and NEFCO as Implementing Agency
NEFCO has longer experience in implementing environmental projects with EU co-financing. In 2016, our high fiduciary standards were formally recognized when we passed the European Commission’s so-called “pillar assessment” for entities entrusted with implementation of the EU budget. Presently, we are acting as implementing agency for the following facilities, which are co-funded by EU: the Eastern Europe Energy Efficiency and Environment Partnership (E5P), the EU Neighbourhood Investment Platform (NIP) and the Northern Dimension Environmental Partnership (NDEP). Investment grants made available through these facilities, in combination with grant financing we manage on behalf of our owners for project preparation and implementation, have enabled us to offer NEFCO Investment Fund loans even to smaller and financially weaker cities in Eastern Europe, mainly Ukraine.
The Green Climate Fund
In September 2018, NEFCO was also accredited by the Green Climate Fund (GCF). This accreditation is expected to offer new opportunities for us to blend our own financing and other funds we holds in trust now also with funds from the Green Climate Fund as well as create new innovative financing packages together with other accredited entities to further mobilize and scale up the capabilities of developing countries to grow in a sustainable way. The Green Climate Fund, the world’s largest climate fund, was set-up in 2010 by the 194 county parties to the United Nations Framework Convention on Climate Change (UNFCCC) with the aim to help developing countries limit or reduce their greenhouse gas emissions and adapt to climate change. It seeks to promote a paradigm shift to low-emission and climate-resilient development, taking into account the needs of nations that are particularly vulnerable to climate change impacts.