Act on the Climate Fund passed in Parliament

The proposal for an Act on a Wholly State-Owned Limited Liability Company Called Ilmastorahasto Oy was passed by the Finnish Parliament in a plenary session on Wednesday February 1st. The Act will next be ratified by the President. After its entry into force, the Act would allow the Climate Fund to use asymmetric funding instruments, counted as state aid, enabling even greater impact for the company’s investment operations. 

The purpose of the Act on a Wholly State-Owned Limited Liability Company Called Ilmastorahasto Oy is to enshrine in law the key duties, aspects of the company’s administration and funding instruments available to the company outlined in its operational guidelines, as well as to provide for the legal basis for allocating state aid. Using state aid is a task of the public administration according to the Constitution of Finland, and since the Climate Fund is a limited liability company, its right to allocate state aid must be provided for in an Act. 

In the Climate Fund’s operations, funding in the form of state aid would not mean subsidies or grants, but the adoption of asymmetrical funding terms, i.e. letting the company accept lower than market-based profits or take higher risks than now and thereby remedy identified shortcomings on the market more efficiently and effectively than at present. This would also further improve the effectiveness of the Climate Fund’s impact-based investment operations. 

Giving the Climate Fund the opportunity to use asymmetric funding will further solidify the company’s position in the field of state innovation funding. The possibility to leverage state aid is thought to underline the distinction between the Climate Fund’s operations and market-based, for-profit investment activities, which will provide added value to the company’s business operations. 

Report of the Commerce Committee of Parliament 

In its report, the Commerce Committee of the Finnish Parliament found the enactment to be justified and necessary and supported its adoption with a minor clarifying amendment.  

According to the Committee report, the key added value provided by the Climate Fund comes from its contribution to mitigating climate change and boosting low-carbon industry. The prevailing energy crisis and transformation create significant opportunities for clean solutions and the Finnish export industry, which nevertheless require major investments in the development and scale-up of innovations.

Next steps 

Next, the Act, presented by the Government, moves forward to be confirmed by the President of the Republic. Should the Act be approved, the Climate Fund will start the actual work for the adoption of asymmetrical funding instruments. The adoption of funding counted as state aid also requires the approval of the European Commission.

Links to documents on the Parliament website (in Finnish): 

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