The operational guidelines issued by the Ministry of Economic Affairs and Employment to the Climate Fund in December 2020 state that the launch of the company’s operations will be assessed comprehensively in late 2022. The Ministry of Economic Affairs and Employment published news article about KPMG’s assessment report today. According to the assessment, the Climate Fund’s operations have gotten off to a good start, and the report also gives some suggestions for the future.
The Climate Fund’s operational guidelines state that, in addition to the company’s annual evaluations, the success of the company’s launch will be assessed comprehensively in late 2022, including a thorough evaluation of the Climate Fund’s instruments. The assessment also looks at the Climate Fund’s capital in relation to continuity of operations, as well as the possible need for additional capitalisation.
According to KPMG’s report, ”[our] aim was to produce neutral, systematic and analytical assessment data on the Climate Fund’s operations and the various factors potentially related to their development”. The assessment team was led by Kim Lehto from the strategy unit of KPMG’s Advisory Services.
The assessment produced seven key observations and three recommendations. The key observations concerned the Climate Fund’s social relevance and justified special-assignment role, the success of the company’s recruitment, appropriate positioning on the financial market, the alignment of investment decisions and dealflow with the company’s assignment, as well as the capital required to meet the annual investment volume target of €130 million going forward.
The recommendations were related to continuity planning, a potential increase in the risk level of investments by expanding the company’s range of instruments, as well as the close monitoring and assessment of the Climate Fund’s operations and impact. These key observations and recommendations are quoted in full at the end of this release.
”The Climate Fund’s operations were launched on a fairly tight schedule, and I am happy with the observations made in KPMG’s assessment, according to which the company is positioned sensibly in the market and has been successful during its first two years of operations. The development suggestions given in the assessment give us food for thought, and we will take them into account in our development planning”, says Perttu Puro, Chair of the Climate Fund’s Board of Directors.
- Link to KPMG’s report (in Finnish)
- Link to the Climate Fund’s operational guidelines (in Finnish)
- The Climate Fund’s Investment Council, which includes representatives from Finnish ministries, evaluates the company’s operations on an annual basis. The latest annual review can be found here (in Finnish)
Key observations made in KPMG’s assessment:
- The Climate Fund’s operations have clear social relevance. The goals of the company’s operations are connected to solving an acute social problem, and the operations focus on the need to accelerate the green transition, as highlighted by an extensive body of research.
- The Climate Fund has a clearly defined and justified special-assignment role, which gives it a clearly distinct position from other state investment companies.
- The Climate Fund’s administrative structures are functioning well and supported the company in its launch phase.
- The Climate Fund has succeeded in recruiting key expertise and capabilities to the company, enabling the ramp-up of operations to the target investment volume and the further development of the company’s operations.
- The Climate Fund has achieved an appropriate position in the financial markets.
- The company’s investment decisions and dealflow are in line with the Climate Fund’s special assignment and goals.
- The company needs roughly €300 million in capital to be able to implement its target investment volume of €130 million in 2023–2026. A government plenary session decided to capitalise the company with €200 million on 24 November 2022. The agreement between the MEE and the Climate Fund was signed on 30 November 2022, and a further capitalisation of €100 million was proposed.
Recommendations given in KPMG’s assessment:
- Based on this assessment, the launch phase of the Climate Fund’s operations was a success. On the basis of our assessment, we recommend that the Climate Fund and its ownership steering committee pay more attention to continuity planning in the coming years.
- The Climate Fund’s operative management, the company’s Board and the ownership steering committee should conduct a strategic discussion of the extent by which the risk level of the Climate Fund’s investments should be increased, for example by expanding the range of funding instruments employed by the company.
- The effects and impact of the Climate Fund’s operations should be monitored closely, both through continuous self-assessment and with external evaluations.