Climate Fund’s investment criteria

As a state-owned special-assignment company that complements private and public actors, the Climate Fund’s main goal is to achieve societal impact – combating climate change, boosting low-carbon industry and promoting digitalisation.

In the Climate Fund’s operation, special attention must be given to the impact model and criteria that guide the company’s investment decisions. The assessment model and investment criteria must include all the targets set for the company in a balanced manner, and the impacts must be verifiable in the future. The criteria takes into consideration relevant indicators for climate change mitigation both in the short and long term, utilising international standards when applicable.

The following description outlines the Climate Fund’s investment assessment model and the criteria used to evaluate each investment proposal made to the company.

1. Preconditions

Every investment decision has to pass the preconditions.
Three preconditions are evaluated when making every investment decision.

  • Minimum self-supporting business activity
  • Verified added value from the Climate Fund funding
  • Alignment with the ”Do no significant harm” principle
2. Climate Fund impact criteria

The priorisation is mainly based on the impact criteria …
Four general Climate Fund impact criteria are taken into account when making every investment decision.

  • Emissions reduction potential
  • Productivity potential
  • Alignment with the EU taxonomy (yes/no)
  • Business potential, productivity gains and the added value derived from the funding
3. Investment proposal specific analysis

and the investment proposal specific analysis.
In addition, other most relevant proposal specific point of views will be analysed.

Proposal specific analysis, e.g.:

  • Biodiversity impact
  • Export potential
  • Social justice
  • Leveraging EU funding
  • .…

Preconditions

Each investment must fulfil the following threshold conditions:

  1. Each investment target must have a credible plan for at least a self-supporting business regarding i.a. competences and financing. The Climate Fund may use a longer than normal timespan when assessing the self-sustainability of the proposal.
  2. The Climate Fund’s investment must bring a verifiable added value as a part of the total investment: the Climate Fund’s investment must enable the project to be realised in the first place, earlier, on a larger scale, or allow it to target Finland in a manner that would not be achieved otherwise.
  3. Alignment with the so called “do no significant harm” principle. If the investment is carried out it must not cause significant harm to any of the six environmental objectives included in the EU’s framework* for facilitate sustainable investments:
  • climate change mitigation,
  • climate change adaptation,
  • the sustainable use and protection of water and marine resources,
  • the transition to a circular economy,
  • pollution prevention and control, and
  • the protection and restoration of biodiversity and ecosystems.

(*EU 2020/852).

Once the preconditions are met, the funding possibilities are prioritised and assessed mainly based on the Climate Fund’s impact criteria and the investment target specific assessment.

Climate Fund’s impact criteria

The general criteria relating to the Climate Fund’s impact are assessed for each investment decision. Additionally, a mechanism for monitoring and verifying the desired impacts is built before the decision is made.

  1. Emissions reduction potential in Finland and globally
  2. Productivity potential can be assessed for example through the growth of national RDI inputs, high value employment impacts, or strengthened intellectual capital (for example patents).
  3. EU’s framework for sustainable investments*, the so-called EU taxonomy, aims at guiding funding to support climate and environment friendly investments by stipulating technical screening criteria for which actions can be classified as sustainable. As the taxonomy so far covers mainly those industries and actions that cause the largest greenhouse gas emissions, alignment with the taxonomy is considered an advantage for the investment target, but not a prerequisite. The actions included in the classification have been given clear thresholds and requirements they must fulfil, and the Climate Fund’s team helps applicants understand how the taxonomy is applied.
  4. Business potential, productivity benefits and added value that the investment package enables for other registered actors operating in Finland.

*(EU 2020/852).

Investment proposal specific analysis

The Climate Fund’s actions are related to a smaller number of investment proposals with substantial monetary value and which can represent very different industries. Before the investment decision is made, the aspired secondary impacts must be defined, and a mechanism must be built for monitoring and verifying them.

Depending on the investment target, very different aspects may be central to evaluating both impact and risks. The analysis of each individual investment proposal may, depending on the target, strengthen the assessed effect of for example biodiversity impact, export potential, social justice issues or link to EU funding.

Depending on the investment proposal, the evaluation may utilise for instance the criteria for sustainable recovery drafted by the Ministry of the Environment’s working group, the UN’s Sustainable Development Goals (SDG), or the European Investment Bank’s investment criteria and credit terms.

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