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.
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 enabling those.
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.
Below is pictured the evaluation model and criteria of the Climate Fund, against which every potential investment target is evaluated.
Every investment decision must pass the preconditions. When preconditions are met, the final priorisation and selection of investment proposals will be made based on the impact criteria. Prioritisation is based on the assessment of emission reduction potential as well as productivity and business potential. In addition, other most essential proposal specific aspects will be analysed such as natural resources and the circular economy, biodiversity impact, export potential, questions related to social justice or leveraging EU funding.
- Credible plan for repayment of the investment and return of capital
- With Climate Fund’s investment the project will be realised in the first place, earlier or on a larger scale
- Alignment with the “do no significant harm” principle
- Emissions reduction potential
- Productivity and business potential
Investment Proposal Specific Assessment
- Natural resources and circular economy
- Biodiversity impact
- Export potential
- Social justice
- Leveraging EU funding
- …and other relevant impacts
In addition, the Climate Fund’s assessment process examines the project’s alignment with the EU taxonomy.
Each investment target must meet the Climate Fund’s preconditions:
- Each investment target must have a credible plan with regard to, e.g. the competencies and financing required for being able to repay the Climate Fund’s investment. The Climate Fund may assess whether a proposal will become self-supporting over a longer-than-usual time span.
- The Climate Fund’s investment must either be necessary for the project to be realised in the first place or enable the project’s realisation earlier or on a larger scale.
- Alignment with the “do no significant harm” principle. The investment must not cause significant harm to any of the six environmental objectives of the EU’s sustainable investment framework:
- 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.
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.
The Climate Fund’s general impact criteria are:
- Emissions reduction potential in Finland and globally.
- Productivity and business potential, which the investment enables either directly or indirectly for operators registered in Finland. This potential can be assessed with the investment target’s business plan as well as indicators such as the growth of national RDI inputs, high-value employment impact, or increases in intellectual capital (for example patents).
In addition, the Climate Fund’s assessment process examines the project’s alignment with the EU taxonomy. The EU framework for sustainable investment*, or EU taxonomy, aims at channeling funding to climate-friendly and environmentally friendly investments by stipulating technical screening criteria for determining which actions can be classified as sustainable. As the taxonomy is still mainly limited to the industries that cause the largest greenhouse gas emissions and the most common measures, alignment with it is not required for Climate Fund funding, but the Climate Fund monitors and reports on the percentage of its investments in alignment with the taxonomy.
Investment proposal specific analysis
The Climate Fund’s actions are related to a limited number of investment proposals with substantial monetary value and representing very different industries. Making responsible investment decisions therefore requires very thorough project-specific analysis and assessment.
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, assess effects in e.g. natural resources and the circular economy, biodiversity, export potential, social justice issues or with a link to EU funding.