Stockholm (NordSIP) – Mobilising private capital is key to closing the UN-estimated financing gap of US$2.5 trillion per year needed to meet the UN Sustainable Development Goals (SDGs) in developing countries.
To address this issue, the Finnish development finance agency Finnfund adopted a strategy in January 2022 according to which one of its targets is to fund 50% of its investments with private capital by 2030. To this end, Finnfund, issued a €75 million sustainability bond on October 17th. The 3-year bond pays a floating rate coupon of 125 basis points (bps) over the 6-month Euribor. The issuer commitment to sustainability and its strong ties to the Finnish State contributed to the safe-have status and appeal of the investment.
This is Finnfund’s first issuance under its Sustainability Bond Framework. Geographically, 47% of the demand came from Norway, with another 40% from Finland and 13% from Denmark. Sectorally, official institutions represented 53% of the investors, followed by fund managers (35%) and other miscellaneous investors (13%). Danske Bank A/S acted as the sole lead manager in connection with this bond.
Sustainalytics has provided a Second-Party Opinion for Finnfund Sustainability Bond Framework, verifying its credibility, impact, and alignment with ICMA’s 2021 Sustainability Bond Guidelines. As a sustainability bond, proceeds will be used for both green as well as social purposes in line with the SDGs. This includes green lending, equity investments, and mezzanine financing mainly targeting the objective of climate change mitigation and adaptation and/or improved living and health conditions for unserved groups.
“This is a strong sign of confidence for our impact investing activity. Sustainable development and climate action require funding, and these challenging times highlight the importance of investors like us. The global political and economic turmoil may also create new opportunities for investors,” Jaakko Kangasniemi (Pictured), Managing Director and CEO at Finnfund said.
During the worst period of the COVID19 pandemic, Finnfund invested in Kasha, an e-commerce platform improving women’s access to genuine health, hygiene and self-care products in Rwanda and Kenya, which also contributed to the fight against the pandemic.
