Finnvera provides loans and guarantees for domestic projects, and grants guarantees for the exports of Finnish companies and export credits for financing foreign buyers. When assessing projects abroad, Finnvera adheres to international standards and guidelines. Domestic projects are carried out in keeping with the laws of Finland and the EU.
In 2016, the most important development areas pertaining to responsible financing were the updating of Finnvera’s project policy and the launching of the new Compliance function. The purpose of this function is to keep Finnvera’s own processes up to date in response to the increasing regulation of foreign guarantees and lending.
General principles of responsible financing
Finnvera’s Code of Conduct steers all activities. Adopted in December 2016, the Code of Conduct brought together the ethical principles and legal rules followed by Finnvera in its activities.
Finnvera’s financing operations are based on the provision of financing for economically viable business and meticulous risk assessment when making financing decisions. The overall responsibility of financing is steered, among others, by the following principles:
- Financing decisions are based on criteria for assessing profitable business; these criteria are defined in advance.
- In order to avoid conflicts of interest and to ensure impartiality, Finnvera observes the disqualification provisions laid down in the Administrative Procedure Act.
- In its financing activities, Finnvera complies with the obligation to know its customers, the intention being to combat money laundering and the financing of terrorism.
- It is strictly prohibited to receive or offer any financial or other benefit if it is likely to undermine confidence in the party concerned or in the impartiality of Finnvera’s actions.
Principles steering the financing of projects abroad
In export financing, Finnvera complies with the OECD Arrangement on Officially Supported Export Credits and with the standards and guidelines published by the International Finance Corporation (IFC) of the World Bank Group.
When assessing projects to be carried out abroad, the most important component is to assess their environmental and social aspects. In practice, the work is steered by the Recommendation of the OECD Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence, the UN Guiding Principles on Business and Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, and the UN Framework Convention on Climate Change.
Finnvera complies with the guidelines and criteria published by the OECD, which also strive to ensure that export credit agencies’ project evaluations, definitions and conditions are applied consistently among providers of export financing.
In 2016, Finnvera updated its own project policy, which is used to examine the environmental and social impacts of projects. Thanks to the updated policy, increased attention is now paid to human rights. Another clear change to the project policy was the inclusion of guarantees granted to shipping companies and shipyards within the scope of the project policy. In addition, all power plant projects that use fossil fuels must report their greenhouse gas emissions to the OECD.
In its anti-bribery measures, Finnvera follows the recommendations issued by the OECD Export Credit Group. The latest recommendation is from 2006, but the recommendations are currently being updated. Moreover, Finnvera has in place its own anti-bribery policy that is in agreement with responsible export credit guarantee and credit operations. In practice this means that, for each project, Finnvera requests financiers and exporters to sign a declaration that they have not participated in bribery.
When granting export credit guarantees and export credits for the poorest countries, Finnvera complies with the principles of sustainable lending approved within the OECD.
Assessment of the social and environmental risks of projects carried out abroad
If in projects carried out abroad, Finnvera’s liabilities for guarantees exceed EUR 10 million and the loan repayment period is more than two years, the project always undergoes a review of the consequent environmental and social impacts.
In general, Finnvera’s project review encompasses the whole project even when export financing is granted, for instance, for an individual delivery of equipment.
Projects are divided into four categories: A, B, C and non-project. In Category A, the applicant must provide Finnvera with a report of the assessment of environmental and social impacts. The report is compiled by an external actor. In Category A projects, impacts are reviewed more extensively; the project may be, for example, a pulp mill, a mine or a power plant. In Category B, the information required is more limited. No background studies are needed for Category C and non-projects.
A prerequisite for granting financing for Category A projects is that the information on environmental and social impacts is published 30 days before Finnvera signs the agreement on export financing. This allows stakeholders, at their discretion, to comment on the financing of the projects before the actual decisions are made.
Consideration of social impacts in projects
Social impacts refer to the project’s impacts on local communities and on persons involved in the construction and operation of the project. In this context, social impacts include the human rights aspects associated with the project.
Put more precisely, the impacts may relate for example to the working conditions and rights of workers, the health and safety of local communities, the acquisition of land and forced relocation, the rights of indigenous peoples, and cultural heritage. Project-specific human rights factors are forced labour, child labour, and occupational health and safety issues threatening human life.
The impacts on working conditions, local communities and workers are weighed for all projects that are assessed.
Monitoring of projects
The assessment of projects does not end when the financing decision is made. Instead, impacts can also be monitored during the progress of the projects. All Category A projects and some Category B projects are monitored until the end of the loan repayment period.
During their construction and production stages, several major projects are monitored by external consultants. If shortcomings are discovered during the project, the corrective action plan defined in the loan agreement terms is drawn up and monitoring will continue. Additionally, the parties implementing the projects are often required to report annually to Finnvera. If the various parties cannot agree on how the shortcomings should be corrected, the last resort is to call in the loan.
Finnvera as a co-financier for cleantech companies
During the past five years, Finnvera has been a steady provider of financing to cleantech companies operating in the SME sector. In 2016, the financing granted totalled EUR 22 million, which was divided between 58 SMEs. In 2013–2015, the financing granted annually totalled EUR 26–33 million.
Cleantech is one of the fastest growing sectors in Finland. More than one third of Finland’s public R&D investment is made in cleantech. In proportion to its population, Finland is the world’s leading researcher in the energy and environmental sectors.
Cleantech means that a company develops not only its own operations from environmental aspects but also the operations of other companies. At present, the cleantech and bioeconomy business focuses on energy generation, transport and food, as well as on the reduction of carbon dioxide emissions. The future trend is that cleantech will expand increasingly broadly into the consumer business, and Finnvera consumers are helped to act more sustainably.