Wellbeing for society and return for investors
Achieving the UN’s sustainable development goals requires an increase in private capital. Impact investing is a new financial market megatrend where investors aim to achieve wellbeing and environmental impacts in addition to gaining returns on their investments. Finland’s sustainable financing roadmap outlines a path to measures that will motivate private investors to channel their capital into achieving sustainable development goals.
Increased interest among private investors in tackling social challenges is the most important trend to emerge in the investment community in the 2010s. Responsibility has played a role in the activities of investors for a long time, but clear and established practices around it have yet to emerge. Investors are, however, well aware of the many opportunities responsibility has to offer.
Since 2018, the European Commission has been implementing an action plan on financing sustainable growth with the goal of mobilising private capital for sustainable investments. The programme also aims to manage financing risks caused by factors such as social problems, climate change and the depletion of natural resources. Sustainable financing is guided by the principles of economic and financial transparency and aims to increase long-term commitment on the part of investors.
Thanks to the action plan, technology for mitigating climate change is quickly becoming one of the most important investment targets of the financial sector in the EU.
“The dwindling of natural resources and the mitigation of climate change require major investments at the global level. This development presents significant new business opportunities for Finnish companies. At the same time, this area is an interesting target for investments, as it focuses on a new kind of risk management and new ways to measure effectiveness,” says Seppo Rekolainen, Director of International Water Cooperation at the Ministry of Agriculture and Forestry.
Measuring effectiveness plays an essential role in mobilising private capital to take on challenges in society. Especially when the state participates in risk-sharing, it must be possible to demonstrate that the investments will create added value and lead to the desired impact. Public capital of EUR 50–100 million, for example, could be used to seek private capital of EUR 150–500 million for sustainable investments.
Finland’s sustainable financing roadmap is a concrete step toward creating a national sustainable financing ecosystem and accelerating impact investing. In impact investing, private capital is directed in a purposeful way towards solving national and global sustainability challenges. In order to achieve these goals, it is essential to be able to assess the effectiveness of measures.
“The national roadmap will help to remove bottlenecks and create a Finnish investment ecosystem that can attract a significant amount of private capital. Achieving this requires goal-oriented and active cooperation between the key players – in this case, the solution providers, interested investors and the parties in charge of measuring effectiveness,” says Ministerial Adviser Timo Halonen.
Finland made a commitment to achieving a more sustainable economy and society when it adopted the Paris Climate Agreement and the UN’s Agenda for Sustainable Development. Achieving the sustainable development goals requires multidimensional collaboration between different countries and operators, active exchange of information and experiences, sharing best practices and cohesive policies. The national roadmap will help create a Finnish financing ecosystem that is an integral part of the solutions for achieving the UN’s sustainable development goals.
Online recording of the roadmap release event (in Finnish)
Timo Halonen, Ministerial Adviser, Ministry of Agriculture and Forestry, tel. +358 295162411, timo.halonen(at)mmm.fi
Seppo Rekolainen, Director of International Water Cooperation, Ministry of Agriculture and Forestry, tel. +358 295162086, seppo.rekolainen(at)mmm.fi
Max von Bonsdorff, Director of Unit for Development Finance and Private Sector Cooperation, Ministry for Foreign Affairs, tel. +358 295 351 720, max.vonbonsdorff(at)formin.fi
Mikko Halonen, Leading Consultant, Gaia Consulting Oy, tel. +358 407002190, mikko.halonen(at)gaia.fi