Our impact

We are ready to take financial risks if there is a green upside

Nefco’s main priority is to invest in economic activities that lead to positive and tangible environmental or climate impacts. These include saving energy and reducing emissions, pollution, harmful discharges or hazardous waste. We also look for activities that generate economic and social impacts such as business growth, a stronger competitive edge and job creation.

Additionally, we finance feasibility studies and technical assistance through various trust funds to facilitate capacity building and development of sustainable business solutions. These do not lead to immediate environmental impacts but rather facilitate project implementation in the near future.

EU Taxonomy assessment

Since 2022, Nefco has actively used a full EU Taxonomy alignment analysis on a best effort basis for its investments, evaluating Eligibility, Substantial Contribution criteria (SC), Do No Significant Harm criteria (DNSH) and Minimum Social Safeguards criteria (MSS).

At the end of 2024, 80% of our investments are considered eligible or eligible and compliant with the Substantial Contribution criteria under the EU Taxonomy. A total of 54% of our investments are eligible and considered compliant with the respective SCs. The most common reason for eligible investments not complying with SC, is a lack of life-cycle greenhouse gas emissions calculations.

Key figures from 2024

341

active projects in our portfolio at the end of 2024

80%

of our investments are considered EU Taxonomy eligible

54%

of our investments are considered EU Taxonomy eligible and SC compliant

SMEs are not yet required to comply with the Taxonomy requirements and at this stage they often encounter challenges in complying with all the alignment criteria. As the EU is aiming to expand the requirements to encompass SMEs as well in the coming years, Nefco strives to bolster its clients’ sustainability strategies and reporting capacities, as it is an opportunity for them to prepare for the future and build competitive advantages.

Note also that ‘green’ is not defined by the EU Taxonomy alone. For economic activities that are not yet covered by the EU Taxonomy, we use our own definitions based on the spirit and logic of the EU Taxonomy.

Read more in our Annual Report 2023.

Focus on projects with high demonstration value

An essential objective of Nefco’s financing activities is to support the scale-up of new transformative technologies and solutions. We primarily finance small and medium-sized projects that demonstrate new technologies or solutions with the potential to be replicated. Our financing supports the testing of green innovations in new markets. This is what we refer to as high demonstration value.

Projects with a high demonstration value have the potential for environmental impacts worth many times Nefco’s initial investment. A demonstration project provides an indication of how well a solution can be adopted at scale and what kind of impact it can generate. Trying and testing is a bottom-up approach. It’s a real-life alternative to top-down spending. The ultimate goal is to accelerate the green transition.

Providing high additionality

As an international finance institution, Nefco’s role is to fill a financing gap that cannot be covered by other financiers for projects that meet Nefco’s criteria. The goal is to promote new solutions, reduce implementation time and accelerate the green transition. When there is a green upside, we can take greater financial risks than are normally accepted by commercial banks and financiers; in many cases, projects would never be implemented without our financing. This is referred to as additionality.

Our higher risk tolerance for financing small projects and growth-phase companies makes projects bankable and often mobilises other financiers to invest, building capacity for the future needs of project owners.

Environmental and social risks

Nefco applies risk-reduction measures in its operations. We apply the mitigation hierarchy, which aims to avoid, minimise and restore adverse impacts in project design and during operations.

All projects should be carefully designed and implemented to sufficiently mitigate their potential environmental and social risks. In certain cases, clients are requested to prepare an Environmental and Social Action Plan (ESAP). The purpose of the action plan is to reduce sustainability risks to an acceptable level and improve clients’ sustainability practices. Action plans must be approved by Nefco and form part of financing agreements.