NDF - Financing for climate change and development projects

NDF Results Report for 2018 published - Blended financing the banner theme

Photo: RARE
8.03.2019

The report shows another year of strong results

NDF Results 2018 - Summary Report

NDF's results were characterised by a significant shift in the funding portfolio towards financing instruments other than grants. During the year, NDF's Board of Directors approved financing for nine new projects with a total value of EUR 47.15 million. Of these commitments, EUR 16 million was allocated as loans, EUR 17.5 million as equity, and EUR 5 million as reimbursable grants, while the remaining EUR 8.65 million was allocated as traditional grant financing. This puts the ratio of non-grants this year at 82:18. In 2017, the corresponding ratio was almost the opposite at 29:71. According to Leena Klossner, Acting Managing Director of NDF, the profound shift away from grants towards blended financing is an excellent way to promote the viability of NDF's projects. "The increased use of loans and equity investments also serves to enable a development environment that will increasingly be led by the private sector," she adds.

NDF as a funding partner is mandated to take larger risks than many other financing mechanisms, for example in testing new climate technologies or approaches for market readiness. The investment in CRAFT, the world's first market-driven climate change adaptation fund, is a case in point. NDF has combined a sizeable equity investment with initial preparatory grants to help get this unique fund up and running and in front of investors. Furthermore, NDF is providing catalytic financing for climate resilience solutions along the heavily populated West African Coastline, where the extent and impact of climate change, particularly coastal erosion, has reached a critical juncture.

With the launch of the second challenge fund, namely the Energy and Environment Partnership Trust Fund (EEP Africa), the Fund opens doors to the private sector. EEP Africa offers early-stage clean energy funding predominantly to private-sector-led projects in Southern and East Africa, and represents the first time NDF has managed a trust fund in-house. The Nordic Climate Facility, the other challenge fund, issued its eighth call for proposals during the year, with the theme "Testing the business viability of climate solutions."  The facility was set up to finance early-stage climate projects while stimulating local business and employment opportunities in the developing world.

During 2018, ten NDF-backed projects reached completion. Six projects focused on mitigation and four had both adaptation and mitigation targets and results. Nine out of ten projects were rated as satisfactory or highly satisfactory in all three summary variables of their project performance ratings. The results are based on the Results-based Management Framework, with a focus on results at the institutional level, at the portfolio level, and for individual projects.