NDF - Financing for climate change and development projects

Projects

Photo: XJUA
Photo: Iñigo Ruiz-Apilánez, Arup

NDF provides financing to mitigation and adaptation activities within the nexus of climate change and development in lower-income countries and countries in fragile situations. Financing can be provided for the public and the private sectors, as well as through specific financing facilities.
 
NDF’s financing is provided on concessionary terms in the form of grants, loans and equity. NDF engages in both the public and the private sector, and use financial instruments flexibly, alone or in various combinations, to match the needs of the project. NDF provides also early stage grant and catalytic financing to innovative climate change mitigation and adaptation projects through calls for proposals in the Energy and Environment Partnership Trust Fund (EEP), and the Nordic Climate Facility.

Our key targets for the strategy period 2020-2025 are:

  • Climate. At least 50% directed towards adaptation projects
  • Country focus. At least 60% targeted towards Sub-Saharan Africa
  • Concessionality. At least 50% of financing with grants

 
NDF’s focus on the nexus between climate and development implies a focus on selected countries within the groups of lower-income countries and countries in fragile situations, including Small Island Developing States (SIDS).
 

NDF can provide:
 
Public sector financing
Through its financing, NDF provides different kinds of solutions for the financing of nationally prioritised public sector projects implemented by public sector entities in the focus countries.
 
Private sector financing
Recognising the important role of the private sector in climate finance, NDF seeks ways to partner with the private sector to mobilise institutional investors to finance climate action, and to support local private entities.
 
Facilities
NDF provides early stage grant and catalytic financing to innovative climate change mitigation and adaptation projects through the Energy and Environment Partnership Trust Fund (EEP), and the Nordic Climate Facility through calls for proposals.
 

Principles of Engagement and NDF’s Approach 
 
Building on the strengths and NDF’s added value, the principles of Complement, Co-create and Convene steer and guide NDF, cutting across all activities that NDF undertakes towards reaching its purpose.
 
Complement. The ambitious global climate and development agenda calls for strong action by multiple stakeholders. NDF constitutes a value adding complement to the actions of its strategic partners, which can amplify NDF’s impact and add value in addition to the financing and resources NDF can provide.

Co-create. As a co-creator, NDF demonstrates a robust engagement with strategic partners that offer an opportunity to co-create and design financial support and interventions translating into a range of new portfolio activities and financing arrangements to achieve the overall NDF Purpose.
 
Convene. As a convener, NDF strives to mobilise support and visibility around Nordic priorities in climate and development for an increased Nordic profile and leadership, and to strengthen synergies within the Nordic structures for an enhanced global impact. As a convener around Nordic priorities, NDF has the network and potential to partner with a number of different institutions to demonstrate increased outreach and knowledge activities with linkages to Nordic priorities.
 
 

Based on these principles, NDF‘s approach is to respond quickly and appropriately by using financing instruments flexibly to build a portfolio of projects along the strategic pathways of (1) Advancing Nordic leadership, (2) Developing early-stage project design and structures and (3) Providing catalytic finance for launch and scale.

 

Advance the Nordic leadership
The objective of this strategic pathway is to mobilise public and private support for climate and development areas that are underserved and those that rank as a high priority on the Nordic countries’ climate and development agenda. By highlighting high-need sectors and concentrating knowledge-building and financing on their development, NDF looks to improve the strategic partners’ ability to design, implement and scale replicable solutions, contributing to creation of sustainable, inclusive and climate-resilient societies.

In addition to its strategic partnerships with global actors, collaboration opportunities and partnerships with other Nordic institutions, including the bilateral development finance institutions as well as the bilateral development aid agencies can further strengthen the Nordic leadership. Such collaboration has the potential to advance the Nordic agenda more broadly in the world.

Under this pathway, NDF will seek to:

  • mobilise action and visibility around Nordic priorities in climate and development;
  • strengthen synergies with Nordic financing organisations, IFIs and Nordic institutions for an enhanced global impact;
  • strengthen and effectively implement initiatives within the Nordic climate and development policy agenda;
  • contribute to thought leadership on Nordic priority areas.

 

Develop early-stage project design and structures
The objective of this strategic pathway is to increase the probability that innovative early-stage climate and development projects, in a planning or pilot stage, will be validated, developed and tested to a point where they can draw financing for scale-up from public or commercial sources. By creating a larger pipeline of effectively designed and implemented early-stage projects, NDF seeks to increase the number and effectiveness of large-scale and highly replicable climate and development solutions.

Under this pathway, NDF will seek to:

  • engage with strategic partners in the design, preparation and delivery of emerging early-stage projects, investments and climate solutions;
  • mitigate the issues related to lack of financing and support due to perceived risks related to early-stage financing.

 

Provide catalytic finance for launch and scale
The objective of this strategic pathway is to enable and catalyse financing from the public and private sectors for climate and development impact. By increasing the number of projects that receive scale-up financing and improving leverage ratios to create a larger volume of climate finance, NDF facilitates the more widespread creation of climate and development solutions capable of delivering inclusive and climate-friendly development.

As a concessionary financier, NDF can add value to projects by mobilising co-financing from investors with both concessionary and non-concessionary mandates. The market demand for concessionary and risk-tolerant capital provides opportunities for NDF to distinguish itself within the climate finance spectrum. NDF is well-positioned to match optimally existing market demand with relevant financing instruments and institutional support. NDF’s possibilities to customise solutions creatively to address deficits and needs in financing packages, constitutes a comparative edge and a value adding feature.

Under this pathway, NDF will seek to:

  • create financing arrangements with various types of strategic partners, including Nordic financing organisations, and to provide financing tailored to specific situations and needs;
  • co-finance projects in the public sector through grants and concessionary loans with the goal of validating the project’s concept and leveraging financing from other sources;
  • take higher-risk positions in the private sector to improve investment risk profiles and to catalyse financing from other sources;
  • act as a matchmaker and first mover to help raise further financing once a project is demonstrably viable and scalable.

 

More information
NDF Strategy
Guidelines for Project Identification and Screening