Norfund Investing to create improve lives jobs and improve lives - PowerPoint PPT Presentation

The Norwegian Investment Fund for Developing Countries The Norwegian Investment Fund for Developing Countries Investing to create jobs and Norfund – Investing to create improve lives jobs and improve lives Q1 2020 October, 2019

The share of the world’s population living in extreme poverty has fallen substantially 2,000 1,750 1,500 EXTREMELY POOR (million people living on less than 1,250 US$ 1.9 per day, 2011 PPP) 1,000 750 500 250 0 1990 1993 1996 1999 2002 2005 2008 2010 2011 2012 2013 2015 2016 2017 2018 Sub-Saharan Africa Latin America and Caribbean Other high income East Asia and Pacific Middle East and North Africa South Asia Europe and Central Asia 2 Sources: World Bank PovcalNet; World Bank datablog, September 19, 2018

600 4% of waste in 33 000 67% million developing young people in of the adult countries is people in Africa SSA enter the job population in SSA recycled lack access to market every day is unbanked electricity 3 Sources: unstats.un.org; IEA 2018 «World Energy Outlook 2018»; World Bank 2018, «What a Waste 2.0»; World Bank Development Indicators; McKinsey 2016 « Lions on the move II”

Three pillars are needed to ensure inclusive and sustainable development Institution Sustainable building MANDATE: economic Assist in developing sustainable growth business and industries in developing countries Social development 4

MISSION: Create jobs and improve lives by investing in businesses that drive sustainable development 5

Norfund key figures Total committed portfolio: $2.9 billion New commitments 2019 $ 460 million Sector Geography 16 % Direct investments Funds 163 Central Scalable 21 % America enterprises Loans 11% Indirect investments 18% 900 63% Clean Africa South- Equity energy 55% East Asia IRR since inception 48% Financial 33% 6% in investment currency institutions 34% 9% in NOK As of 30.06.19 Estimates as of 31.12.19 6

Our investments have grown substantially to more than 400 mUSD per year Committed investments per year, USD million 460 $mill 500 Scalable 450 enterprises 400 350 300 Financial 250 institutions 200 150 Clean 100 energy 50 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Exchange rates as of 31.12.2019 7

Optimise impact by being additional and catalytic CATALYTIC ADDITIONAL Invest where capital Add value through Pave the way for others to invest is scarce expertise and influence with us or inspired by us KPIs and additionality framework Track capital mobilized More capital and competence where it will have the most impact 8

We measure key performance indicators to ensure we invest where we are needed the most Least Developed 40% Countries (LDC) 33% 31% Greenfield 15% 15% 80% Equity 70% 70% 54% Sub-Saharan Africa 50% 60% Renewable Energy * 50% 50% Target Estimates as of 31.12.19 9 *Per 31.12.18, share of accumulated allocated capital from government

We aim to achieve and systematically measure development effects NORWAY NORFUND $ TEAM 6% IRR in investment currency DEVELOP 900 companies RETURN SUSTAINABLE ON OUR ENTERPRISES INVESTMENT 9% IRR in NOK 304,000 jobs in portfolio 1,600 MUSD TAXES JOBS taxes paid by investees 17,100 new jobs created 2018 GOODS & 1.8 mill. new bank clients 17.4 TWh electricity produced SERVICES 2.8 bn. USD increase in lending to clients 6 mill. tonnes CO2 avoided 10 2018 figures; IRR since inception

Norfund's investments are concentrated in four areas that contribute to the SDGs Green Clean Financial Scalable infrastructure energy institutions enterprises 11

CLEAN ENERGY Increase energy access and supply INVEST in greenfield grid-connected power plants, distributed generation and off-grid supply Our ambitions: 1.5 million new households provided 5,000 MW new capacity financed, with access to electricity whereof 4,000 MW renewable 12

FINANCIAL INSTITUTIONS Strengthen financial inclusion FURTHER GROW bank and microfinance whilst exploring fintech and insurance Our ambitions: Offered financial services Extended NOK 130 billion to 15 million new clients more in loans to clients 13

GREEN INFRASTRUCTURE Improve essential infrastructure services INVEST in waste management, water supply and power networks Our ambitions: Establish Execute investments in waste management, Invest NOK 1 billion partnerships water and power networks in 6-10 investments 14

SCALABLE ENTERPRISES Grow companies in agribusiness and manufacturing BUILD ENTERPRISES through funds, and industrial partnerships targeting the agribusiness and manufacturing sectors Our ambitions: 50,000 jobs created through Established partnerships Realised growth so that total revenues direct investments and funds with larger industrial actors have increased by NOK 2 billion 15

We target select developing countries with high impact potential CORE SELECTION CRITERIA OUR KPI S EXTENDED REACH LDCs Angola Myanmar Benin Additionality – Opportunities – Knowledge 33% in LDC - 50% in SSA Bangladesh Rwanda Burkina Faso Cambodia Senegal Burundi* Ethiopia Tanzania Cameroon Laos Uganda Costa Rica Lesotho Zambia Guinea Malawi Zimbabwe Haiti* Mozambique India Liberia* Other SSA Madagascar Côte d'Ivoire Kenya Mali* Ghana South Africa Nepal Nigeria Niger Panama Other countries Philippines Colombia Indonesia Sierra Leone Dominican Rep. Nicaragua Somalia* El Salvador Sri Lanka South Sudan* Guatemala Vietnam Swaziland Honduras Togo* CORE COUNTRIES; 29 countries where Norfund: EXTENDED REACH COUNTRIES: • Actively builds pipeline and deep country expertise Investments are channelled through reputable • Seeks to make direct investments, thereby strengthening our impact funds, strategic partners or platforms Core countries Extended reach Fragile states 16 * Fragile states New core countries in red

We will not reach the SDGs without substantial private sector investments Advanced economies Emerging markets and developing economies (trillion USD) (trillion USD) Investment gap 0.1 Public Public Investment 1.2 0.4 gap Annual Annual investment need 2.5 investment need 1.5 4.5 Private 0.9 Private 1.0 • Globally, there is an annual financing gap of $2.5 trillion to reach the SDGs Private capital is key and • In developed economies, private sector finance enables us to (almost) close the gap must be mobilised • In emerging and developing economies the gap is more than 50%, in Africa close to 90% Source: UNEP FI 2018: “Rethinking impact to finance the SDGs” (figures rounded off for simplicity reasons and might not add up to the total) 17

Norfund outperforms peers on additionality indicators Share of total committed capital 2017 Norfund 90% 85% 80% 70% EDFI 60% 50% 48% 50% IFC 36% 40% 28% 27% 30% 17% 20% 16% 9% 10% 0% Equity LDC Sub-Saharan Africa Sources: SIGLA analysis/ EDFI, IFC annual report FY17, Norfund, EDFI members 18

CLIMATE & ENVIRONMENT GENDER EQUALITY HUMAN RIGHTS ANTI-CORRUPTION Assess cross-cutting issues systematically in our work and strengthen our efforts 19

We are a responsible investor, adhering to international standards WHAT IT MEANS: HOW WE WORK: Working with investees to achieve social and ESG* integrated into the investment process • Investments are categorised based on ESG risk - high environmental sustainability • Compliance to local laws and international standards risk projects trigger a different process and close • Environmental and social considerations follow-up • • Norfund does not expect “perfect enterprises” at the Zero tolerance for corruption • Good working environment: occupational health and time of investment, but require an action plan to safety standards improve over time • Good corporate governance and internal controls Environmental and Social Performance standards The standards are operative, hands on guidelines and enable us to deliver in practice and respect other international standards 20 *ESG = Environmental, Social and Governance issues

Additionality is key, but also difficult to measure + Norfund’s additionality criteria* Our investments should make a contribution beyond what is available in the market and Financial: • Investing in the poorest countries (income level) should not crowd out the private sector • Investing in capital constrained markets (availability of finance) • Investing in risky markets (credit rating) + • Investing in difficult business environments (ease of doing business) • Providing scarce capital (instrument) Key questions: Would the investment • Contributing to starting new business activity (greenfield) happen without us? Do we enhance the • Mobilising private investors investment in any way? Value: + • Taking an active role in investments (engagement level) • Promoting social and environmental standards (E&S category) Difficult to prove – have to substantiate it • Supporting enterprise improvements (business support) 21 * Resulting in rating high, medium, low