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

The Norwegian Investment Fund for Developing Countries

Norfund – Investing to create jobs and improve lives

October, 2019

Investing to create jobs and improve lives

Q1 2020

The Norwegian Investment Fund for Developing Countries

2005 1993 1990 2011 1996 1999 2002 2008 2010 2012 2013 2015 2016 2017 2018 East Asia and Pacific Other high income South Asia Europe and Central Asia Latin America and Caribbean Middle East and North Africa Sub-Saharan Africa 250 500 750 1,000 1,250 1,500 1,750 2,000

EXTREMELY POOR

(million people living on less than US$ 1.9 per day, 2011 PPP)

Sources: World Bank PovcalNet; World Bank datablog, September 19, 2018

The share of the world’s population living in extreme poverty has fallen substantially

2

33 000

young people in SSA enter the job market every day

67%

• f the adult

population in SSA is unbanked

4% of waste in

developing countries is recycled

600 million

people in Africa lack access to electricity

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”

3

Institution building Sustainable economic growth Social development

Three pillars are needed to ensure inclusive and sustainable development

4

MANDATE: Assist in developing sustainable business and industries in developing countries

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

5

6

Estimates as of 31.12.19

Total committed portfolio:

$2.9 billion

New commitments 2019

$ 460 million

Direct investments

163

IRR since inception

6% in investment currency 9% in NOK

As of 30.06.19

Indirect investments

900 Norfund key figures

Geography

Clean energy 48% Financial institutions 34% Scalable enterprises 18% 16 % Funds 21 % Loans 63% Equity

Sector

Africa 55% South- East Asia 33% Central America 11%

Our investments have grown substantially to more than 400 mUSD per year

7

Committed investments per year, USD million

Exchange rates as of 31.12.2019

• 50

100 150 200 250 300 350 400 450 500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Clean energy Financial institutions Scalable enterprises 460 $mill

KPIs and additionality framework

ADDITIONAL

Invest where capital is scarce Add value through expertise and influence

More capital and competence where it will have the most impact

CATALYTIC

Track capital mobilized Pave the way for others to invest with us or inspired by us

Optimise impact by being additional and catalytic

8

We measure key performance indicators to ensure we invest where we are needed the most

9 Estimates as of 31.12.19 *Per 31.12.18, share of accumulated allocated capital from government

Least Developed Countries (LDC) Greenfield Equity Sub-Saharan Africa

40% 80% 54%

15% 70%

Renewable Energy*

50%

60% 31% 33% 50% 70% 50% 15%

Target

We aim to achieve and systematically measure development effects

10

304,000 jobs in portfolio 1,600 MUSD

taxes paid by investees

6% IRR in investment currency

NORFUND TEAM

DEVELOP SUSTAINABLE ENTERPRISES RETURN ON OUR INVESTMENT

JOBS TAXES

17.4 TWh electricity produced

GOODS & SERVICES

900 companies

NORWAY

$

17,100 new jobs created 2018 1.8 mill. new bank clients 2.8 bn. USD increase in lending to clients 6 mill. tonnes CO2 avoided

9% IRR in NOK

2018 figures; IRR since inception

11

Norfund's investments are concentrated in four areas that contribute to the SDGs

Clean energy Green infrastructure Financial institutions Scalable enterprises

CLEAN ENERGY Increase energy access and supply Our ambitions:

1.5 million new households provided with access to electricity 5,000 MW new capacity financed, whereof 4,000 MW renewable

INVEST in greenfield grid-connected power plants, distributed generation and off-grid supply

12

FINANCIAL INSTITUTIONS Strengthen financial inclusion Our ambitions:

Offered financial services to 15 million new clients Extended NOK 130 billion more in loans to clients

FURTHER GROW bank and microfinance whilst exploring fintech and insurance

13

GREEN INFRASTRUCTURE Improve essential infrastructure services Our ambitions:

Establish partnerships Execute investments in waste management, water and power networks Invest NOK 1 billion in 6-10 investments

INVEST in waste management, water supply and power networks

14

SCALABLE ENTERPRISES Grow companies in agribusiness and manufacturing Our ambitions:

50,000 jobs created through direct investments and funds Established partnerships with larger industrial actors Realised growth so that total revenues have increased by NOK 2 billion

BUILD ENTERPRISES through funds, and industrial partnerships targeting the agribusiness and manufacturing sectors

15

We target select developing countries with high impact potential

16

SELECTION CRITERIA

Additionality – Opportunities – Knowledge

OUR KPIS

33% in LDC - 50% in SSA

CORE COUNTRIES; 29 countries where Norfund:

• Actively builds pipeline and deep country expertise
• Seeks to make direct investments, thereby strengthening our impact

EXTENDED REACH COUNTRIES: Investments are channelled through reputable funds, strategic partners or platforms

EXTENDED REACH

Benin Burkina Faso Burundi* Cameroon Costa Rica Guinea Haiti* India Liberia* Madagascar Mali* Nepal Niger Panama Philippines Sierra Leone Somalia* South Sudan* Swaziland Togo*

Core countries Extended reach Fragile states

New core countries in red

CORE

LDCs Angola Myanmar Bangladesh Rwanda Cambodia Senegal Ethiopia Tanzania Laos Uganda Lesotho Zambia Malawi Zimbabwe Mozambique Other SSA Côte d'Ivoire Kenya Ghana South Africa Nigeria Other countries Colombia Indonesia Dominican Rep. Nicaragua El Salvador Sri Lanka Guatemala Vietnam Honduras

* Fragile states

We will not reach the SDGs without substantial private sector investments

17 Source: UNEP FI 2018: “Rethinking impact to finance the SDGs” (figures rounded off for simplicity reasons and might not add up to the total)

Public Private Investment gap

Emerging markets and developing economies

(trillion USD)

1.2 1.0 2.5

• Globally, there is an annual financing gap of $2.5 trillion to reach the SDGs
• In developed economies, private sector finance enables us to (almost) close the gap
• In emerging and developing economies the gap is more than 50%, in Africa close to 90%

Public Private Investment gap

Advanced economies

(trillion USD)

Annual investment need

4.5

Annual investment need

1.5

0.1 0.9

Private capital is key and must be mobilised

0.4

85% 36% 50% 48% 16% 28% 27% 9% 17% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Equity LDC Sub-Saharan Africa

Share of total committed capital 2017

Norfund outperforms peers on additionality indicators

18

Sources: SIGLA analysis/ EDFI, IFC annual report FY17, Norfund, EDFI members

Norfund

IFC EDFI

Assess cross-cutting issues systematically in our work and strengthen our efforts

CLIMATE & ENVIRONMENT GENDER EQUALITY HUMAN RIGHTS ANTI-CORRUPTION

19

We are a responsible investor, adhering to international standards

20

WHAT IT MEANS: Working with investees to achieve social and environmental sustainability

• Compliance to local laws and international standards
• Environmental and social considerations
• Zero tolerance for corruption
• Good working environment: occupational health and

safety standards

• Good corporate governance and internal controls

HOW WE WORK: ESG* integrated into the investment process

• Investments are categorised based on ESG risk - high

risk projects trigger a different process and close follow-up

• Norfund does not expect “perfect enterprises” at the

time of investment, but require an action plan to improve over time

Environmental and Social Performance standards

*ESG = Environmental, Social and Governance issues

The standards are operative, hands on guidelines and enable us to deliver in practice and respect other international standards

Additionality is key, but also difficult to measure

21

Our investments should make a contribution beyond what is available in the market and should not crowd out the private sector

+

Key questions: Would the investment happen without us? Do we enhance the investment in any way?

+

Difficult to prove – have to substantiate it

+

* Resulting in rating high, medium, low

Norfund’s additionality criteria* Financial:

• Investing in the poorest countries (income level)
• 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)
• Contributing to starting new business activity (greenfield)
• Mobilising private investors

Value:

• Taking an active role in investments (engagement level)
• Promoting social and environmental standards (E&S category)
• Supporting enterprise improvements (business support)

LAKE TURKANA WIND POWER

Reducing the need for fossil energy in Kenya

Mobilising private investors Has enabled Kenya to shut down 3 fuel oil plants

*Estimate from 2018 Impact Assessment

Induced jobs through better power supply: ∼ 93,000*

CREATING JOBS

2500 direct jobs during construction

• Est. annual production 1440 GWh

PROVIDING RISK CAPITAL

Early-stage project development financing and equity investment (12.5%) together with KLP

REDUCING EMISSIONS

310 MW wind farm = ∼ 17% of Kenya’s installed capacity and largest of its kind in Africa

22

CENTRAL SOLAR DE MOCUBA

First large-scale solar power plant in Mozambique

75 000 tonnes of CO2 emissions to be avoided

INCREASING RENEWABLE SHARE

40 MW solar, increasing renewable power share in Mozambique’s energy mix

Reduced power outages for manufacturing and other businesses, which again can hire more people

CREATING JOBS

Location of plant critical for energy security in northern Mozambique

• Est. annual production: 79 GWh

Mobilising lenders and reaching financial close PROVIDING CAPITAL AND EXPERTISE Early-stage project development financing, equity investment, guarantees and ESG expertise

23

MARGINPAR

Viable and sustainable company High satisfaction and job safety for the employees Increased export revenues and improved resilience for the country

CREATING JOBS

Creates jobs with safe and responsible working conditions 3 600 employees, 50% women

CAPITAL AND ACTIVE OWNERSHIP

Equity investment facilitated expansion, board seat and ESG expertise

Growing people, growing flowers IMPROVING QUALITY AND PRODUCTIVITY

Climate adaptation and a culture of improvement gives higher productivity

Sources: Marginpar; Norfunds annual data collection

24

Our mission is challenging and cannot be achieved on our own

We are set up to take risk and contribute to development – it is difficult and we will not always succeed

Our ambition is to create jobs and improve lives We will not succeed alone but in partnership with others

25