Norfund increased investments by 10% to a record 5.3 billion NOK in 2021.
“We’re proud that even in the middle of the pandemic we have increased our investments toward job creation and fighting poverty”, says Norfund CEO Tellef Thorleifsson.
This is the third year in a row Norfund has increased investments to a record high. In 2020, the first year of the pandemic, Norfund also increased investments by 20%, to 4.8 billion NOK.
While in 2020 the pandemic caused a reduction in the overall investment level of the European Development Finance Institutions (DFIs), last year they reported a recovery to pre-pandemic levels of investment.
Overall recovery in 2021
Following the economic downturn for the world economy that followed the outbreak of the COVID-19 pandemic in 2020, the world experienced an economic recovery in 2021 with a GDP growth of 5.5% and a strong growth in cross-border direct investment. Investments are important for employment and economic growth, but only 1.7% of global direct investment in 2021 found its way to the least developed countries (LDCs). The small share of world investments flowing to the poorest countries underlines the necessity of development finance institutions (DFIs) like Norfund, channeling investment capital to cover investment needs in LDCs and Sub-Saharan Africa.
Future world economic development has become more uncertain. The Russian invasion in Ukraine has led to a marked deterioration in global business sentiment and is likely to weaken global activity. Norfund’s key markets such as LDCs and Sub-Saharan countries will primarily be impacted through higher commodity prices in the world market, especially the prices of food, fertilisers and energy. However, this comes on top of the impact of COVID-19 still being felt, as well as increasing interest rates which is making financing pricier.
Invested three times the awarded budget
Norfund was awarded 1.68 billion NOK in last year’s development budget, but invested three times as much.
“We can see how effective it is to make a difference through investing the capital, as our returns and profits can be used to reinvest again and again, creating more impact”, says Thorleifsson.
In total Norfund made 32 new investments and 13 follow-on investments in existing companies. Clean Energy was the biggest investment area with 2.7 billion NOK in new investments. The remaining capital was invested in Scalable Enterprises and Financial Institutions. Norfund also made its first investment related to water supply.
Total portfolio in 2021 by investment area
Defied the pandemic
“We are particularly glad to have increased the pace of our investments the last two years. It has been even more important during the pandemic to create jobs and prevent job losses”, says Thorleifsson. “That has also made our work more challenging.”
More than 700 million people lived in extreme poverty in 2021. That is over 50 million more than in 2019 and nearly 100 million more than there would have been without the pandemic.
“We are particularly glad to have increased the pace of our investments the last two years, when the pandemic has made our work to create jobs and prevent job losses even more important, but also more challenging”, says Thorleifsson.