Board of Directors’ report

The president of Ghana stated in an address in May of 2022 that, “Though the bombs are falling far away, they are hitting us here in Africa”, a pertinent observation of the fact that as with COVID-19, the impacts of the war in the Ukraine and macroeconomic instability are hitting hard in the poorest countries.

Following an economic rebound in 2021, the world economy was hit by inflation, rising interest rates and a slowdown in economic growth in 2022. The Russian invasion of Ukraine drove up the prices of energy, food and fertilizers in particular. According to the World Bank, inflation reached almost 10 per cent in emerging and developing economies (EMDEs), its highest level since 2008, and in advanced economies it reached just over 9 per cent, the highest since 1982. 

Monetary tightening, rising interest rates and risk aversion led to depreciation of many currencies and capital outflows from many EMDEs. While food prices eased somewhat toward the end of 2022, food price inflation remained very high in some EMDEs. For Low Income Countries (LICs) the number of people living in food insecurity increased from around 92 to 104 million people between 2021 and 2022. This is further exacerbated by a significant increase in the number of extreme weather-related events in LICs.

Increased poverty and an inequitable distribution of global investments heightens the need for Norfund’s activity. The International Energy Agency has reported that clean energy investments grew by 8 per cent in 2022, but half of this increase is linked to rising costs. However, the growth is concentrated in advanced economies with EMDEs stuck at 2015 levels. This illustrates the importance of the establishment of the Climate Investment Fund. 

In 2022 Norfund increased its investment in developing countries by 22.5 per cent, to another record-high 6.5 billion NOK. This was possible through a combination of available funds from the sale of SN Power (completed in 2021), recycling of funds through selling assets and stable, annual capital injections from the Norwegian government.

With continued capital injections from the Norwegian government, Norfund is in a position to maintain a high level of investment in the years ahead.

About Norfund

Norfund’s mandates and strategy

Norfund was founded in 1997 as Norway’s key instrument for promoting investment in developing countries. The fund’s mandate is to contribute to the development of sustainable business and industry in developing countries by providing equity and other risk capital and furnishing loans and guarantees. The aim is to establish viable, profitable businesses that would not otherwise be initiated because of the high risk involved.

In addition to Norfund’s original development mandate given in the Norfund Act, Norfund was in 2022 assigned the management of the Climate Investment Fund on behalf of the Norwegian state. The aim of the fund is to accelerate global energy transition by investing in renewable energy in developing countries with large emissions from coal and other fossil power production. The new mandate builds on Norfund’s long track record of investing in renewable energy and there are considerable synergies between the two mandates. The fund is managed according to a separate instruction issued by the Ministry of Foreign Affairs, anchored in a revision of the Norfund Act. This means that Norfund now has two mandates – a development mandate and a climate mandate.

The mission of the development mandate is to create jobs and improve lives by investing in companies that contribute to sustainable development. Here, Norfund has four investment areas, the largest being Financial Inclusion, which invests in banks, microfinance, as well as insurance and fintech. The second largest is Renewable Energy, which invests in solar, wind and hydropower plants as well as distributed energy solutions. Scalable Enterprises covers investment in the agricultural value chain, manufacturing industry and funds. Green Infrastructure covers investment in water supply and waste management. Each investment area has ambitions that contribute directly and in a measurable way to the achievement of the UN Sustainable Development Goals. Under the development mandate, Norfund prioritises investing in countries where capital is scarce, such as Least Developed Countries (LDCs) and Sub-Saharan Africa and is primarily an equity investor. Further, the Ministry of Foreign Affairs has decided that approximately 60 per cent of capital injections from the state budget should over time be invested in renewable energy (starting as of 2022).

For the climate mandate the mission is to contribute to the transition to net zero in emerging markets. Here, Norfund invests primarily in large-scale renewable power plants as well as commercial and industrial energy solutions. Also for this mandate, Norfund prioritises equity. For the climate mandate, the geography is primarily middle-income countries where the potential to avoid large-scale greenhouse gas emissions is significant. 

Under both mandates, Norfund strives to be a responsible owner, tailoring our engagement to the industry, instrument and risk level of our investment. For some investments (such as equity investments with a substantial stake), we will take an active role, for others (such as loans to banks), we will be less active, but still ensure that we are a responsible owner with high ethical standards. We will always seek to exit when our role as investor is no longer needed so that capital can be recycled and put to work in new investments.

For all of Norfund’s investments we collaborate with and rely on strong, local partners. These partners are the companies in which we invest, their owners, management teams and employees as well as our co-investors, both locally and internationally. This is core to our model and to how we can invest responsibly and with healthy returns in our markets. 


Norfund is financed through annual capital allocations from the Norwegian government and the surplus generated by its investment activities. In 2022, government allocations amounted to 1.7 billion NOK to the development mandate and 1 billion NOK to the climate mandate. In addition to the capital allocations, Norfund received a grant of 15 million NOK for the Business Support programme. As of 31 December 2022, Norfund’s committed portfolio amounted to 31.65 billion NOK. The return in the form of interest and return on investment, repayment of loans and realisation of earlier investments makes up a growing share of the Fund’s available investment capital and enables Norfund to increase the volume of its investment and contribute to even stronger development and climate effects going forward.


Most countries in which Norfund invests hold limited attraction for international investors because the risk associated with them is considered too high. Norfund’s expertise, willingness and ability to manage risk are therefore important for bringing capital to and succeeding in these countries. Additionality is therefore key to how Norfund invests. The Fund is financially additional in that it supplies capital that businesses would otherwise have difficulty securing because of a shortage of capital and high risk. Norfund is value additional in that it contributes beyond the financial capital through active ownership, promoting environmental and social standards, and business improvements. Norfund is a minority investor and thereby also contributes to mobilising capital from other investors, both in Norway and worldwide. Norfund’s additionality ambitions for the individual investments are registered and reported to the OECD Development Assistance Committee and reported on Norfund’s website.

Investments and results in 2022

Investments and results in 2022 – Development mandate portfolio

In 2022, the development mandate delivered an estimated return, measured as IRR,1 of 5.1 per cent measured in the investment currency and 14.8 per cent measured in NOK. Since its inception, the portfolio has had an IRR of 5.1 per cent measured in investment currencies and 8.1 per cent measured in NOK. The profitability of the portfolio was in line with expectations. As of end 2022, committed portfolio was 29.5 billion NOK, an increase of 2.6 billion NOK. The rise reflects this year’s commitments and FX effects due to the weakening of the NOK, with the transfer for one project to the climate mandate and a significant exit tempering the increase.

For the development mandate, Norfund committed 4.5 billion NOK and made 34 new and 18 follow-on investments. Investments were broadly distributed within Norfund’s investment areas, with 1.8 billion NOK in Financial Inclusion and 1.1 billion NOK in Renewable Energy. Direct investment in Scalable Enterprises (agricultural value chain and manufacturing) amounted to 839 million NOK, and 680 million NOK was invested in Scalable Enterprises through funds. The newest investment area Green Infrastructure remains small, with 139 million NOK invested in 2022. 

Investment in LDCs accounted for 37 per cent of the portfolio at the end of 2022, while investment in Sub-Saharan Africa accounted for 63 per cent of the portfolio. Equity investment accounted for 74 per cent of the portfolio at the end of the year. The new Renewable Energy KPI ended at 64 Per cent at the end of 2022. Norfund’s portfolio is thus well within the key performance indicators set by the Board, which stipulate that at least 33 per cent of the portfolio must be in LDCs, 50 per cent must be in Sub-Saharan Africa, 70 per cent in equity, as well as approximately 60 per cent of capital allocations to Norfund over time should be invested in renewable energy.

Norfund’s investments contribute directly to the attainment of the UN Sustainable Development Goals. For the development mandate, these are SDG 1 (No poverty), 7 (Affordable and clean energy), 8 (Decent work and economic growth) and 9 (Industry innovation and infrastructure. Each year, Norfund gathers data on development effects in our portfolio companies. These include companies we are invested in both directly and indirectly through platforms and funds. The data is gathered based on harmonized indicators. In 2022 Norfund received data from 915 companies (a 97% response rate) for the Development Mandate. To highlight the actual development in portfolio companies, we also report changes from 2021 to 2022 for those which were part of the portfolio and reported also 2022/2021 data (71%).

At the close of 2022 there were a total of 514,000 jobs in Norfund’s portfolio companies. 60% of these were in Africa, and 28% were in Least Developed Countries. Women held 37% of these jobs; youth under the age of 25 held 18% of them. There was a net increase of 24,500 new jobs in Norfund’s portfolio companies in 2022, equivalent to a 7% increase, the largest part being in Africa. Taxes and fees paid by portfolio companies constituted 23.2 billion NOK, of which 17 billion NOK was paid in Africa.

Norfund uses the Joint Impact Model to estimate the indirect effects of our investments. These estimates show that the ripple effects of Norfund’s investments both backwards (value chain and suppliers) and enabled (effects of access to finance and energy) are substantially bigger than the direct effects. It should be noted though that these numbers are modeled estimates and come with a significant degree of uncertainty.

As part of the Norfund strategy for 2019-2022 ambitions were set for each investment area to reflect accumulated organic growth (that is, development in the companies after Norfund invested) on sector-relevant parameters. Clean energy delivered above ambitions with access to energy at 7.6 million new households (2022 goal: 1.5 million) and new capacity financed at 5.3 GW (2022 goal: 5 GW). Financial Institutions also delivered above ambitions with 32.1 million new banking clients (2022 goal: 15 million clients) and an increased loan portfolio of 195.9 billion NOK (2022 goal: 130 billion NOK). For Scalable Enterprises, the situation was more challenging, particularly due to COVID-19. Ambitions were not met, with increased revenues for portfolio companies at 1.1 billion NOK 2022 goal: 2 billion NOK) and 32,300 new jobs created (2022 goal: 50,000).

All numbers for development effects are unattributed, meaning they show the total effect of Norfund’s portfolio companies and do not account for Norfund’s ownership stake. More comprehensive information on Norfund’s development effects is available in the annual report.

1 IRR in Norfund is at a gross rate as costs related to investing in the instrument such as due diligence, evaluation and other direct or indirect costs are not considered.

Investments and results in 2022 – Climate mandate portfolio 

The climate mandate became operational in 2022, making it too early to report meaningful numbers on financial returns. At the end of 2022, the total committed portfolio was 2.14 billion NOK. The investments were primarily in large-scale integrated power producers (IPPs), and one in transmission. For the climate mandate, the board has set an indicative risk threshold for individual country exposure of 25 per cent. 2022 was the first year of investment and the fund invested in only two countries (India and South Africa), which means it is too early to apply the risk threshold.

Also for the climate mandate, Norfund’s investments contribute directly to the attainment of the UN Sustainable Development Goals. These are SDG 13 (Climate action), 7 (Affordable and clean energy) and 8 (Decent work and economic growth). For 2022 Norfund contributed to financing 2 443 MW renewable energy and estimated ex ante avoided greenhouse gas emissions of 6,2 million tonnes CO2 equivalents. This is in line with the ambitions for the strategy period for the climate mandate (2022-2026) of 9 GW renewable energy financed and 14 million tonnes of avoided emissions. Due to the fact that only a limited number of companies in the climate mandate portfolio reported data for 2022 it is not possible to report on jobs and taxes. This will be reported for 2023. As for the development mandate, this numbers are not unattributed.

Review of the financial statements

Norfund ended the year with an operating income of 1070 million NOK and a positive result after tax of 2.243 billion NOK. We received total dividends of 421.2 million NOK where KLP Norfund Invest AS (138 million NOK), Agua Imara (92 million NOK), Klinchenberg B.V. (82 million NOK), a joint venture with Scatec, and Arise B.V. (33 million NOK), were the most significant. Interest income has increased significantly to 475 million NOK as we have achieved a growth of 28 per cent of our loan portfolio in local currency, while floating interest rates have soared as national banks have increased their interest rates from around zero to levels we have not had since prior to the financial crisis. However, the most significant effect on income and financial statements for 2022 is the significantly weaker NOK with a 11.8 per cent decrease against USD, our main currency. The historically weak NOK results in a higher value of investments and cash holdings converted into NOK. This shows the significant impact that NOK fluctuations have on income and financial statements, an effect that will be reversed if there is a similar strengthening of the NOK. To the board, however, the relevant indicator is IRR measured in local currency as this better captures Norfund’s underlying performance. 

While some investment areas have seen improvements as COVID-19 restrictions have been lifted, repercussions of the pandemic as well as the Russian invasion of Ukraine have led to high inflation rates in many markets, with negative effects on our investments and subsequent write-downs. Further, as the situation in Myanmar remains challenging, we have further written down our investments in the country with NOK 63 million and have now written down an average of 72 per cent of these assets. All in all, we have accounted for net write-downs of 243 million NOK in 2022.

Last year, overall labor costs rose by 14 per cent, to 180 million NOK, after further strengthening both corporate and investment departments to be able to deliver on the climate investment mandate. This also means increases in the other cost areas, but on balance within the expectations for 2022. Travel costs remained at a lower level than we expected as travel has been still restricted throughout the first quarter of 2022. 

Norfund’s overall balance at the end of 2022 was 37.4 billion NOK, an increase of 4.9 billion NOK on 31.12.2021. The total earnings added to the earned equity amounted to 2.2 billion NOK. As of 31.12.2022 the net asset value, based on the estimated market value of Norfund’s portfolio, was 39.8 billion NOK.

At the end of 2022, Norfund had outstanding, undisbursed commitments totaling 8.5 billion NOK. Cash holdings were 5.5 billion NOK, in addition to current assets of 8.3 billion NOK. When the Climate Investment Fund was established, 5 billion NOK of Norfund’s cash and current asset reserves were reserved for this purpose. The Board regards liquidity as sound and confirms that the going concern assumption applies. In the opinion of the Board of Directors, the financial statements for 2022 provide a true and fair view of Norfund’s financial position.

Organisation, environment and corporate social responsibility

Corporate governance

The General Assembly is Norfund’s supreme body. Corporate governance is exercised through decisions taken by the General Assembly, including the adoption of and any amendments to the Norfund statutes. In 2022 an extraordinary general meeting was held to pass a resolution to amend Norfund’s statutes to include a new article on the management of the Climate Investment Fund and raise the expectation on Norfund’s investments in renewable energy. In addition, a resolution was passed to formalise the governance instructions for the Climate Investment Fund. These resolutions were anchored in a revision of the Norfund Act, passed by the Norwegian parliament, to reflect the fact that Norfund has now been tasked with managing the new fund. The Norwegian Ministry of Foreign Affairs receives quarterly reports, and four contact meetings are held through the year. Norfund’s Board of Directors is elected by the General Meeting, and two members are elected by and among the Fund’s employees. The Board consists of nine members. In 2022, the Board held a total of eight Board meetings. In addition, the Board travelled to London and Cambridge for a session on Norfund’s role in a changing world and meetings with key partners. Norfund has taken out a Directors and Officers Liability Insurance with AIG.

Norfund has a framework of governing documents ranging from the Norfund Act and statutes to policies adopted by the board, guidelines for important areas, to procedures for the conduct and follow-up of investment activities. The structure is geared to Norfund’s activities. The Investment Committee considers investment proposals and contributes to quality assurance. In 2022 the committee consisted of eight members, two of whom are external. The Credit Committee considers and approves loans to financial institutions and consists of five members, one of whom is external. Both committees are authorised to approve individual investments of between 4 million USD and 20 million USD. Both committees also submit their recommendations for investments of over 20 million USD, but it is the Board that approves them. Investments of less than 4 million USD are considered and approved by the management.

Risk management and internal control

It is at the core of Norfund’s mandate to take risk. The risks taken and how these are managed are set up in Norfund’s risk appetite statement. This statement describes two categories of risks. The first is about where and in what Norfund invests (such as markets, instruments, and currency risks). These risks are managed by market insight, local presence, and portfolio diversification. The second category is risks related to how investment partners are selected and how Norfund operates and runs investment and operational processes (such as risk of corruption, ESG compliance and health & safety). These risks are minimized by designing and implementing appropriate systems and processes, regular training, contractual requirements, internal control and compliance. The risk appetite statement was updated in 2022 to also include climate risk.

In 2022, Norfund worked to strengthen and operationalise the recently introduced risk management initiatives. This includes the systematic use of the framework for Enterprise Risk Management (ERM) which is a tool for the management and board to identify, monitor and manage key operational risks. Under the current framework, the risk overview is updated and reported to the management team, Risk and Audit Committee and the Board every six months. IT security continued to be a priority and a new IT strategy was developed. An external audit of the IT operations was performed, concluding that governance and control of the IT operations and IT security has been significantly improved.

Financial operations continued to streamline processes and implemented further checks and segregation of duties to minimize risk of fraud and unintended error, especially regarding payments. A new accounting system was introduced in 2022 to improve overview of the daily business and to enable automatization of processes and reconciliations to reduce risk with manual tasks. 

Norfund has developed a country risk tool to assess, understand and manage country risk. This tool enables Norfund to monitor portfolio exposure by country and the risk level of the country with respect to political, economic, E&S and business integrity. Based on the country risk tool the board has set risk thresholds on exposure to individual countries and groups of countries. The country exposure under both the development and climate mandate are in line with the indicative risk thresholds set by the board.

Norfund has zero tolerance for corruption and financial irregularities in its portfolio companies. There were six reports of purported financial irregularities in the portfolio, of which two cases were documented irregularities and four cases remain unsubstantiated allegations. Norfund has established systems for preventing, reporting and handling irregularities in its portfolio. One of the confirmed cases was reported further to the Ministry of Foreign Affairs. 

In addition to the reports on purported financial irregularities from our portfolio companies, Norfund received a total of six whistleblowing reports through our externally managed whistleblowing channel. Norfund has followed up, maintaining confidentiality and integrity of the whistleblowers in accordance with internal procedures. No allegations or claims raised through the whistleblowing channel in 2022 have led to any further criminal or formal proceedings.  A dedicated business integrity week was launched in 2021 and carried out for the second time in 2022 with corruption as the main theme.

Organisation and operational efficiency

Norfund has experienced substantial growth over the past few years, both in new investments, size of portfolio and number of employees. As the organisation grows it has been necessary to strengthen corporate staff functions to ensure that the growth is monitored and supported sufficiently. Recruitments during 2022 have primarily been related to the responsibility for the climate mandate as well as increased expectations and requirements for measurement and reporting. The regional offices have also grown, reflecting the ambition to primarily grow the organisation close to the markets in which Norfund invests. In 2022 Norfund initiated a cost efficiency study, mapping Norfund against a selection of other DFIs. Preliminary findings show that Norfund is among the most cost efficient, as measured by the share of operational costs of committed capital. Norfund’s ambition is that this number will remain below the average of comparable development finance institutions. This, combined with the efforts to strengthen and improve processes as described under «Risk management and internal control» will going forward strengthen Norfund’s work on operational efficiency.

Increased complexity due to organisational growth has been defined as a key risk. Acknowledging that a specific and concrete corporate culture is paramount to ensure that the organisation develops and grows smart, Norfund initiated a project in 2022 to further strengthen the corporate culture. This resulted in The Norfund Way – five action driven values that describe the attitudes and behaviours we believe are most important to promote and deliver on Norfund’s mandate. 

By year end 2022 Norfund had 127 employees; of those 121 are permanent positions, representing 24 nationalities. Strong regional offices with experienced teams that are close to our markets are vital to succeed with Norfund’s investment strategy. In addition to the office in Oslo, Norfund consists of five regional offices in Accra, Cape Town and Nairobi in Africa, Bangkok in Asia, and San José in Central America. 

The activity duty and the duty to issue a statement (aktivitets- og redegjørelsesplikten) is provided in a separate report on the Norfund website, available under the annual report. Norfund has guidelines for recruitment, competence building and gender equality and procedures for employee follow-up and remuneration. In 2022, “desk swap” was introduced, whereby employees can work at a different office for a short period of time. The aim is to strengthen company culture and promote learning across the organisation as well as increase employee motivation. In 2022, 10 employees were assigned to desk swaps. 

Norfund is hiring more young employees, and the average age has fallen from 41.4 in 2019 to 40.4 in 2022. The gender balance remains stable with 48 per cent female and 52 per cent male employees. In 2022, Norfund had 23 new employees, 48 per cent women and 70 per cent aged 30 or under. The internal network “Young Norfund” ran a self-leadership training and provided an arena for young employees to develop professional skills and share experience. In 2022 Norfund continued the internship programme, which aims to enhance diversity and support employer branding. Six students/recent graduates participated. 

Sick leave in 2022 amounted to two per cent of working hours. This is one per centage point lower than in 2021, and the Board of Directors does not deem it necessary to implement special measures relating to the working environment or designed to promote the aims of the Norwegian Anti-Discrimination Act and Anti-Discrimination and Accessibility Act.

In 2022, Norfund continued to monitor salary levels across functions, including conducting an annual gender pay gap analysis. Following the adjustments that were made in 2021, no further adjustments were required in 2022. Guidelines for executive pay and reports on salaries and other remuneration of senior executives are both published on the Norfund website.

Corporate social responsibility

Social responsibility is a foundation for Norfund’s activities, both for its own operations and the portfolio companies. The cross-cutting considerations of Norwegian development policy – human rights, gender equality, anti-corruption, climate and environment – all form part of these efforts.

Norfund has significantly strengthened its work on climate in 2022. The ambitions and actions in this area reflect owner expectations and the fact that Norfund is an investor in developing countries, which presents different challenges and opportunities than for organisations in more developed markets. Norfund is aligned with the other European DFIs in its commitment to net zero by 2050, aligning all new investments with the Paris agreement and assessing climate risk for all new investments. Norfund also reports in line with TCFD. In 2022, improvements were made to strengthen climate competence and integrate risk assessments into the investment process. Integrating climate effectively is challenging and this work will continue in the coming years. 

With regards to Norfund’s own operations, Norfund was certified as an Eco-Lighthouse (Miljøfyrtårn) in 2022 and uses this framework to improve our internal environmental performance. Emissions from operations and the process to estimate emissions from the investment portfolio can be found in Norfund’s annual report.

For the development mandate, there is a requirement that approximately 60 per cent (previously 50 per cent) of capital allocations from the government should over time be invested in renewable energy, an important contribution to mitigating climate change. In line with the mandate, the organization will also continue to prioritise the least developed countries and Sub-Saharan Africa, which are expected to be hardest hit by climate change.

For the climate mandate, established in 2022, the mission is to avoid greenhouse gas emissions and hence this is a cornerstone of Norfund’s contribution to mitigating climate change.

Norfund works systematically with environmental and social (E&S) risk throughout the investment process, applying the environmental and social standards of the International Finance Corporation (IFC). The IFC standards are tailored to investments in developing countries. By applying these operational standards, Norfund meets the expectations of responsible business conduct in Meld. St. 8 (2019–2020) (The state’s direct ownership of companies) including the expectation that due diligence should be performed to avoid harm to people, society or the environment as described in the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights (UNGP). In 2022, EDFI published a summary statement on human rights that describes the DFIs’ ambitions and commitments in this important area, including support for the Guiding Principles on Business and Human Rights (UNGP). In 2022, Norfund’s work on E&S was further strengthened by the expansion of our ESMS (Environmental and Social Management System), development of a new E&S monitoring system as well as recruitment (9 FTEs now work as dedicated E&S advisors) and competence building (improved mandatory E&S training for all investment staff).

Good working conditions are a requirement for all companies in Norfund’s portfolio. Norfund monitors health, safety and environment (HSE) in all its investments, with a particular focus on training and compliance with HSE procedures. The investment agreements contain a requirement that serious accidents and fatalities must be reported. In 2022 Norfund regrettably experienced 13 fatalities in directly held portfolio companies. Seven of the fatalities were the result of traffic accidents. These incidents are reported to the Board, and in special cases also to the Ministry of Foreign Affairs. One of these was reported to the Ministry of Foreign Affairs. Norfund follows up all fatalities related to its investments to ensure that they are investigated, that safety procedures are modified if necessary, and that the next of kin receive the compensation to which they are entitled.

Norfund has a firm policy on responsible tax which is aligned with the European DFIs based on a review conducted in 2021, operational adjustments, including more focus on tax structure elements and adjustments in the investment manual, were initiated in 2022. There was substantial investment in funds and companies with regional outreach in 2022, and hence extensive use of third countries also in 2022.

Norfund has a Business Support Program funded by the Ministry of Foreign Affairs. The purpose of this facility is to enhance the development effects of investments. For example, Norfund supports capacity development and climate adaptation training for smallholder farmers and digitalization of a training program for women entrepreneurs. In 2022, 19 new Business Support projects were approved, a total of 27.4 million NOK was committed, and the portfolio consisted of 54 active projects.

In 2021 Norfund signed up to the “2X Challenge”, designed to promote investors’ work for equal opportunities in their investment activities. In 2022, the primary focus was to strengthen implementation of the Norfund’s gender position by enhancing the investment process and working through the business support program. As a result, 2022 saw an increase of Business Support projects focusing on this issue. Dialogue with external stakeholders continued.

Norfund regularly engages in dialogue and collaborates with civil society organisations and other partners. In 2022, a dialogue meeting on Norfund’s impact took place with all interested organisations, and several bilateral meetings were held with individual organisations on issues such as climate and environment, gender equality, child labour, microfinance and job creation. 

The Norwegian parliament established a separate Project Development and Risk Mitigation Facility (PDRMF) in 2019, renamed the Frontier Facility to better communicate its purpose in a simple way. Through this, Norfund can provide early-stage project development and risk mitigation. The facility is used for projects with higher risk than the investments in Norfund’s core portfolio and is managed separately. The current portfolio consists of eight projects with 94.8 million NOK committed. In 2022 one PDRMF project was converted into an equity investment, which allowed for a replenishment to the facility of 26.8 million NOK.

Outlook for the future

The UN Sustainable Development Goals (SDGs) and the climate ambitions set out in the Paris agreement provide important guidelines for development going forward, also for Norfund. The funding gap to reach the SGDs was formidable in developing countries already before the COVID pandemic and the Russian invasion of Ukraine. The investment gap has now widened even more.

The economic outlook for developing countries is bleak. The World Bank estimates that over the next two years, per capita income growth in emerging and developing economies will average 2.8 per cent, a full percentage point below the 2010-2019 average. In Sub-Saharan Africa – which accounts for 60 per cent of the world’s poor – growth in per capita income over 2023-24 is expected to average just 1.2 per cent, a rate that could cause poverty rates to rise, not fall. By the end of 2024, GDP levels in emerging and developing countries will be roughly 6 per cent below levels expected before the pandemic. The Bank further estimates that over the 2022-24 period, gross investment in these economies is likely to grow by 3.5 per cent on average – less than half the rate of the previous two decades. In fragile and conflict-affected areas, average per-capita incomes are expected to decline by 2024.

After the balance sheet date, there has been substantial turbulence in the financial industry where several banks, especially in Europe and the United States, face significant challenges. This has led to uncertainty in the financial markets. At the time of submission of the annual accounts it is the board’s assessment that this does not present significant uncertainty for Norfund’s financial position. Still, it should be underlined that this economic backdrop, combined with uncertainty about possible new corona virus outbreaks and the development of the war in the Ukraine creates instability and uncertainty, not least for Norfund’s markets.

This situation entails new challenges for companies in Norfund’s portfolio, but it also clearly shows the need for a patient, countercyclical investor like us. When capital flows are moving out of developing countries, Norfund’s role becomes even more important. It also shows the importance of investing in the priority sectors, for example strengthening the agricultural value chains, not least in Sub-Saharan Africa, a region which is a large net importer of food. With the high energy prices and a return to fossil fuels in many parts of the world, it also positions the Climate Investment Fund as part of the solution to avoiding large-scale emissions from countries such as India and Indonesia.

Even in challenging conditions, Norfund’s pipeline remains strong for both mandates. By the end of 2023, we estimate that the committed portfolio will be approximately 31.2 billion NOK for the development mandate and 3.6 billion NOK for the climate mandate. However, these numbers depend on market conditions and continued development of pipeline.

Norfund has revised its strategy for the 2023-26 period. Our mission now reflects the two mandates – development and climate: “Norfund invests to create jobs, improve lives and support the transition to net zero by investing in companies that drive sustainable development”. The four investment areas for the development mandate – Renewable Energy, Financial Inclusion, Scalable Enterprises and Green Infrastructure – still address key development needs in our markets and will remain. The strategy for the new climate mandate has been developed to deliver on the mission to avoid large scale climate emissions. By clearly delivering on both our development and climate mandates, as well as understanding the interlinkages between the two, we have a strong foundation for continued growth in the next strategy period. The Fund is in position to keep its level of investment high in the years ahead but maintaining the investment level is contingent on continued annual injections of capital from the Norwegian government for both the development and the climate mandate.

As Norfund, we never succeed on our own, but rely on collaboration with our partners – our investees, co-investors, owner and other stakeholders. We are grateful for the trust that they have put in us in 2022 and will do our utmost to deliver also in 2023.

The Board views Norfund as well equipped to deliver on the strategy and goals that have been set, and thanks the management and employees for their important work through a demanding year. Norfund will continue to make an important contribution to the success of an ambitious development and climate agenda and contribute to creating jobs, improving lives and supporting the transition to net zero in the developing countries of the world.

Oslo, 8 May 2023

Olaug Svarva

Brit Rugland

Åslaug Haga

Jarle Roth

Lasse David Nergaard

Tove Stuhr Sjøblom

Martin Skancke

Karoline Teien Blystad

Vidar Helgesen