The year 2022 saw an increased focus on climate adaptation and resilience, through the Technical Assistance Facilities of our fund managers targeted at indirect investees. Two examples of this are the EcoEnterprises Fund III Technical Assistance Facility and the Locfund Next Technical Support Facility that supported the use of new and existing digital tools to measure climate risk.
EcoEnterprises Fund III
EcoEnterprises is a women-led venture fund with an unparalleled track record of over twenty years of building nature-positive, gender-smart investment portfolios in Latin America. Norfund invested in 2018 and following this investment was approached by the EcoEnterprises team to support their Technical Assistance Facility (TAF).
In 2022, Norfund approved to co-fund this TAF that has a specific focus on gender equality and climate solutions together with FinDev Canada.
EcoEnterprises has been able to support portfolio companies on reviewing their climate change strategies with the aim of finding tools to mitigate risk and build resilience.
An example of such an intervention is the application of the Cool Farm Tool, which is an online greenhouse gas, water and biodiversity calculator for farmers. Using this tool has allowed for better communication on environmental benefits.
With the decision to support EcoEnterprises on these interventions, Norfund was also able to mobilize additional TA funding from the Belgian Investment Company for Developing Countries (BIO). This additional support will allow EcoEnterprises to reach more investees and deliver on the pipeline of projects presented to Norfund at the time of application.
Locfund Next Technical Support Facility
Climate is a subcomponent under the Technical Support Facility of Locfund Next, aiming to address climate adaptation and resilience in microfinance institutions. As Norfund has been supporting the Locfund Technical Support Facilities since 2007, a focus on this specific topic was as a requirement for continuous support.
In 2022, Locfund implemented three bespoke activities and one program focusing on climate risk analysis, digital solutions and the development of a manual. The program developed aimed to create awareness and basic guidelines for over 380 staff in 10 microfinance institutions (MFIs).
Furthermore, Locfund conducted an analysis of its portfolio to understand where MFIs are with regard to understanding climate risk. Findings are that 14% of the MFI of Locfund Next evaluate the environmental risk of their clients. Of those MFI evaluated, 43% implement internal actions to reduce the ecological footprint of the MFI.
At fund manager level, Locfund has also increased its efforts to address climate change and all staff have participated in training related to environmental and climate risks. This training, in addition to existing ESG due diligence tools, has led to Locfund starting to promote green finance and the development of green products.