Green Infrastructure

Green Infrastructure is Norfund’s newest investment area. The goal is to develop projects and companies by investing with partners to improve water, wastewater and waste management. These are challenging investment areas, but vital parts of the infrastructure in our target countries.

Key achievements in 2024

234

MNOK

committed

10,000

tons

annual waste recycling enabled

investments in portfolio

Today, more people live in urban than in rural areas and the total number of people living in cities is expected to grow from approximately 4.5 billion in 2023 to 6.7 billion in 2050. A city such as Lagos in Nigeria is forecasted to grow from approximately 20 to 70 million inhabitants during the same time frame. The development of economic growth, jobs, and prosperity requires investments in green infrastructure to alleviate an added strain on the environment and human well-being.
By investing in urban infrastructure, such as the safe removal and management of waste as well as increased access to clean water and sanitation, we can help address urbanization challenges while improving resource use, reducing pollution and contributing to job creation.

Waste management
As much as 93% of waste in low-income countries is thrown away without proper consideration for environmental impact. Yet, waste management has the potential to be profitable, create many new jobs, build local supply of recycled raw material and offer access to hard currency through exports. Waste also contributes 20% of global methane gas emissions, a gas which is up to 86 times more potent than CO2 and has caused a third of historical global warming.

Water access
2 billion people globally and almost half of all in Sub-Saharan Africa lack safe water at home. A million people die every year from drinking unsafe water. Every dollar invested in water and sanitation is estimated to yield 15 dollars in indirect economic returns.

35 billion USD of investments are needed annually in Sub-Saharan Africa to reach SDGs 6.1 and 6.2. Green infrastructure-related areas have achieved increased global attention and funding. Several major funds are turning their attention to investments in waste, water and oceans. Still, the difficulty to secure funding to provide basic services and necessary water and waste infrastructure is a major challenge in Africa for many projects.

The African infrastructure paradox
While many projects are in search of financing and investor interest is high, it is difficult to find commercially sustainable and bankable projects. This is Africa’s infrastructure paradox.
Operational challenges and risks often lead projects to collapse before they can reach financial close. Only very few projects manage to get past the feasibility stage and to financial close. Out of 130 reviewed water projects, only two have turned out to been at an investable stage. Within waste to energy projects, the ratio is nine out of a hundred.

Where Norfund can play a role
Water and waste management are especially challenging sectors given the limited willingness to pay for the services offered.

In developing countries, people are often not used to paying for access to water, and the responsibility for and funding of waste collection is often lacking. This leads to complex projects with high inherent ESG and business integrity risks and therefore start-ups struggle with profitability and growth.

While commercial investors shy away from immature opportunities where risk adjusted returns become unattractive, Norfund can fill a gap by taking higher (but thoroughly considered) risks to validate nascent business models and pave the way for commercial investors.

Green Infrastructure’s aim is to improve essential infrastructure services in:
– Waste management, including recycling and waste-to-energy
– Water supply and sanitation, including wastewater treatment

The priority is direct investments in Sub-Saharan Africa. However, projects have also been explored in South East Asia and India where more mature regulatory environments allow for projects to collect revenues for e.g. waste treatment, thus making those projects investable.
Norfund prefers to invest in collaboration with experienced industry partners who are able to transfer best practices to investee companies. Local or regional smaller players are also considered. During the year several such collaborations have been matured towards investment with world leading companies in waste and water.

Strategic ambitions

Norfund has defined the following ambitions for Green Infrastructure in the 2023-2026 strategy period:

Enable 50 million m3 water and wastewater treatment capacity
Enable 20,000 tons of waste treatment capacity

Investments and results in 2024

By year end, the Green Infrastructure portfolio amounted to 429 million NOK spread across six investments.

234

MNOK

committed in 2024

429

MNOK

committed in total GI portfolio

Highlights of 2024

In Green Infrastructure, six commitments have been made since the inception in 2020; From before TransAfrica Water Systems, The Water Access Accelaration fund, InfraImpact Mid-market Infrastructure fund and Wecyclers were in the portfolio. During 2024 the Veolia-Norfund Platform and The Urban Resilience Fund have been added.

Veolia-Norfund Platform

Norfund has entered into a development partnership with Veolia and announced it to the market in August 2024. The partnership is aiming at developing assets for industries in Africa to treat their effluents and reduce their energy footprint. The type of assets will include water treatment and reuse to waste-to-energy technologies. The project’s value will range from EUR 5 to 50m. The partnership will bring both expertise and financing to the projects. The objective is to create a platform that owns the assets, and Veolia would provide EPC services and O&M to the projects.

The partners have both committed EUR 150k to this development venture and hired one dedicated developer based in Cape Town. The primary geography focus is Southern and Western Africa.

Six months into the development phase, the pipeline has grown significantly demonstrating that the market is responding well to the platform offering. The next six months will now be focused on project development execution with the objective of bringing at least two sizeable projects to financial close by the end of the development period.

TURF

The Urban Resilience Fund B (TURF B) is a significant investment initiative focused on urban infrastructure projects across Africa. Managed by Meridiam S.A.S., an established infrastructure manager with a global presence, TURF B aims to address the critical challenges posed by population growth, urbanization, and climate change in African cities. Norfund has committed EUR 20 million to TURF B in 2024.

TURF B plays an instrumental role in enhancing African urban infrastructure by adopting a long-term investment perspective. The initiative invests in the development of projects from the initial idea stage through to construction and ownership, partnering with local authorities and reputable financiers to ensure successful project execution. This approach not only helps in building essential infrastructure but also promotes public-private partnerships (PPPs) to solve public challenges.

The structure includes funded pockets of concessional and development capital, which provide subsidies for development costs and help mitigate risks associated with greenfield projects. TURF B’s focus on high environmental, social, and governance (ESG) standards further underscores its commitment to sustainable development.

By supporting TURF B, Norfund contributes to the development of resilient and sustainable urban environments, ultimately improving the quality of life for millions of people across the continent.

TransAfrica Water Systems

During its first year of operation, Green Infrastructure provided a loan of USD 2 million, of which USD 1.55m was disbursed, to TransAfrica Water Systems, a Kenyan water solutions company engaging in the production and distribution of equipment and services related to water pumping solutions, water treatment, wastewater management solutions, solar powered water borehole rigs and solar powered water heating systems. The company is one of the recognized distributors of world-renowned water and solar systems in East Africa.

The loan has accelerated access to clean and affordable water to households and institutions in East Africa, deepened the water sector, and facilitated jobs creation directly through the company’s expansion and indirectly through improved economic activities, for example, use of water for irrigation. The company managed to expand its sales significantly following Norfund’s financing and raised further equity financing.

Following challenging markets during 2023, the company has focused on stabilizing its finances. The Kenyan shilling depreciated against the USD, increasing the company’s cost for loan interest and imports. Changed weather patterns with prolonged rain seasons decreased the need for pumped water.

The challenging environment continued in 2024 with volatile political environment and severely reduced government expenditure following a cancelled government financing bill slowed down economic growth affecting the sector. The business has however seen an improved performance in the first two months of 2025.

Water Access Acceleration Fund

As part of Green Infrastructure’s strategy of investing in specialized funds within water and waste, a commitment of EUR 5 million was made to the Water Access Acceleration Fund (W2AF) in 2022, managed by the fund manager Incofin. Norfund’s early contribution contributed to unlocking an additional EUR 30 million in commitments from IFU, DFC and others. The final close for the fund is expected to be in April 2025, and the total size to reach EUR 65m.

W2AF invests in innovative water businesses that provide affordable, safe drinking water to underserved populations. W2AF is the first private equity initiative in a sector that traditionally gets its financing from governments, donors and foundations. The fund aims to demonstrate the financial viability of the safe drinking water market worldwide. It rests on a unique blended finance structure – an approach to use part of the public financing from governmental agencies to lower the risk for private investors to come in.

W2AF aims to provide safe drinking to 30 million people, mainly in Africa and Asia. It has so far 2 portfolio companies. In 2023, W2AF committed EUR 7.5m in Rite Water, an Indian company specializing in potable drinking water and quality improvement. It has 6 117 water plants under management and has served 7.4m people in the low-income category.

In 2024, W2AF made its second investment, committing EUR 1.9m to Spouts International, a manufacturer and distributor of ceramic water filters in East Africa. The company has reached close to a million people in the low-income category.

In 2025 the fund will accelerate its deployment phase with a target commitment of EUR 15m across 4 investments.

Infra Impact Mid-Market Infrastructure Fund

In 2023 we completed an investment of ZAR 150 million into Infra Impact Investment Managers’ Mid-Market Infrastructure Fund. This fund, with a total fund size of over ZAR 2000 million, aims to provide growth capital for mid-market infrastructure businesses in Southern Africa. These businesses own real assets that are essential in providing vital services, particularly in the water and waste sectors.

Infra Impact boasts a team of local specialist investors, who have expert knowledge and experience in navigating the unique challenges faced by the infrastructure segment in South Africa. With a staggering ZAR 1.7 trillion funding shortfall, there is immense potential for value creation and positive impact, provided good projects can be developed.

The primary objectives of this fund are to create 2,200 jobs and contribute to the supply of one billion liters of water, serving the needs of 88 million people. Additionally, the fund aims to divert 3.7 million tons of waste from landfills, promoting a sustainable approach to waste management.

During the 2024 calendar year, Infra Impact successfully closed seven transformative deals in their targeted-sectors: Dolphin Coast Landfill Management (Waste), Oricol (Waste), Lightstruck (Telecommunications Fibre), Too-Much WiFi (Telecommunications fixed and wireless broadband), Bright Light Capital (Renewable Energy), Sustainable Heating 9 Fine Chemicals (Waste) and HyperionRE (Renewable-Energy). These transactions, totaling nearly ZAR 1 billion, exemplify Infra Impact’s unwavering commitment to driving impact and shaping a more sustainable future.

Fund Investment 7: Lightstruck

Lightstruck Holdings was established in 2019 to develop, design, own and operate high-speed open access last file fibre optic networks in South Africa. Infra Impact has a 33% ownership of the company and has in addition provided a shareholder loan and mezzanine loan for the expansion of its business in Namibia, an acquisition of a fibre network operator of the Century City Precinct and other surrounding areas and for working capital.

Fund Investment 8: Oricol Environmental Services

Oricol Environmental Services is a waste-to-product waste management business with a specific focus on diverting waste from landfill sites. Infra Impact acquired 67% of the ordinary shares from existing and outgoing shareholders.

Dolpin Coast Landfill Management is a hazardous waste landfill facility located in Kwazulu-Natal. InfraImpact acquired 20% of the ordinary shares of DCLM and provided a shareholder loan of ZAR 29 million.

WeCyclers

A EUR 2 million commitment was made during 2023 to the Nigerian plastic recycling company Wecyclers, using Norfund’s Frontier Facility. In September 2024 the company had managed to fulfil all its contractual obligations and the first disbursment was conducted. The company is since then working on constructing their first industrial processing plant. As part of Norfund’s requirements, the co-financing from the industrial company Serioplast was secured during 2024, strengthening both the project’s outlook and critical non-financial technical and operational support.

In addition, Norfund’s financing helped unlocking an outcome based bond from Unilever and Bridges Outcome foundation for the financing of 26 franchisee collection points. These have been deployed during 2024, increasing the collection of waste to an all-time high for Wecyclers.