TCFD (Task force on Climate related Financial Disclosures) report summary 2021

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TCFD recommendations for climate-related disclosures


As part of our strategy, Norfund observes certain cross-cutting issues in our investment activities. Norfund’s work on cross-cutting issues is regularly reported to the board of directors, including an annual review on climate. Climate risk is also discussed in the “Risk and Audit Committee”, a sub-committee of the board of directors designed e.g., to oversee risk management in Norfund.  

At management level, Norfund’s Climate Position informs strategic investment planning and is embedded within portfolio management processes. Climate-related risks and opportunities are assessed as part of the investment process. The responsibility for these assessments lies with the investment teams and ultimately with the head of each Investment Department.  

Climate risk is further integrated into Norfund’s overall enterprise risk framework and risk catalogue with designated risk owners. 


Norfund’s investment strategy directs how we work to achieve our mission, which is to create jobs and improve lives by investing in businesses that drive sustainable development. Climate-related risk is a threat to achieving our mission as both physical and transition risk may challenge the sustainability and profitability of our investees. On the other hand, climate-related opportunities can generate new investment and value creation opportunities for Norfund and our investees. Norfund’s mandate suggests that we are willing to accept climate risk that is inherent to the markets we operate in. We seek to mitigate the climate risk at investment level by building capacity and support our investees to manage climate impacts, reduce financial risk and seize climate-related business opportunities where relevant. 

Climate risk in our portfolio is driven by two main factors: the characteristics of the sectors we are exposed to, and the physical location of our investments.  

  • Sectors: Norfund is heavily invested in sectors that are exposed to physical risks. At least 47% of our portfolio exposure is in physical infrastructure and agriculture investments (as of 31.12.2021), sectors that are particularly vulnerable to physical climate risks. Key climate risks include damage to infrastructure and supply chain disruptions due to weather related events, and reduced crop yields or productivity due to chronic or acute weather changes. We are less invested in sectors that are, all else equal, more exposed to transition risk due to our Fossil Fuel Exclusion list and strategy.  
  • Geography: Norfund targets countries where capital is scarce, and investments have high impact potential. One of Norfund’s strategic KPIs is investing at least 33% of our portfolio in the Least Developed Countries (LDCs). As a result, Norfund is exposed to countries highly vulnerable to climate change. We estimate that 73% of Norfund’s portfolio is in countries with high or very high physical risk scores according to Notre Dame Global Adaptation Initiative’s country scoring. 
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Norfund adopted a Climate Position in 2020, which outlines how we, at the strategy level, address climate change. We are also a signatory to EDFI’s Statement on Climate and Energy Finance. Through these positions, Norfund has committed to and taken several important steps that reduce climate-related risk and ensures that we can systematically capture climate-opportunities, notably: 

  • Norfund has incorporated assessment of climate risk as part of the investment process 
  • Norfund has committed to investing in climate solutions. Of new investments in 2021, climate financing represented 49% of committed capital1
  • Norfund has committed to transitioning our portfolio to net zero by 2050 at the latest. For 2021 we will do a first assessment of the GHG footprint of our portfolio, which will serve as a baseline from which we will develop our strategy to gradually transition our portfolio 
  • Norfund has adopted a Fossil Fuel Exclusion List which excludes new coal and fuel oil financing, and limits other fossil fuel financing to Paris-aligned projects until generally excluding them by 2030 at the latest 
  • Norfund has committed to ensuring that all new financing is Paris-aligned, in accordance with EDFIs (European Development Finance Institutions) harmonized framework to assess Paris alignment, by 2022 

Norfund’s management team has assessed the potential impacts of different climate scenarios on strategy and planning in a qualitative manner. Two scenarios were assessed: 

  1. Successful transition (2-degree or lower scenario) – characterized by high transition risk and rapid roll out of climate solutions2  
  2. Unsuccessful transition (greater than 2-degree scenario) – characterized by high physical risks driven by higher temperatures, sea level rise, extreme weather etc.3 

Overall, Norfund’s strategy was assessed to be robust in a range of climate scenarios, acknowledging that efforts related to adaptation and resilience will need to be strengthened regardless of scenario. Climate is part of Norfund’s strategy review for the period 2023-26. 

Risk management 

As we continue to implement the recommendations of the TCFD, and learn from the processes, our climate risk management processes will evolve.  

In 2020-21, Norfund’s new Enterprise Risk Management system was developed, and climate risk was integrated into the system. 

At the investment level, Norfund includes climate risk and opportunities identification, assessment, and management into the investment process. The approach is described in Norfund’s Investment Manual and supplemented by a separate practical guidance note on climate risk assessments. Norfund sees climate risk not as a new stand-alone risk category, but as a supplementing factor for the categories already covered in our risk assessment (financial, E&S (Environmental & Social), reputation etc.).  

The financial impacts of climate risk on an investment are driven by (1) the climate-related risks to which the investee is exposed, and (2) its planned response to manage those risks. We have therefore defined two lenses through which the climate risk associated with an investment can be assessed: 

  1. Assessing the investee’s underlying climate risk exposure 
  2. Assessing the investee’s capabilities in managing its climate risk exposure 

The time spent on each lens will vary by investment department and the specific case at hand. 

Metrics and targets 

The areas where we currently are measuring or developing methodologies are: 

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4 Valid until end of 2021