Investments to support sustainable development: a comparative study of how the Nordic development finance institutions work with development impact in context of the sustainable development goals

The four Nordic donor countries: Finland, Norway, Sweden  and Denmark, all have a long  history in the international landscape of development cooperation. In their official development aid (ODA), all four countries have an implemented focus on investing in business- and private sector development and therefore allocate funds to support market development, sustainable business, employment opportunities, financial systems and increasing the tax base in developing countries.

The allocated funds are managed and invested by the individual countries’ Development Finance Institutions (DFIs): Finnfund in Finland, Norfund in Norway, Swedfund in Sweden and IFU in Denmark. The DFIs play a decisive role by providing high-risk loans, equity and guarantees to private sector investments in developing countries and emerging markets.

In recent years, and most notably by the 2015 adoption of the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda on financing for development, the convergence between human rights, labour standards and the Sustainable Development Goals (SDGs) has been recognised by the international community, thus setting forth a global reliance on the private sector to contribute to the achievement of the 2030 Agenda. A particular focus has been put on establishing the private sector as a active partner in eradicating extreme poverty by placing emphasis on private sector investments in supporting and creating inclusive growth and sustainable development. In the light of these international developments, the role of DFIs has been considered to be particularly important by governments to bridge traditional development aid with private investments in developing countries.

The  DFIs  overall  objective  to  contribute  to sustainable  development,  place  them  as  an  important  vehicle  for change. Their significant responsibility towards implementing solid policies, procedures and monitoring systems in  their  investments  are  identified  as  key  in supporting  sustainable  development in  the  countries  in  which  they engage. It is therefore important to continuously measure and monitor the actual long-term development impact and short-term effect of their investments in order to establish transparency on results. Consequently, the need for DFIs to document the actual development impacts of their investments has been further solidified.

On this backdrop and with considerations given to the general level of increased engagement by Nordic DFIs ten Nordic NGOs have commissioned this study. The study will look into the role of Nordic DFIs in development cooperation,  highlight  trends  and  developments  through  comparison  of  similarities  and  differences  in  practices and propose recommendations on how to improve their work with and reporting on development impact in the light of the 2030 Agenda.