Finnish Climate Fund in 2023: investment decisions totalling EUR 53.5 million and a portfolio with an emissions reduction potential of up to 270 Mt CO2-eq

“The Finnish Climate Fund was established to carry out a unique mission among state-owned companies, and the company’s key objective has been to achieve measurable climate impacts. Over the course of three years, we have made funding decisions with nearly EUR 180 million into 24 Finnish companies, enabling emissions reductions both in Finland and abroad,” explains Toni Mikkonen, Acting CEO of the Finnish Climate Fund.

 The Climate Fund’s investment decisions in 2023

• Cactos Fleet Finland: Investments in smart energy storage systems. Fund investment of EUR 5 million.
• Filtrabit: Industrial dust extraction systems. Capital loan of EUR 4 million.
• Lamor Recycling: Recycling plant for plastics in Kilpilahti, Porvoo. Capital loan of EUR 6 million.
• In addition to the above, the Climate Fund has made three funding decisions that are yet to be published.

The past year was challenging in terms of operative investment activities. The most significant reason behind the decreased funding volume was the exceptional financial market situation where securing funding became more difficult in general. Projects under preparation at the Climate Fund were postponed as a result of the delays in the customers' investments, and the postponement of large-scale projects in particular affected the Climate Fund’s funding volume. 

Finnish Climate Fund in 2023

• KPMG’s assessment of the Climate Fund’s operations was published in January 2023.
• The Act on the fully state-owned limited liability company called Ilmastorahasto Oy (173/2023) entered into force on 20 February 2023.
• The Programme of Prime Minister Petteri Orpo’s Government was published in June: The Climate Fund will be merged with three other state-owned companies and becomes a part of the new Tesi Group (Finnish Industry Investment Ltd).
• Paula Laine was the Climate Fund’s CEO until 14 September 2023. Toni Mikkonen has been the Acting CEO since 15 September 2023.
• Perttu Puro continues as Chairman of the Board.
• The Climate Fund employed 23 people at the end of the year.
• The carbon footprint of the Climate Fund’s own operations (scope 3 upstream) was 112 t CO₂-eq.

The focus of the company’s operations was on preparing and implementing investment decisions as well as the future State investment company, decided in the Government Programme. The Climate Fund’s governance was completed by draft­ing guidelines for data protection and insid­er management. In addition, the company’s existing guidelines and practices were updated where necessary. The Climate Fund also developed its company-level and investment portfolio risk management as well as project-specific impact assessment.

“The year 2024 will most likely be the last full year of operation for the Climate Fund in its current form. In accordance with our mission, our objective is to use the remaining funds to finance projects with the largest positive impact on the climate and environment – accelerating and enabling the growth and global reach of Finnish innovations. The second focus of the year is enabling a smooth transition towards the new TESI Group”, says Perttu Puro, Chairman of the Climate Fund Board.

Finnish Climate Fund finances

• Net income: EUR 39.6 million
• Income from assets and investments: EUR 58 million
  • Dividend yield from Neste Corporation: EUR 48.6 million
  • Interest income from operational investments: EUR 1.7 million
  • Interest income from liquid assets: EUR 7.9 million
• Operating expenses: EUR 4.9 million
  • Personnel expenses: EUR 3.1 million
  • Preparation of investment decisions: EUR 0.7 million
  • Other operating expenses: EUR 1.1 million
• Tax footprint: EUR 161 million
• Closing balance on 31 December 2023: EUR 406 million

The transfer of Neste Oyj’s shares back to the owner in September 2023 had a significant impact on the financial situation of the Finnish Climate Fund. As a result of the transfer of shares, the Climate Fund will no longer receive income from dividends and the company had to pay approximately EUR 149 million in taxes for the calculated gain on the transfer of the shares. In addition, the owner decided to remove the appropriation of EUR 100 million allocated for the capitalisation of the Climate Fund in the second budget amendment of 2023.

The company’s liquid assets are invested in short-term deposits with agreed maturity, liquid bond funds and interest-bearing bank accounts. Income from liquid assets amounted to approximately EUR 8 million during the financial period.

The increased risk level of the financial market has also had an impact on the activities of the Climate Fund’s portfolio companies and, consequently, on the valuation of investments. Unrealised write-downs recorded during the financial period amounted to approximately EUR 3.3 million.

From a financial perspective, the company has the ability to continue its investment activities before the new State investment company is operational with a funding volume adjusted for the level of unallocated reserves.