Sustainable growth and jobs top of the agenda as Swedfund publishes its Integrated Report

The pandemic has caused a multidimensional crisis that requires a multidimensional response. In many cases, development is regressing, jobs are lost and poverty is increasing, with huge consequences for people in developing countries. At the same time, we are seeing a sharp decline in foreign investment and remittance inflows, as well as a negative development of democracy in a number of countries and a deterioration in the respect of human rights. Swedfund’s publication of its Integrated Report serves to highlight the challenges ahead, but also the opportunities that exist and our achievements so far.

At the beginning of the pandemic Swedfund together with the European Development Finance Institutions, traditional aid organisations, civil society and other stakeholders analysed the consequences of the pandemic and potential mitigation measures. It was evident that coordinated action was essential and that there was a lot to be gained from cooperation, particularly between the European development finance institutions, which often invests in the same countries. New methods for conducting digital due diligence were developed to enable new investments at a time when restrictions have prevented us from travelling and visiting potential investments.

Nine out of ten jobs are created by the private sector, and by providing private companies in developing countries with access to long-term capital, existing jobs can be saved and new jobs created. According to Maria Håkansson, CEO of Swedfund, the development finance institutions have a more important role than ever by investing to promote increased job creation and safeguarding access to vital products and services, such as renewable energy and healthcare.

“Swedfund’s role has never been more important. The sectors we focus on, which are Energy & Climate, Financial Inclusion and Health, are at the intersection of the pandemic. We have an effective business model that has been stress-tested during the pandemic and proven to work well. It addresses key aspects such as human rights, women’s economic empowerment, climate and job creation. When development finance institutions, like Swedfund, continue to provide sustainable capital and increase our efforts to adapt to the new conditions, we lay the foundations for a sustainable recovery and rebuilding,” says Maria Håkansson.

“Our dialog with the portfolio companies over the past year has enabled us to closely analyse and understand the consequences of the pandemic, but it won’t be until next year that we’ll be able to report on indicators of how the pandemic has affected the portfolio companies in areas such as jobs and tax revenue. This is because reporting is subject to a one-year delay, which gives the portfolio companies an opportunity to report their overall performance. This enables Swedfund to review the results and deliver an integrated report. Swedfund’s results within our three pillars are thus audited in a coherent way, and sustainability information is integrated with the financial information,” explains Maria Håkansson.

In the past year, Swedfund contracted 11 new investments corresponding to a total investment volume of SEK 950 million. These have been financed by a capital injection of SEK 800 million for 2020, and through reflows from the portfolio. Our portfolio companies are reporting good results within our three pillars of impact on society, sustainability and financial viability.

59% of Swedfund’s portfolio qualify as investments that increase women’s economic empowerment. The portfolio shows a job growth of 25%, and the majority of the portfolio companies report progress in areas such as decent working conditions, anti-corruption and the existence of environmental management systems. There have been extensive efforts in the area of climate, where the portfolio has been analysed based on how well it adheres to the Paris Agreement and Swedfund’s objective for the portfolio to be climate-neutral by 2045, which means that the portfolio must have net-zero emissions of greenhouse gases, as per the IPCC’s definition.

An important prerequisite for accelerating the implementation of Agenda 2030 is the mobilisation of capital from private investors to developing countries. During the year, Swedfund has mobilised private capital equivalent to 42% of contracted investments in 2020, which surpasses the goal of mobilising 30% of invested capital.

The consequences of the pandemic have affected Swedfund’s operating profit (EBIT). Swedfund is reporting a negative operating profit (EBIT) of SEK -373 million. SEK -200 million are caused by negative exchange rate fluctuations, while the remaining amount can primarily be attributed to impairment losses related to holdings that were fragile even before the pandemic or that operate in sectors affected by the pandemic.

Development finance for a sustainable future - Swedfund Integrated Report 2020