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What is the Nordic Environment Finance Corporation (NEFCO)?
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“ The Nordic countries have long led the way on environmental action, and NEFCO is one of the tools they've used to extend that impact beyond their borders. ”
Established by the Nordic governments, the Nordic Environment Finance Corporation (NEFCO) is an international green bank that finances practical, results-driven environmental projects. From supporting SMEs across the Nordic region to improving water quality in the Baltic Sea and backing clean energy initiatives in Sub-Saharan Africa, NEFCO helps scale local solutions to meet global environmental challenges.
In this article, we’ll examine NEFCO’s role in climate finance, the projects it supports, and its growing influence across both the Nordics and developing regions.
What is NEFCO? A quick overview
“ The Nordic Environment Finance Corporation (NEFCO) is an international green bank established by the five Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden). NEFCO primarily focuses on funding Nordic green solutions led by small and medium-sized enterprises (SMEs) that might otherwise miss out on financial support. Through the provision of this financing, NEFCO supports international climate targets and facilitates the global scale-up of Nordic green solutions for further reach and impact. ”
In addition to supporting and upscaling Nordic SMEs, NEFCO also focuses on the following priorities:
- Assisting towns and cities in Eastern Europe, especially in Ukraine, in adopting more environmentally friendly practices;
- Enhancing and preserving the Baltic Sea's ecological health by experimenting with innovative technologies, solutions, or concepts;
- Promotion of business models that expand the availability of clean, off-grid energy and contemporary cooking solutions in Sub-Saharan Africa.
“ NEFCO specializes in identifying and nurturing high-impact projects that may be too risky for traditional financing methods. This approach has enabled a wide variety of initiatives, from reducing pollution and enhancing renewable energy sources to protecting biodiversity and addressing climate change. NEFCO's success lies in its ability to bridge the gap between environmental needs and practical financial support, making it an important body in the international effort to build a more sustainable future. ”
Why NEFCO matters
As global demand for climate finance grows, NEFCO fills a critical gap by funding smaller, high-impact green projects that traditional banks often overlook. With a strong Nordic mandate and a focus on practical solutions, it helps scale climate innovation while advancing international goals like the Paris Agreement and Sustainable Development Goals.
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How is NEFCO different from other green finance institutions?
While many people are familiar with large players like the European Investment Bank or the Green Climate Fund, NEFCO occupies a very different niche. Rather than funding major infrastructure projects, NEFCO focuses on smaller, high-impact initiatives, often backing early-stage companies and underfunded municipalities. Its Nordic governance model and environmental mandate make it uniquely positioned to take risks and drive innovation.
Here’s how NEFCO compares to other key climate finance institutions:
| Institution | Primary focus | Typical project size | Geographic scope | Key differentiator |
|---|---|---|---|---|
| NEFCO | SMEs, municipalities, early-stage climate projects | Small to medium (€100k – €10M) | Nordic countries, Eastern Europe, Sub-Saharan Africa | High risk tolerance, Nordic-backed, catalytic role in de-risking green innovation |
| European Investment Bank (EIB) | Large-scale infrastructure, sovereign lending, EU-aligned investments | Large (€50M+) | EU and global | EU policy-driven, major infrastructure funder |
| Green Climate Fund (GCF) | Climate adaptation and mitigation in developing countries | Medium to large (€10M – €250M) | Global (developing countries focus) | Largest multilateral climate fund, often works through accredited agencies |
| National development banks (e.g. KfW, CDC) |
Domestic or bilateral development finance | Varies widely (€1M – €100M+) | National or partner countries | Government-aligned finance, often tied to trade or aid strategy |
Who funds NEFCO, and what kind of projects does it back?
The Nordic Environment Finance Corporation (NEFCO) was founded in 1990. As a Nordic green bank, NEFCO serves to channel Nordic capital into environmental solutions, both at home and abroad.
“ Often described as the world's “first green investment bank”, NEFCO focuses primarily on financing small and medium-sized Nordic enterprises that are considered too risky by traditional banks. But where commercial lenders hesitate, NEFCO steps in, ready to back promising projects with strong environmental potential. Its overarching aim is to 'generate direct or indirect environmental or climate-related benefits'. ”
The initial capital provided by the Nordic governments is used for both lending and equity-type financing. Today, NEFCO also manages trust funds supported by a wider group of contributors, expanding its financial reach.
All earnings are reinvested into new projects. While the original paid-in capital totalled EUR 113.4 million, NEFCO has invested over EUR 375.5 million to date - more than 3.3 times its starting base - thanks to returns generated over time.
NEFCO is governed by a Board of Directors appointed by its Nordic member countries and operates with a lean, transparent structure. Robust environmental and social safeguards are integrated into every stage of the project cycle, from screening and approval to monitoring and reporting, to ensure that investments deliver measurable, responsible outcomes.
In addition to providing its own capital, NEFCO plays a catalytic role by de-risking early-stage projects and growth-phase companies. By taking the first leap it helps attract additional investors and scale up climate impact more rapidly. This high risk tolerance is a defining feature of NEFCO’s investment strategy and a key reason why it continues to drive innovation in green finance.
NEFCO's mission in more detail
At the heart of the Nordic Environment Finance Corporation (NEFCO) is its ambition to facilitate environmental improvement and sustainable development. Its goals are aligned with the Nordic Vision 2020, the EU Green Deal, the Paris Agreement, and the Kunming-Montreal Biodiversity Framework.
NEFCO's core objective is to generate positive environmental results through financing and investment, though it also acts as a fund manager and helps to implement and support projects through its partnerships.
Although financing is primarily focused on Nordic SMEs, NEFCO also supports projects that deliver impacts in Eastern Europe, emerging countries, and LDCs (least developed countries). Its three business focus areas are:
Global scale-up of Green Nordic SMEs
NEFCO offers financing to Nordic small and medium-sized enterprises (SMEs) with environmentally friendly solutions, supporting their initial scale-up and helping them expand globally and contribute to the green transition. This support includes market-rate loans, equity-type funding, and feasibility studies focused on international growth. For SMEs with proven green solutions ready for global scale-up, NEFCO’s financing options can unlock access to global markets, drive green growth, and accelerate impact.
Municipal financing in Eastern Europe
NEFCO has a history of creating positive environmental impacts in Eastern Europe through green investments. With extensive experience working with municipalities, NEFCO finances a range of projects, helps build capacity, and tracks outcomes. As an international financial institution, it manages the risks involved in lending to small and mid-sized municipalities.
Currently, NEFCO is financing projects in Georgia, Moldova, and Ukraine, using a combination of loans and grants. These projects range from energy-saving initiatives to waste management improvements and green recovery efforts in Ukraine. NEFCO also offers technical assistance for feasibility studies and helps implement the projects it finances.
Currently, NEFCO is financing projects in Georgia, Moldova, and Ukraine, using a combination of loans and grants. These projects range from energy-saving initiatives to waste management improvements and green recovery efforts in Ukraine. NEFCO also offers technical assistance for feasibility studies and helps implement the projects it finances.
Special funds for international development initiatives
NEFCO helps finance and implement innovative projects around the world that focus on climate action, support efforts to restore the Baltic Sea, and promote sustainable development in Sub-Saharan Africa. Examples of initiatives include:
• Beyond the Grid Fund for Africa (BGFA) – supports clean and affordable off-grid energy solutions in Sub-Saharan Africa.
• Modern Cooking Facility for Africa (MCFA) – uses green financing to help scale access to modern clean cooking solutions, reaching over 3 million people.
• Baltic Sea Action Plan Fund (BSAP) – improves the ecological health of the Baltic Sea through targeted initiatives.
• Nordic Initiative for Cooperative Approaches (NICA) – promotes international cooperation to accelerate climate action and mobilize private sector finance.
• Beyond the Grid Fund for Africa (BGFA) – supports clean and affordable off-grid energy solutions in Sub-Saharan Africa.
• Modern Cooking Facility for Africa (MCFA) – uses green financing to help scale access to modern clean cooking solutions, reaching over 3 million people.
• Baltic Sea Action Plan Fund (BSAP) – improves the ecological health of the Baltic Sea through targeted initiatives.
• Nordic Initiative for Cooperative Approaches (NICA) – promotes international cooperation to accelerate climate action and mobilize private sector finance.
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NEFCO's role as a trust fund manager
NEFCO not only manages its own capital, it also oversees funds on behalf of various donors, including the Nordic governments and the Nordic Council of Ministers. By the end of 2023, the total value of these managed funds had reached EUR 653 million.
“ These trust funds are often used to support project implementation. For example, they may finance feasibility studies, technical assistance, or other preparatory work that helps move projects forward. They also contribute to capacity building and support the growth of sustainable businesses and solutions in emerging markets. ”
In some cases, primarily in municipal sector projects in Eastern Europe, NEFCO combines trust fund support with loan financing to provide a more flexible funding structure.
NEFCO-managed trust funds are also notable for their broader focus. In addition to environmental and climate goals, many projects incorporate social impact objectives such as job creation, gender equality, and circular economy principles.
NEFCO's role as implementing agency
“ Beyond direct financing and fund management, NEFCO plays a hands-on role in delivering international climate and energy programmes. As an accredited implementing agency for major global funds and partnerships, NEFCO helps turn climate goals into on-the-ground projects, especially in regions where access to funding is limited and capacity is still developing. ”
By combining its own financing with grants from partners like the EU and the Green Climate Fund, NEFCO helps cities and countries unlock tailored, flexible solutions for sustainable development. Key partnerships include:
European Union
NEFCO has been involved in a number of environmental projects co-funded by the EU. It passed the European Commission's Pillar Assessment in 2016, qualifying it to manage EU funds directly. In 2022, NEFCO also met updated EU Financial Regulation standards. This enables it to blend EU funding with its own loans, helping smaller or financially constrained cities in Eastern Europe advance their sustainability goals. In Ukraine, for example, EU-funded efforts are focused on green recovery through grants.
E5P
The Eastern Europe Energy Efficiency and Environment Partnership (E5P), launched in 2009 under the Swedish EU Presidency, supports energy efficiency and environmental projects in Armenia, Georgia, Moldova, and Ukraine. Through grants, E5P encourages municipalities to take on loans for projects that reduce emissions and improve local infrastructure.
Green Climate Fund (GCF)
NEFCO was accredited by the Green Climate Fund (GCF), the world’s largest climate fund, in 2018. This recognition allows NEFCO to combine its own financing with GCF and other trust fund resources, helping to structure financial solutions that support low-carbon, climate-resilient growth in developing countries.
NEFCO’s projects
The Nordic Environment Finance Corporation (NEFCO) has made a significant impact through its projects, enhancing sustainability and benefiting local communities in the process. Let's take a look at some of the projects that NEFCO has supported:
Street lighting in Ukraine
Modernizing local infrastructure for safer streets
NEFCO managed EU grant funds to upgrade street lighting in Andrushivka and Radomyshyl. About 400 lights were modernized in Andrushivka and 700 in Radomyshyl, improving energy efficiency and safety despite the war.
Rotor sails for shipping
Scaling Finnish innovation to cut emissions
NEFCO supported Norsepower’s rotor sail technology, which reduces fuel use by 5–25%. Funding also enabled a new factory in China, boosting global clean shipping capacity.
Energy-efficient school
Creating healthier classrooms for 200 students
NEFCO and the EU funded a major energy renovation at Susk lyceum. Improvements included insulation, ventilation, and heating upgrades — cutting costs and improving air quality for students and displaced families.
Weather tech for wind farms
Helping Norway’s shift from oil to renewables
NEFCO supported Automasjon og Data as it expanded from oil and gas into offshore wind. The company’s weather stations now help optimize operations at wind farms in the UK and southern Europe.
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Looking ahead
“ NEFCO may be small compared to major development banks, but its impact is outsized. By backing projects that are too early-stage or too local for traditional financiers, it plays a vital role in accelerating the green transition, not just in the Nordics, but across some of the world’s most climate-vulnerable regions. As the demand for targeted, flexible climate finance grows, NEFCO’s approach offers a powerful model for high-impact investment. ”
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What about Greenly?
Greenly helps companies take control of their climate impact through accessible, science-based carbon management. Our platform supports businesses in understanding their emissions and building practical, data-driven strategies for reduction.
Here’s how Greenly can support your sustainability journey:
- Carbon footprint analysis: Measure your Scope 1, 2, and 3 emissions in line with the GHG Protocol.
- Tailored action plans: Identify key emissions hotspots and receive sector-specific recommendations to reduce them.
- Supplier engagement: Assess and improve sustainability across your value chain.
- Regulatory alignment: Stay on track with frameworks like CSRD, SECR, and the EU Taxonomy.
- Support for SBTi targets: Get guidance on setting and validating science-based targets.
Whether you're an SME scaling a green solution or a larger company looking to embed sustainability across your operations, Greenly provides the tools to turn ambition into measurable progress. Get in touch today to find out more.
Sources:
- Greenly, How Nordic Countries Are Facing Climate Change Together
https://greenly.earth/en-gb/blog/ecology-news/how-nordic-countries-are-facing-climate-change-together - NEFCO – Nordic Environment Finance Corporation, Homepage
https://www.nefco.int/ - Greenly, Paris Agreement: All You Need to Know
https://greenly.earth/en-gb/blog/ecology-news/paris-agreement-all-you-need-to-know - Greenly, What Are the United Nations Sustainable Development Goals?
https://greenly.earth/en-gb/blog/ecology-news/what-are-the-united-nations-sustainable-development-goals - NEFCO, About NEFCO
https://www.nefco.int/about/ - NEFCO, How We Finance Projects
https://www.nefco.int/about/how-we-finance/ - Nordic Council of Ministers, Our Vision 2030
https://www.norden.org/en/declaration/our-vision-2030 - Greenly, All You Need to Know About the Fit for 55 Plan
https://greenly.earth/en-gb/blog/ecology-news/all-you-need-to-know-about-the-fit-for-55-plan - Convention on Biological Diversity (CBD), COP15 Decision on Resource Mobilization – Target 19
https://www.cbd.int/doc/decisions/cop-15/cop-15-dec-04-en.pdf - Greenly, Your Guide to Sustainable Finance
https://greenly.earth/en-gb/blog/industries/your-guide-to-sustainable-finance - Greenly, How Can You Make the Change to Green Finance?
https://greenly.earth/en-gb/blog/industries/how-can-you-make-the-change-to-green-finance - Beyond the Grid Fund for Africa, Homepage
https://beyondthegrid.africa/ - Modern Cooking Facility for Africa, Homepage
https://www.moderncooking.africa/ - NEFCO, Baltic Sea Action Plan Fund
https://www.nefco.int/financing/other-regions/baltic-sea-action-plan-fund/ - NEFCO, Nordic Initiative for Cooperative Approaches
https://www.nefco.int/financing/other-regions/nordic-initiative-for-cooperative-approaches/ - Nordic Council of Ministers, Homepage
https://www.norden.org/en/nordic-council-ministers - European Commission, Pillar Assessments for International Partnerships
https://international-partnerships.ec.europa.eu/policies/audit-and-control_en - Eastern Europe Energy Efficiency and Environment Partnership (E5P), Homepage
https://e5p.eu/ - Green Climate Fund (GCF), Homepage
https://www.greenclimate.fund/ - NEFCO, Case Study – Norsepower
https://www.nefco.int/case-stories/norsepower/ - NEFCO, Case Study – Energy Efficiency at Susk Lyceum
https://www.nefco.int/case-stories/energy-efficiency-project-susk-lyceum/ - NEFCO, Case Study – Automasjon og Data AS
https://www.nefco.int/case-stories/automasjon-og-data/