To boost productivity in its member countries, NIB seeks to support projects that aim for technical progress and innovation, improvements in infrastructure, development of human capital and equal economic opportunities, and improvements in market efficiency and the business environment. Environmental benefits are sought by financing projects that contribute to pollution reduction, maintaining resilient infrastructure, advancing resource efficiency, and climate change mitigation.
All projects undergo NIB’s Mandate Assessment according to its Mandate Rating Framework.
A parallel process, as described in these Guidelines, is the Environmental, Social and Governance (ESG) assessment that focuses on ensuring compliance with NIB’s Sustainability Policy, including the Exclusion List, and provides guidance on ESG factors on both the project and counterparty level.
Projects and investments financed by a financial institution through a NIB loan programme shall also fulfil NIB’s mission through at least one of its mandates.
Your participation is critical
At this stage of your journey with NIB, we will ask you to share with us a detailed project description and relevant environmental information about your project, such as an environmental impact assessment and applicable permits and licenses. The scope of the review and information required depends on the nature and scale of the project.
What we assess
We assess to what extent your project is in line with both pillars of the Bank’s mandate—promoting productivity gains and environmental benefits for the Nordic and Baltic countries. For this purpose, we use NIB’s mandate rating framework.
Productivity gains
For prosperous economies, where wealth and economic opportunities are equally distributed, a common denominator is high labour productivity.
The Bank seeks productivity gains in projects that foster:
- Technical progress and innovation
- Human capital and equal economic opportunities
- Infrastructure improvements
- Market efficiency and business environment
Historically, investments in new physical capital and innovations have been shown to be the main drivers for increased output. Particularly, research and development activities that turn ideas into successful products or new manufacturing techniques have improved productivity levels. An important element for NIB when financing innovation projects is that benefits are not limited just to the borrowers, but that they often induce spill-over of expertise across firms and industries.
The quality of labour inputs and accumulation of knowledge pool is another fundamental driver of long-term productivity growth. NIB recognises the importance of human capital, and therefore, a substantial part of NIB’s lending is targeted at improving the quality of research, education, and healthcare in the Nordic–Baltic region. In this context, advancing equal opportunities for individuals in the member country economies is an important factor in NIB’s lending operations.
The functionality and service level of regional infrastructure shape the business environment of the region and are known to increase productivity directly by reducing friction in operations. Indirectly, high-quality infrastructure services improve the efficiency of labour and product markets. These features of infrastructure investments are of great importance to NIB, as they often add significant value to everyday operations of member country companies and their employees.
Although few investments directly affect market efficiency and the business environment, the impacts tend to be realised indirectly through other channels. For instance, investments that streamline business processes may result in efficiency and market expansion possibilities for one company. But for other companies, they can cause competitive pressure, and they can force companies to adopt new operating models. As competition and the economy’s ability to support the creation of new businesses are among the most critical factors boosting productivity growth, NIB seeks to finance projects that promote these attributes in member countries.
Environmental benefits
NIB recognises four main drivers for achieving environmental benefits:
- Pollution reduction
- Preventive measures
- Resource efficiency
- Climate change mitigation
Pollution reduction in NIB’s member countries is still imperative, although significant progress has been made during recent decades. Increased efficiency in emission control technologies, new types of pollution, and stricter environmental requirements are promoting the investments. NIB plays an important role in the protection of the Baltic Sea by providing loans for projects enhancing wastewater treatment.
A well-functioning society is dependent on resilient infrastructure. Although the infrastructure in NIB’s member countries is well developed, it is necessary to replace and upgrade systems that are close to surpass their technical lifetime. A further challenge is posed by the need to adapt existing systems to the changes in climate. Typical projects that NIB finances in this area include strengthened electricity grids, sewage networks and storm water control.
Improving resource efficiency and utilisation of secondary raw materials alleviate the pressure on natural resources and vulnerable ecosystems. These actions also help to maintain the value of resources and materials longer in the economy. In line with the EU’s Circular Economy Policy, these are important areas for NIB’s lending. Typical investments financed in this field include projects that reduce the use of energy, water and raw materials and the generation of waste.
Considerable investments are required to decrease greenhouse gas emissions, increase the share of renewable energy, and improve energy efficiency to achieve the targets of the EU’s climate policy and the Paris Agreement. NIB’s lending in this area focuses on renewable energy generation, electrified transport, green buildings and energy-efficient solutions for industry.
We assess the environmental benefits of projects qualitatively and quantitatively. The qualitative assessment is based on the sector of the project. NIB has a sector list, where each sector is rated based on its potential to contribute to the achievement of the international and national targets relevant for the five drivers mentioned earlier. Our environmental analysts assess the quantitative impact of the project using selected indicators to describe direct and indirect changes in e.g. use of energy, water or raw materials, and emissions of pollutants. With its mandate, NIB only considers environmental benefits affecting the member country region in the assessments.
Project review
All projects considered for NIB’s financing are evaluated for their potential risks, impacts and economic quality.
Sustainability review
In accordance with NIB’s Sustainability Policy and Guidelines, we review the potential impact as well as the environmental and social risks of a project. We also analyse the borrower’s commitment and capacity to manage those.
The Bank’s environmental analysts review the relevant information provided by borrowers, such as an environmental impact assessment and applicable permits and licenses.
The quality of information is assured through site visits and interviews with project staff. We benchmark projects’ social and environmental performance against acceptable standards to ensure compliance and assess their resilience e.g. towards the effects of climate change.
The scope of the review depends on the scale and extent of a project’s potential negative impacts. Projects with potential significant adverse environmental or social impacts are categorised as Category A projects. Information on Category A projects is made publicly available on NIB’s website for commenting by all interested stakeholder groups before the Bank makes a decision on financing. NIB’s Sustainability Policy and Guidelines provide more information about the project categories and the type of projects belonging to different categories.
If we conclude that the project is estimated to provide significant environmental benefits, and has low environmental and social risks and a high likelihood of succeeding, it is eligible for funding with the proceeds from NIB Environmental Bonds.
Analysis
Besides the sustainability aspects, we analyse the projects’ technical and economic quality. An analysis includes quantitative and a qualitative assessment, own estimates and projections, sensitivity checks and peer-group comparisons. It also includes an assessment of non-quantifiable elements, such as industry characteristics, market position, management, institutional conditions, regulatory framework and corporate governance. When required, we also conduct a project risk assessment.
Ex-post assessment
The implementation of NIB-financed projects is monitored on an ongoing basis. When a project has reached operating maturity (which is normally three years after project completion), it receives an ex-post evaluation to assess if NIB’s mandate criteria have been fulfilled. Ex-post evaluation is based on impact indicators that are determined during the ex-ante assessment of a project prior to loan approval and aims to identify lessons learnt and aspects that can serve as recommendations for improvement.