Nordic Development Fund
Organizational profile: The Nordic Development Fund (NDF) is the joint development finance institution of the five Nordic countries i.e. Denmark, Finland, Iceland, Norway and Sweden. NDF was established in November 1988 and commenced operations in February 1989. The objective of NDF's operations is to facilitate climate change investments, primarily in low-income countries. NDF finances projects usually in cooperation with bilateral, multilateral and other development institutions. The operations mirror the Nordic countries’ priorities in the areas of climate change and development. NDF provides financing on concessionary terms in the form of grants, loans, and equity. NDF engages in both the public and the private sector, and uses financial instruments flexibly, alone or in various combinations, to match the needs of the project.
NDF’s primary focus is on climate change mitigation and adaptation. In addition to its primary focus on climate change and thus the Sustainable Development Goal (SDG), NDF works in a holistic way towards the development challenges spelled out in the other sixteen SDGs, recognising the interlinkages to and actively seeking co-benefits with other SDGs, not least with regard to environmental objectives. The position entails a strong focus on inclusive development as well as a proactive approach on gender responsiveness in line with Nordic priorities.
Financing Instrument: Grants, Loans and Equity
Project scale: An NDF transaction usually amount to between €2 million and €5 million. €40 million in financing was approved for 8 projects in 2019. NCF project ideas can receive a grant between €250,000 and€ 500,000.
Recipient countries/regions/country groups: Global
Eligibility Criteria: NDF flexibly uses grants, loans and equity or combination of these financial instruments for climate change investments in low-income countries which are eligible for support from IDA (less than USD 1,165 per capita income in 2016) and have previously received NDF support. Generally, both these criteria should be fulfilled. Under certain conditions, NDF may also provide assistance to other low-income and lower middle-income countries on a case by case basis. Currently, eligible countries include Benin, Burkina Faso, Cape Verde, Ethiopia, Ghana, Kenya, Malawi, Mozambique, Rwanda, Senegal, Tanzania, Uganda, Zambia, Zimbabwe, Bangladesh, Cambodia, Kyrgyz Republic, Lao PDR, Maldives, Mongolia, Nepal, Pakistan, Sri Lanka, Vietnam, Bolivia, Honduras, and Nicaragua. NDF will normally finance a component of a larger programme or project and the responsibility for procurement and contract negotiations rests with the national authorities. Projects have a national executing agency, and in relation to NDF, a lead agency. The lead agency can be the World Bank Group, Asian Development Bank, Inter-American Development Bank, African Development Bank or other agencies engaged in development financing.
The guiding principle for NDF approval is that adaptation projects should be defined as those that are primarily aimed at responding to the adverse consequences of climate change, hence, explicitly contributing to increasingly climate-resilient sustainable development. The core screening criteria for mitigation projects are as follows:
- Projects should satisfy standard economic and social tests (or be expected to if not easily quantified) at the national level.
- Projects should have a significant climate component, i.e. the global benefits of the direct GHG emission reduction or carbon sequestration should be at least 10% of project investment costs.
The Nordic Climate Facility (NCF) is a challenge fund set up and administered by the Nordic Development Fund (NDF). Eligible applicants must be registered legal entities, such as:
For-profit companies and organisations; Non-profit organisations and social enterprises; Civil society organisations (CSOs); and Research institutes and universities.
Application guidelines: Projects are normally identified by governments in partner countries according to national priorities. NDF will normally finance a component of a larger programme or project and the responsibility for procurement and contract negotiations rests with the national authorities. Projects have a national executing agency, and in relation to NDF, a lead agency. The lead agency can be the World Bank Group, Asian Development Bank, Inter-American Development Bank, African Development Bank or other agencies engaged in development financing.
NCF financing is allocated on a competitive basis with calls for proposals arranged annually. The NCF application process is a two-stage process with a concept note and full proposal. The application in the concept note stage is intended to be brief, focusing on the fulfilment of the basic eligibility criteria as well as the following key aspects: business concept viability, climate change relevance, development impact and innovativeness. The highest scoring concept note proposals will be invited to submit a detailed full proposal, including a detailed project budget and a project specific results framework. After the final evaluation, selection of shortlisted projects and a due diligence process, NDF will approve the final shortlist and grant agreement negotiations will commence between the lead Nordic partner and NDF. Approximately 20-25 project proposals will be shortlisted at the concept note stage and invited to submit full proposals. The aim is to finance between 12 and 15 projects per call.