How we operate
Introduction
Swedfund has two main instruments to deliver on our mission as a development finance institution. We make sustainable investments in the private sector, and we finance feasibility studies and capacity building measures for public project owners through Swedfund's Project Accelerator. Investment operations and the Project Accelerator are mutually reinforcing and are both tools that enable us to work holistically with our mission.
Our investments aim to strengthen the resilience of communities and individuals by contributing to the sustainable development of the private sector. We do this by contributing to decent jobs, women's economic empowerment, digitalisation, reducing climate impact, and increasing access to essential products and services such as electricity and healthcare.
As an active owner and through our sustainability work, we help companies meet international standards, creating opportunities for increased trade and private sector capital mobilisation. We invest in local production and value creation to foster innovation and local competitiveness.
Investing in sustainable infrastructure is crucial for economic development, closing gaps and driving the green transition. The Project Accelerator contributes to the development of more infrastructure projects that consider environmental, climate, social and life-cycle costs by providing support during the project development phase. These efforts facilitate investments and enable Swedish companies to contribute with sustainable solutions to local needs. The Project Accelerator thus acts as a bridge between trade, investment and development.
We tailor our support to each project, based on the capacity of the local project owner and the needs of the specific project. With an early entry into the project phase and strong technical expertise, we become a trusted and strategic partner for the project owner. This allows us to influence the design of the projects and enable sustainable solutions in line with local priorities and needs.
Theory of Change
Our work is based on our Theory of Change. This means that we analyse how a potential investment can contribute to change and what direct and indirect development effects we can help create. We contractually bind the changes we want to achieve and believe are possible.
In addition to our overall Theory of Change, we also have a Theory of Change for the Project Accelerator and sector-specific Theories of Change.
Theory of Change - Swedfund Project Accelerator
Theory of Change - Energy & Climate
Theory of Change - Financial Inclusion
Theory of Change - Sustainable Enterprises
Theory of Change - Food Systems
Our pillars
Our business model is based on three pillars: impact on society, sustainability and financial viability. When we invest in companies, these pillars permeate every step of the investment process, from the initial assessment in the investment phase through to the active ownership phase and all follow-up of results to the final exit from the investment. In the same way, the Project Accelerator takes the pillars into account in the assessment of new projects during the project cycle and when the project has been completed.
Impact on society
Our investments aim to have an impact on society in developing countries. We measure performance using the following indicators:
- Job creation and growth
- Gender equality and women’s economic empowerment
- Climate impact
- Tax revenues
Sustainability
Our investments are aimed at helping to create sustainable businesses in developing countries. We measure performance using the following indicators:
- Decent working conditions
- Management system for environmental and social issues, including human rights
- Management system for anti-corruption
Financial sustainability
We aim to help create profitable and financially viable companies in developing countries. We measure performance using the following indicators:
- Turnover and profitability
- Return on funds
- Capital mobilisation
Key issues for us as investors
Impact
Our investments are intended to create development effects, such as private sector development, strengthening of local communities, inclusive economic growth and climate adaptation. We monitor measurable results in key areas of direct impact, such as the number of jobs, gender equality in the workplace according to 2X criteria, climate impact and tax revenues.
Read more about Impact
Sustainability and Business Integrity
We require, and support, our portfolio companies to develop robust management systems, which enable them to offer jobs with decent working conditions and advance business practices counteracting corruption while limiting harm to communities and the environment.
Swedfund’s Sustainability team (Environmental & Social, E&S) and Business Integrity team (BI), evaluate risks and support development of company processes in line with international standards.
Read more about Sustainability
Read more about Business Integrity
Geographical focus & sectors
Swedfund’s remit is to operate in the least developed countries, and thus only invests in developing countries as defined by the OECD/DAC. We have a geographical focus on sub-Saharan Africa, countries in South and Southeast Asia, and a select group of countries in Eastern Europe.
Through our investments and projects, we address a number of themes that permeate our operations and are relevant to sustainable development and the implementation of the 2030 Agenda. This means that we prioritise investments that contribute to jobs with decent working conditions, increased access to capital for companies and individuals, digitalisation, gender equality and climate.
We make sustainable investments in four sectors that we consider particularly important for achieving our goal of contributing to poverty reduction: Energy & Climate, Financial Inclusion, Sustainable Enterprises and Food Systems.
Energy & Climate
Swedfund invests in renewable energy, including both production and distribution. We also focus on energy and resource efficiency, for example through water and waste management. Our investments include nature-based solutions, sustainable forestry and green and digital infrastructure. Climate investments target both mitigation and adaptation.
Financial Inclusion
Swedfund invests in regulated banks and financial institutions to help small and medium-sized enterprises in developing countries with access to capital to develop and grow their businesses. This means we can achieve broader and more effective impact locally in the countries. We also invest in microfinance institutions that provide small loans to entrepreneurs, small businesses and low-income populations, and require them to follow the Customer Protection Principles (CPP) for responsible lending.
Sustainable Enterprises
Swedfund invests in sustainable growth companies to create jobs and increase access to capital for small and medium-sized enterprises in developing countries. We focus on sustainability and international standards, prioritising investments in digital business models, gender equality and healthcare.
Food Systems
Swedfund invests in inputs, agriculture and primary production to strengthen food production in developing countries. By investing in storage and logistics solutions, we help improve efficiency and reduce food waste. We also have sustainable investments that include local production and processing to add value to food products, as well as trading, distribution and sales to ensure that food reaches consumers in a sustainable way. We aim to address all stages of the supply chain.
Read more about our investment operations
Project Accelerator
The Project Accelerator works together with public-sector stakeholders in developing countries and offers support with project development, capacity-enhancing initiatives and financing feasibility studies in the sectors of clean energy, sustainable transport, circular solutions and sustainable projects.
Technical Assistance
Swedfund sets high demands on the companies we invest in, which means that we sometimes need to provide and finance expertise to ensure that the companies develop sustainably and equitably. With Technical Assistance (TA), we can strengthen our capacity as an active investor and raise the quality of the portfolio in line with our mission and goals.
Instruments
Swedfund has several financial instruments for investments: equity, loans and guarantees. We invest directly through equity and loans and indirectly through funds.
Investment process
Investing in developing countries is associated with major risks, particularly financial risks. We endeavour to manage these risks through a comprehensive investment process.
Our investment process follows the same phases regardless of sector, instrument or whether the investment is made directly or indirectly.
Investing in equity gives us ample opportunity to exert influence and usually have a seat on the company’s Board of Directors. As a shareholder, we aim to be a long-term investor, but to sell our shares as soon as we are no longer needed. When we invest in equity, we are minority shareholders.
Using the loan instrument is an effective way of reaching many smaller companies and entrepreneurs. As instruments, loans are more predictable, partly because there is an agreed amortisation plan, ongoing interest payments and a planned closing date.
Swedfund has access to EU guarantees that can be used to de-risk and mobilise private capital. The guarantees can be used for investments in areas such as renewable energy, digitalisation, climate and health.