MuniFin’s internal assessment team for green financing recently celebrated its first anniversary. The three-member team was established in August-September 2022, when the company updated its green financing framework. The new framework has streamlined the granting of green financing: the external assessment team was abandoned, and the responsibility for evaluating projects was transferred internally to Rami Erkkilä, Mikko Noronen and Kalle Kinnunen.

“The internal assessment team can convene quickly if necessary. This means that projects can be evaluated as soon as customers need financing”, says Sustainability Manager Kinnunen.

The schedule is flexible, but the criteria are not. MuniFin’s new green financing framework is stricter and more transparent than ever.

“For example, green financing is no longer granted for projects that use fossil energy sources directly for heating”, clarifies Erkkilä, who is a senior expert in responsible financing in the team.

Evaluation, reporting, and impact calculation

Project evaluation and document review take up a large part of Erkkilä’s and Noronen’s working days. To be selected for the green financing portfolio, two members of the evaluation team must assess and approve the project. Kinnunen, who leads MuniFin’s sustainability work, substitutes for the duo if necessary.

“Throughout the week, we review each other’s decision proposals and discuss them in meetings on Fridays”, says the newest member of the MuniFin team, Noronen, who started as a Sustainability Analyst in May of last year.

“If a decision requires more detailed information, we can ask the customer for clarification. The external assessment team met less frequently, and then the decision was either a ‘yes’ or a ’no'”, Erkkilä recalls.

The trio also participates in customer meetings, maintains contact with banks and other stakeholders, and follows the regulation revolving around responsible financing. A significant part of their work is the annual impact reporting of green financing, i.e., calculating and publishing the environmental impacts of the projects.

At the intersection of domestic and international

One foot of the assessment team is in the domestic market, the other in the international markets.

“On the one hand, you have to look at where financing is granted and what the law in Finland says. On the other hand, you have to consider what international regulation and investors require. You have to be credible in both directions”, Kinnunen reflects.

Discrepancies may also arise when going into details, for example, talking about water flow rates.

“The EU taxonomy states that water should not flow in showers faster than eight liters per minute. Finnish building regulations have a minimum level of nine liters per minute. It’s pretty difficult to reconcile these two”, Erkkilä notes.

These and other “usability challenges” are currently being solved in working groups set up by the Union. However, it is certain that regulation around sustainable financing is tightening. At the same time, more is demanded from reporting.

“The bar is being raised and customers are probably expected to provide even more detailed information. It’s a good idea to prepare for this”, Noronen advises.

Kinnunen says that the responsibility of actors and projects, as well as ESG risks, are already being viewed as a whole – in the future even more broadly.

“We are no longer focusing on just one letter. It could be that our operation changes so that we evaluate the responsibility of our customers comprehensively”, Kinnunen adds.

What kind of projects would the internal assessment team for green financing like to see more of?

“This year we evaluated our first biodiversity project. It was an interesting case, related to river restoration. We hope to see more of these”, Noronen says.

The sustainability agenda primarily focuses on the long-term impact generated through the MuniFin’s business, i.e., the products and services offered to MuniFin’s customers, the Finnish public sector and affordable social housing sector. It defines a clearer direction and objectives for the company’s sustainability efforts, extending up to 2035. The agenda helps in meeting future regulations and enhances communication and reporting with customers, investors, and other key stakeholders. 

“The sustainability agenda is our way of measuring and communicating what we aim to achieve through our work. Our goals are now more aligned with what we are already doing and what we aspire to achieve in the future,” says Esa Kallio, CEO of MuniFin. 

“We wanted to update our perspective on what is crucial for sustainability in the context of our business and core mandate. We also wanted to set goals and metrics that more clearly describe our essential role in the Finnish welfare society,” adds Mikko Noronen, the Sustainability Analyst involved in developing the sustainability agenda. 

Key themes include supporting the welfare society and accelerating Finland’s green transition 

The sustainability agenda consists of three parts. The first part addresses MuniFin’s business environment from the perspective of sustainable development and how our operations relate to national and international goals. The agenda’s second and most important part includes the actual themes, goals, and metrics for MuniFin’s sustainability efforts. The third part discusses the future of the company’s sustainability work. 

The long-term metrics set include two related to sustainable finance and the company’s first emissions reduction target for financed buildings.  

“MuniFin’s customers play a significant role in achieving Finland’s climate goals. Our most substantial positive impact comes through our business, i.e., the financing we provide. Therefore, we aim for at least one-third of long-term customer financing to be green and social finance by 2030. At the end of June, the share was 18%”, says Noronen. 

During the development of the sustainability agenda, the maximum amount of margin discount offered for green financing was increased as an incentive for even more sustainable projects. 

“However, the most notable change in our sustainability efforts compared to our previous initiatives is the establishment of emissions reduction targets for the buildings we finance. Our goal is to achieve a reduction to 8 kgCO2 per m2 by 2035, which represents a 38% decrease from the 2022 levels. To reach this target, we will maintain continuous monitoring, engage in ongoing dialogue, and facilitate knowledge exchange with our customers”, explains Noronen. 

MuniFin has been developing emissions calculations for a while and, for example, joined the PCAF initiative in 2022. The network’s goal is to develop and implement a unified way of calculating and reporting financed emissions to promote the objectives of the Paris Climate Agreement. By joining, MuniFin committed to measuring and disclosing its emissions within three years. 

In addition to MuniFin employees, customers, investors, and other key stakeholders participated in the development of the sustainability adenda. 

 “We conducted a materiality analysis, which helped clarify our goals and our role even further,” says Noronen. 

In the agenda’s third part, which discusses the future of the company’s sustainability work, there is a commitment to review the goals within two years. 

“Goal achievement will be monitored annually as part of our annual reporting, and goals may be expanded or tightened as necessary. The document will also be updated as business environment changes, such as changes in national or international legislation and best practices in the markets,” Noronen explains. 

“Although the sustainability agenda largely focuses on our external means of impact, our employees remain the most crucial implementers of sustainability. Therefore, it is increasingly important for us to invest in developing a culture of sustainability and expertise,” says Kallio. 

Explore MuniFin’s sustainability agenda: 

For more information: 

Antti Kontio 

Head of Funding and Sustainability 

+358 50 3700 285