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The green finance trio drives sustainable development in Finland and monitors international regulation

Rami Erkkilä, Mikko Noronen and Kalle Kinnunen.
Rami Erkkilä, Mikko Noronen and Kalle Kinnunen form the internal assessment team for MuniFin’s green financing.

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.

Green Finance

MuniFin grants green financing to projects that generate clear and measurable positive climate and environmental impacts. Green financing, that is more affordable than ordinary loans or leasing, has been granted since 2016, and today there are over 300 projects within the financing from Helsinki to Inari.

Read more about green bonds