6. NIB – Nordic Investment Bank

6.1. Introduction

The Nordic Investment bank (NIB) is a financial institution co-owned by eight countries: Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden. NIB finances both private and public projects, both in and beyond the member countries. It mainly finances projects within the member state region, but also operates on the international market. NIB provides loans to governments, municipalities, as well as financial institutions and limited companies. The bank provides sustainability-linked loans which are tied to sustainability key performance indicators for companies. It manages funds such as the Baltic Sea action Plan Fund (together with Nefco), which is related to biodiversity conservation. NIB mainly finances projects within the fields of

Technical progress and innovation
Human capital and equal economic opportunities
Improvements in infrastructure
Market efficiency and business environment
Climate change mitigation
Resource efficiency
Pollution reduction
Preventive measures

6.1. Strategies and Policies

According to NIB’s mission, they “…finance projects that improve productivity and benefit the environment of the Nordic and Baltic countries.”

NIB (2018)

. The strategy of NIB is to provide long-term loans and funding to customers to ensure sustainable growth. NIB has five environmental focus areas in its mandate, and will lend to projects that bring pollution reduction, preventive measures, resource efficiency, development of clean technology and climate change mitigation

NIB (2018)

The sustainability aspects of NIB’s operations are regulated through the Sustainability Policy. It is explicitly stated in NIB’s Sustainability Policy that “NIB will support its member countries’ efforts to achieve climate goals and enhance biodiversity in nature

NIB (2021A)

.” Moreover, biodiversity considerations are explicit with regards to protection of the Baltic Sea. Loans that are related to water protection can be included in NIB’s Nordic-Baltic Blue bonds.

NIB’s Responsible Investment Framework outlines investment principles for the treasury operations

NIB (2021B)

. The framework is used to ensure that projects that NIB invests in fulfil the ESG performance expectations. It is stated in the Responsible Investment Framework that NIB actively seeks counterparties that seek to fulfil certain environmental goals and requirements, such as The Convention on Biological Diversity.

6.3. Biodiversity in NIB’s project portfolio

6.3.1. Mandate rating and ESG-assessment

Prior to a credit decision, all projects undergo a mandate rating to make sure that the project fulfils NIB’s mandate: To finance projects that improve productivity and benefit the environment of the Nordic and Baltic countries

NIB (2022B)

. Parallel to this each transaction is taken through an ESG assessment that focuses on ensuring compliance with NIB’s Sustainability Policy, exclusion list. The ESG assessment focuses both on the projects and counterparty level. The process is illustrated below

NIB (2022B)

Counterparty ESG assessment

Project ESG assessment

Biodiversity aspects are included in the ESG assessment for projects and counterparties, especially within certain sectors including mining and forestry

NIB, Head of Sustainability (May 12, 2023) Personal Communication.

. During the project ESG assessment, the analysis focusses on potential environmental impacts, including biodiversity, that would arise during the construction, during the operation and decommissioning. For this purpose, an environmental impact assessment (where applicable), quantification of the project’s relevant emissions and discharges to the environment, permits and licences, description of potential significant environmental, social or governance impacts, environmental and social management plan, etc. will be used. During the counterparty analysis material ESG factors related to client’s activities are analysed, including climate, pollution and waste, biodiversity, and resource efficiency aspects. Where necessary supply chain considerations are also considered in terms of potential biodiversity loss (e.g. supply chains linked to deforestation practices).

Throughout the process NIB monitors if its clients are compliant with NIB’s Sustainability strategy, exclusion list and ESG guidelines. If the clients deviate from this along the way NIB address their concerns. The Lending Department is responsible for implementing the ESG guidelines for lending.

6.3.2. Investments and projects

NIB has a clear environmental focus in its project portfolio, however, biodiversity is not an explicit focus point compared to climate change mitigation, pollution reduction, resource efficiency and resilient infrastructure

NIB (2018)

. Biodiversity is integrated in an implicit, cross-cutting way into these environmental drivers.

In an investment or lending process, the sustainability and mandate team is involved from the beginning. Each project is rated on a scale from negative to excellent both from environmental and productivity perspectives. NIB has set a target that at least 50% of mandate rated projects should receive the excellent or good environmental mandate rating. The same target refers also to the productivity mandate, which encompasses impacts within areas such as technical progress and innovation, improvements in infrastructure, or human capital. Each project can get either one or both mandates. The logic behind such approach is rooted in NIB’s mandate which outlines that both environment and productivity are equally important for NIB.

In the environmental impact rating, the assessment is carried out through as an aggregated qualitative and quantitative assessment

NIB (2019)

. The qualitative assessment is sector-based, with sectors receiving a pre-assigned rating based on their potential to contribute to the achievement of international and national targets for pollution reduction, ‘preventive measures’ (resilient infrastructure), resource efficiency and climate change mitigation. The quantitative impact assessment is based on the outcome impact indicators values connected to the specific project, which are forecasted to assess changes in for example energy or raw material use after project implementation.

6.3.3. Investment criteria

Sectors and activities that NIB do not finance are formally defined through an exclusion list. An excerpt of the biodiversity relevant aspects of the exclusion list can be seen in Table 5. The table describes selected criteria and additional information as defined by NIB, which has been matched with the relevant driver of biodiversity loss (see Background). Biodiversity is not directly mentioned in the exclusion list, however the list contains many aspects directly or indirectly related to biodiversity loss as listed in the third paragraph (Table 5).

Table 5. NIB Exclusion criteria and their relevance for biodiversity loss drivers.

Biodiversity relevant exclusion criteria

Criteria

Additional information

Relevant biodiversity loss driver

Counterparty activities

Activities or materials deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international phase-outs or bans
Such as: Wildlife or products regulated under the Convention on International Trade in Endangered Species or Wild Fauna and Flora (CITES); ozone depleting substances, PCB’s (Polychlorinated Biphenyls) and other specific, hazardous pharmaceuticals, pesticides/herbicides or chemicals; unsustainable fishing methods (e.g., blast fishing and drift net fishing in the marine environment using nets in excess of 2.5 km in length)

Direct overexploitation of natural resources

Pollution of soil, water and air

Spread of invasive species

Land-use and sea-use change

Climate change

Pollution of soil, water and air

	Destruction of High Conservation Value areas (natural habitats where these values are considered to be of outstanding significance or critical importance) In the event that any of the following activities form a significant part of a counterparty’s business activities: Mining, extraction or processing of thermal coal or peat Energy generation based on thermal coal or peat Exploration, extraction, production and transport of unconventional or Arctic oil and gas
Projects: Energy	Mining, extraction or processing of thermal coal and peat Exploration, extraction or production facilities (i.e. upstream) for crude oil or natural gas Any energy generation based on fossil fuels (natural gas, oil, coal, or peat) Producing, processing and/or trading of palm oil and its derivatives for energy use	Climate change Land-use and sea-use change
Projects: Infrastructure	Transportation, storage and refining infrastructure (i.e. mid- and downstream) for oil Transportation, storage or processing infrastructure (i.e. mid- and downstream) for natural gas not supporting energy transition to low-carbon gases (e.g. fossil-free hydrogen, biogas) Other transportation infrastructure such as ports, rail networks and vehicles, if the majority of business consists of coal (i.e. hard coal or lignite), peat and oil transport	Climate change Land-use and sea-use change Pollution of soil, water and air
Projects: Extractive industries (non-energy)	Mining, mineral processing and chemical extraction of radioactive mineral resources Mining and processing of minerals for the sole purpose of using as gems Sand mining	Pollution of soil, water and air Direct overexploitation of natural resources
Projects: Research and development	Research in exploration, extraction, or production of fossil fuels’ Research in purely fossil fuel-based power trains for road transport or stationary energy generation Research involving animal testing not in compliance with EU directives or national legislation	Climate change Direct overexploitation of natural resources

6.3.4. Nature-based Solutions

Although NIB has a strong environmental focus and the core of their financing lies in sustainable activities, nature-based solutions is not a specific focus for the institution. According to NIB, this is mainly related to the availability of such bankable projects. Many of their financed projects apply technological and infrastructural solutions rather than nature-based ones, but NIB welcomes the implementation on nature and biodiversity related proactive and protection measures within such projects.

Beyond NIB's regular lending operations, NIB contributes to environmental protection and climate change offsetting.

Case example: Old-growth forest protection in Lithuania

NIB has supported the acquisition and protection of a 5-hectare old growth forest area in Lithuania through the NGO the Ancient Woods Foundation. The new protected area can contribute to biodiversity preservation of threatened flora, fauna, and fungi.

Protection of a forest area is a nature-based solution with joint climate and biodiversity benefits, and this case demonstrates how financial measures can be used as a tool to conserve threatened ecosystems.

NIB (2022C)

6.3.5. Application of the EU taxonomy

Since 2022, NIB assesses the alignment of each new project with the EU taxonomy, including the fulfilment of technical screening criteria and Do No Significant Harm criteria, which also includes biodiversity.

In addition, NIB has assessed the entire NIB bond pool category alignment with the EU taxonomy. The first estimated alignment assessment for the NIB Environmental Bonds Framework project categories was performed as part of the 2021 Impact report.

NIB (2022A)

For each Environmental Bond category, the assessment was made for the most relevant environmental objective in the EU taxonomy. Climate change mitigation was most commonly found to be the relevant environmental objective. The preliminary alignment assessment results displayed that the majority of environmental bond project categories were estimated as aligned with the environmental objectives of the EU taxonomy. In the 2022 Annual Report, NIB reported on another screening of the alignment of the Environmental Bond project categories to the EU Taxonomy and found that out of the total disbursed loan volume, 99,6% were considered taxonomy eligible

NIB (2023A)

6.4. NIB’s application of biodiversity safeguards

6.4.1. Risk based approach

In general, NIB takes a risk-based approach to all its financing, and an objective analysis is performed for all projects it engages in. NIB is conservative with regards to risk and only finances projects that can demonstrate economical and technical stability

NIB (2023B)

. NIB categorises all projects based on their potential negative environmental and social impact based on the categorisation from the EU EIA Directive

NIB (2022B)

. This allocates projects into three categories:

Category A Projects
- Corresponding to Annex I in the EU EIA Directive. Likely to have irreversible, diverse or unprecedented impacts.
Category B Projects
- Corresponding to Annex II in the EU EIA Directive. Likely to have limited, largely reversible environmental and social impacts. Subject to focused environmental assessment.

Category C Projects
- No requirement for an EIA, as projects are likely to have no negative environmental and social impact.

Biodiversity risk is considered in cases when NIB finds that it is relevant for the project. This is highly sector dependent. In case NIB finds that a project is of high biodiversity risk, it asks the clients to disclose more explicit information on the project. NIB in some cases make use of the ENCORE platform (Appendix B) to identify biodiversity or ecosystem service hotspot areas.

6.4.2. Application of the mitigation hierarchy

The mechanisms of the mitigation hierarchy are stated in NIB’s risk management policy as:

“The Bank recognises that adverse environmental and social impacts cannot be avoided in all circumstances. In these cases, the Bank seeks for the negative impacts to be appropriately reduced, mitigated, or compensated for.”

NIB (2022D)

6.4.3. Requirements for planning, implementing, and monitoring mitigation actions and (if necessary) offsets

Monitoring of mitigation actions is assessed from project to project based on the ESG assessment

NIB (2022B)

. A specific monitoring clause can be put into a loan bond agreement with the client

NIB Head of Sustainability (7 February, 2023). Personal Interview.

. NIB returns to a client three years after the project, to examine whether the impacts determine ex-ante have materialised ex-post

NIB Head of Sustainability (May 12, 2023) Personal Communication.

. If impacts cannot be demonstrated, this factors in, if the client applies for a new loan. The ex-post evaluation does not have effects on the loan which was already received.

6.5. Maturity assessment of NIB

The maturity of NIB (Table 6) is assessed using the maturity tiers developed by Norion (Appendix A).

Table 6: Maturity assessment of NIB

Category		Tier C	Tier B	Tier A
Strategy	Strategy		X
	EU alignment		X
	Investment targets		X
	Biodiversity goals		X
Board and management	Transparency			X
Board and management	Decision-making		X
Systems	Investments targeted at biodiversity		X
	Biodiversity safeguards	X
	Project screening		X
	Risk assessment		X
	Project management		X
	Project monitoring	X
	Project evaluation	X
	Frameworks and tools		X
Structure	Responsibility			X
Structure	Overview		X
Employees	Education		X
	Competences		X
	Internal knowledge sharing		X
Culture	Awareness		X
Culture	Topicality			X
Communication	External communication		X
Network	International partnerships		X
	External knowledge sharing			X
	International agreements			X