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Fireworks at Kansalaistori Square, Helsinki, to celebrate a century of Finnish independence (Photo: Finland 100)

Fireworks in Helsinki, to celebrate a century of Finnish independence (Photo: Finland 100)

Public finance is seed money. It can be used to bring about flows of private money to climate change-related projects, says Pasi Hellman, Managing Director of the Nordic Development Fund (Photo: Paula Toivanen)Pasi Hellman and the evolving environment of development finance

The first Finn at the helm of the Nordic Development Fund (NDF), the joint development finance institution of the Nordic countries, Pasi Hellman is driven by economics and development policy. Speaking in his bright office on Fabianinkatu in Helsinki - almost a full year since he took up the Managing Director’s post at the NDF - Hellman says he thinks it is difficult to improve on his predecessor’s work, but that the Fund should continue to emphasize its strengths in its own sphere of operation.

 “The Nordic Development Fund has its own  narrow pigeonhole in the field of climate  finance,” he says.

“One of our greatest strengths is the fact that we are a small and agile fund. We can even focus on small and micro-enterprise projects for which the World Bank, for instance, is too big.”

The 46-year-old, who holds a PhD from the Turku School of Economics in Finland, wound up as head of the NDF via a long career at the Ministry for Foreign Affairs of Finland and a number of development finance institutions. It was while working at the Unit for Development Financing Institutions of the Ministry for Foreign Affairs that Hellman became interested in developing economies through the development finance sector.

“The joint effect of money and policy of course is greater than the impact of either alone. It is possible to accomplish many more things in this sector than by talking on the policy level,” he says.

The joint development finance institution of the Nordic countries, established in 1989, is owned by the Foreign Ministries of the Nordic countries. Its activities are financed through the development cooperation appropriations of the Nordic countries and the recipient countries’ repayment of credits granted by the NDF, which began as a fund granting credits. The NDF's operating principles were revised in 2009, and it shifted to a finance model based largely on donor contributions. Along with the reform, climate change became the focus of activities. Now, the NDF concentrates on financing projects in developing countries that help correct and prevent the problems caused by climate change.

“Financing by means of donor contributions makes it possible to guarantee a wide range for the various activities and projects,” Hellman explains.

Committed to curbing environmental indebtedness

According to the environmental organisation WWF, the world is now living on debt because the carrying capacity of the environment for this year has been used up. Hellman considers this a cause for concern. In his view, the reduction of the global environmental debt, or even its repayment, is not impossible - but it requires a great deal of commitment from industrialised countries. 

“It is easy to talk about environmental debt and to instruct others how they should act. Deeds, however, should begin at home. One cannot say to developing countries that the pace should be curbed, while at home this has not been done in the past and that is why progress has been made.”

Hellman states that as far as the Earth’s carrying capacity is concerned, the development path for developing countries cannot be the same as the path followed by the industrial countries. The Earth lacks the resources for this.

“New technologies and energy efficiency, for instance, play a role in this debate. Perhaps they can be used to ensure development that conserves natural resources. The NDF concentrates on projects of this type in countries with the least potential to combat climate change.”

From aid donor to aid recipient The Nordic Development Fund, which provides grant financing for climate change interventions, recently facilitated a four million euro financing round to support rights-based management of coastal fisheries in Mozambique (Photo: Jingjie Chu)

Financial aid to developing countries comes under considerable criticism today, even though citizens’ support for development cooperation has remained stable. Configurations between and within states have changed, however - and Hellman ponders what the concept of a developing country actually means today.

“China will soon be both the world’s largest economy and a developing country at the same time. The situation has also changed, so that middle-income countries often quantitatively have more poverty than lower-income countries. Don’t these countries have a greater responsibility for their own poor?”

According to Hellman, the situation whereby Europe and the United States of America pay most development aid is not sustainable in the long run. He believes that the boundaries of development aid are becoming blurred and that aid recipients and donors will change roles. “For example, the support packages to Greece resemble development aid in many ways. They are external assistance to a sovereign state. The difference is that strict conditions have been set for Greece. No one says that Greek ownership needs to be respected. Quite the contrary!”

In development policy, ownership means the recipient country’s right and responsibility to decide on its own development. Consideration of such fundamental issues is not easy, but it gets Hellman to go to work every morning. He believes in development finance.

“It’s great to work with issues that have positive impacts and that spur development forward,” Pasi Hellman says. “In this work, one feels that one has something to contribute to issues that pertain to the whole world.” 

Paula Toivanen