Solid financial returns from Norfund’s investments in developing countries

Last year, Norfund’s investments in developing countries aimed at creating jobs and avoiding emissions delivered returns of 7.2 per cent and 11.4 per cent respectively, measured in investment currency. “Good returns are important in order to combat poverty and limit climate change more effectively,” says Tellef Thorleifsson, CEO of Norfund.

Norfund, the Norwegian investment fund for developing countries, has invested in some of the world’s most challenging markets since 1997. The objective of the investments under the fund’s development mandate is to create jobs and reduce poverty. Since inception, these investments have delivered an average annual return of 5.2 per cent in investment currency, or 7.7 per cent in NOK.

“Over the next 10–15 years, 1.2 billion young people in developing countries will enter a labour market that is expected to create only 400 million new jobs. If we are to succeed in mobilising the necessary investments to create enough jobs, it is important to demonstrate that it is possible to achieve reasonable returns in our markets,” says Thorleifsson.

Strong demand for capital for renewable energy

Since 2022, Norfund has managed the Norwegian Climate Investment Fund, which aims to accelerate the global energy transition by investing in renewable energy in developing countries. The fund’s investments have contributed to avoiding substantial annual emissions. Returns to date have also been very strong, averaging 13.3 per cent in investment currency, or 9.7 per cent in NOK.

“The returns from the Climate Investment Fund reflect the fact that demand for capital for renewable energy investments in emerging economies far exceeds supply,” says Thorleifsson.

He points out that higher gas prices because of the Iran war, have made the capital the fund can provide even more important.

“Gas is now being priced out of the energy mix in Asia. Whether this leads to a faster transition to renewable energy or to higher emissions from coal, depends on access to risk‑willing capital such as the one we can provide,” says Thorleifsson.

Exchange rate fluctuations have a significant impact

For 2025 alone, Norfund’s development mandate and the Climate Investment Fund delivered returns of 7.2 per cent and 11.4 per cent respectively in investment currency. Currency fluctuations during the year meant that returns measured in NOK were ‑3.4 per cent and ‑0.1 per cent respectively. In 2024, the currency effects were in the opposite direction. That year, the development mandate delivered a return of 8.3 per cent in investment currency and 19.7 per cent in NOK, while the Climate Investment Fund achieved returns of 9.3 per cent in investment currency and 18.2 per cent in NOK.

“Exchange rate fluctuations will at times have a significant impact, but over time, we see that we achieve sound returns on our investments measured both in NOK and in investment currency,” says Thorleifsson.