The allure of impact investing among private investors is surging, with an increasing number seeking not just financial returns but also positive societal impact. According to the GIIN, the Global Impact Investing Network, assets managed by impact investors have increased at a compound annual growth rate of 21% over the past six years, with an 11% increase in the past year — a signal of enduring confidence in our market.
“While much of the impact funding still comes from national and multinational banks and development finance institutions, the growth is a clear indicator of market confidence among private investors”, says Finnfund´s Chief Investment Officer Hanna Loikkanen. The Finnish state-owned impact investor Finnfund’s portfolio now spans roughly 200 companies across 55 countries, totalling 1.2 billion euros in investments and commitments.
Climate change has emerged as a defining issue in impact investing. “Our goal is to help companies adapt to climate change through our investments, because its effects touch every aspect of the business environment,” says Loikkanen. Finnfund’s companies face mounting risks: forest fires, droughts, and floods increasingly threaten agricultural and forestry investments. In some cases, extreme weather can halt operations altogether.
Yet, the gravest risks are political and macroeconomic. Political unrest, coups, civil wars, and outright wars can disrupt Finnfund’s investment targets. Current conflicts in Ukraine and Myanmar exemplify the challenges. Even relatively stable countries are not immune, as global events—like U.S. tariffs imposed in spring 2025—can have ripple effects.
Navigating risk
Finnfund’s investment strategy is not for the faint of heart. “We operate in developing markets, investing in private companies that may not have well-established business practices yet. The challenges are diverse, and risks can materialise in many ways,” Loikkanen explains. Nevertheless, resilience is a hallmark of Finnfund’s portfolio. "However, the companies in the portfolio have demonstrated an ability to adapt to challenges and have succeeded in growing their business profitably”, says Loikkanen.
One standout example is EthioChicken, an Ethiopian firm that continues to grow and thrive despite civil war. Finnfund also backs companies building telecom towers in conflict zones—structures often spared in war because all sides rely on communication.
“These situations demand extraordinary adaptability. We seek out companies with strong leadership and robust business models that can weather extreme conditions,” says Loikkanen.
Growing demand for funding
Investing in developing countries requires a tolerance for uncertainty and unpredictability. To mitigate risk, financiers often seek instruments with protective features. Finnfund, for instance, has negotiated with the EU for a guarantee instrument for its new digital fund, with the European Commission backing up a portion of the investments.
Despite the hurdles, Loikkanen sees immense potential in emerging markets. “These are the markets of the future. The Global South is experiencing the world's fastest economic growth, driven by favourable demographics. This opens up ever more opportunities for meaningful business,” Loikkanen notes.
Technological leapfrogging is another source of opportunity. Developing countries can adopt the latest technologies directly—such as banks moving online without ever establishing physical branches.
Finnish expertise in demand
Finnfund’s 36-person team, led by Loikkanen, scouts for companies where investments can deliver both impact and financial returns. Finnfund provides loans and equity to firms in five sectors: sustainable agriculture and forestry, renewable energy and green transition, financial institutions, digital solutions, and infrastructure. “We ensure our investment targets grow and succeed. Eventually, we exit when the time is right, reinvesting the proceeds into new ventures. Our companies are unlisted, so we actively seek strategic investors. We do everything we can to make this happen,” Loikkanen says.
