The government should clarify the tensions between Norfund’s three mandates

Norfund, Norway’s state-owned development investor, was established to create jobs and improve living conditions by investing in businesses in developing countries. The government now also asks it to reduce emissions and support Ukraine’s recovery. These are worthwhile responsibilities, but they require money and people. Norway should explain what taking them on means for Norfund’s original work development mandate.

In September, Norfund announced an investment of up to USD 100 million in AMPIN Energy Transition, to help finance solar and wind power, with battery storage, in India. The investment comes through Norway’s Climate Investment Fund, which Norfund manages separately from its other investments.

The climate fund receives NOK 1 billion a year from the state budget, matched by NOK 1 billion from Norfund’s own capital. In other words, half of the annual NOK 2 billion contribution comes from Norfund’s existing resources. Putting that money into the climate fund may be a sensible choice. But it could also be used for other investments. Separating the funds does not remove the need to explain that choice.

Our research on climate finance and development, published through Harvard Kennedy School, draws on interviews at eight development finance institutions, including Norfund. Governments had given these institutions substantial climate responsibilities, but we found no clear analysis showing how they had weighed climate goals against development needs. Investment teams were left to resolve much of the tension when choosing projects.

Norway has been clearer than many countries about what it wants. Norfund’s development investments are intended to create jobs and improve living conditions, particularly where businesses struggle to find finance. The climate fund concentrates on reducing emissions in countries that rely heavily on fossil fuels for electricity. Renewable energy can serve both purposes. The different priorities nevertheless affect where Norfund invests and how its results should be judged.

Norfund’s former chief executive, Tellef Thorleifsson, told us that a fixed target for how much private money Norfund attracts could harm its work in least-developed countries and sub-Saharan Africa. Larger projects in middle-income countries make it easier to attract private money. Norfund could therefore improve that figure by doing more of those deals, while doing less for businesses in countries where finance is scarce.

That does not make the Indian energy investment less worthwhile. But the amount of private money it attracts should not become the benchmark for judging a smaller business in a poorer country. Norway has chosen to pursue both objectives and should assess each against its purpose.

Ukraine adds another responsibility. The Ukraine Investment Fund was established in December 2024. Norfund built a dedicated team before announcing its first investment, around NOK 100 million in an industrial park in Lviv, in November 2025. The investment is intended to provide warehouse capacity in an economy whose trade routes have been disrupted by war. Finding suitable businesses, assessing them and managing the investments requires staff with the right experience.

For 2026, the government is allocating NOK 1.68 billion for development investments, NOK 1 billion for the climate fund and NOK 500 million for Ukraine. These allocations do not, by themselves, explain how the work will be staffed or what risks the government is prepared to accept. The Ukraine fund is expected to invest in viable businesses that struggle to attract finance because of the country’s high risk. Judging its performance requires taking that risk into account.

Norway should publish an estimate of what its funding decisions mean for Norfund’s investments under each mandate over the next five years. That means comparing how much it could invest under different allocations, allowing for repayments, investment returns and new government funding. Ministers should explain why they consider the balance of funding between development, climate and Ukraine justified.

The government should also identify the staff, expertise and project-preparation budget needed for each responsibility. That budget should show how much work will be done by existing staff and where additional people or specialist advice are needed.

Finally, the government should set out how it will judge each programme. For climate investments, that includes the emissions they are expected to avoid. For development investments, it includes jobs and access to finance where commercial investors are scarce. For Ukraine, it should explain how it will assess support for viable businesses, stating the risks and expected returns the government is prepared to accept.

The proposed 2027 budget would almost double funding for Norfund’s development mandate, to NOK 3.12 billion. The annual NOK 1 billion transfer from Norfund’s own capital to the climate fund also ends this year. The government should explain how it arrived at these decisions and what it expects Norfund to achieve as a result.

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Wasim Tahir is a Senior Advisor at ODI Global Advisory and the Centre for Development Finance Studies. He was previously a Research Fellow at Harvard University’s Center for International Development and Director of Private Capital Mobilisation at British International Investment.