Rating for excellence

Along with NIB's increased capital base of EUR 2 billion, comes an increased commitment to achieve a high mandate rating in all sectors of NIB's lending operations. 

Improvements in energy networks, like the Estlink power link between the Nordic and Baltic countries, enhance competitiveness in NIB's member area.

Photo: ABB

The prime way for NIB to strengthen the competitiveness of our member country economies is to support projects that raise the efficiency with which our member country companies produce their products and services. Therefore, the first question we ask our customers when we look at their projects is to what extent they contribute to improving efficiency or productivity.

NIB distinguishes between internal factors (those that businesses can directly influence) and external factors (those that exist in the company's business environment). Internal factors that a directly impact efficiency include:

• Upgrades of physical capital such as equipment or human capital in the form of skills
• Business process innovation: improving business practices or strategies
• Product innovation (for example Nokia Siemens Networks)
• Improved access to suppliers

External factors indirectly impact a company's competitiveness. They affect the environment in which the company is active, and so help it to produce more efficiently. The rate of return of investments that generate these external effects may often be higher for the society or the national economy than for the company planning the investment.

In order to ensure that projects with such spill-over effects materialise, NIB prioritises these types of competitiveness enhancers over direct effects that normally are fully incorporated in companies' business decisions. These external factors include:

• Improvements in infrastructure, including roads as well as telecommunications and energy networks (for example Estlink-2)
• Improvements in health and education facilities (for example New Karolinska Solna Hospital)
• Increased competitive pressures 
• Demonstration effects or leakages: showing the way for other companies or simply involving a spill-over of knowledge or technology
• Strengthening cluster or agglomeration effects, for example through better communications or research and development

When the Bank assesses the potential impact on competitiveness of our projects, we look at the relative improvement in the company's performance compared to a no-project situation. The relative impact on the company or on the business sector is then compared to similar projects in similar sectors. To properly gauge the expected benefits of the project, NIB also assesses the implementation risk, the risk that the project's full potential will not be realised.

Enhance the environment 

The second of the two key eligibility criteria for lending is enhancing the environment. This means that NIB provides loans and guarantees for projects that prevent and treat pollution. When the Bank evaluates the environmental impact of a project, we consider the following questions:

• Does the project show a net benefit for the environment? The Bank carries out a before and after comparison of the project's expected effects on the environment.
• Does the project fit into a NIB environmental focus area? These include cleaner production and resource management (for example Boliden); environmental technology; emission reductions; and renewable energy.
• Does the project include research and development that leads to environmental benefits? (for example Nokia Siemens Networks)
• Does the project enhance public transport and transport solutions so they benefit the environment? 
• Does the project raise industry standards by applying an innovative solution?

To achieve a positive environmental impact rating the project must be in compliance with NIB's Environmental Policy and Guidelines as well as relevant national legislation. A direct positive environmental net impact requires a quantitative assessment.

Defining and limiting the scope or boundaries for the analysis constitutes the first step in assessing mandate fulfilment. Every project is assessed against:

• The peer group performance
• Best available improvement
• Absolute positive environmental impact

The environmental impact is measured on a six-degree scale, including a negative rating which is not applicable for competitiveness. Similarly to the assessment of competitiveness impact, the environmental assessment covers both the potential impact as well as the implementation risk of the project.

Information and background material 

To assess mandate fulfilment we need to understand the client's rationale for, and basic assumptions behind, the investment decision and the context of the investment. For instance, in a larger energy generation project such as a wind farm, most of the information related to environmental issues is available in the environmental impact assessment and feasibility studies. For public transport projects that increase capacity in trains, the information should relate to quantitative environmental benefits of transferring passengers from road to rail. To assess both the environmental impacts and the impact on competitiveness, the basic information needed would consist of traffic volume forecasts combined with performance data on trains.

December 2010

Back to cases and feature stories

Back to the top