Financing a sustainable future for Arctic investment

In recent years the Nordic Investment Bank has been increasing the size and scale of its investment in the Arctic, as the region's resources have caught global attention

By Elías Thorsson - October 26, 2023
Nordic Investment Bank president André Küüsvek (Photo: Nordic Investment Bank)

“I think we’ll certainly see more investment in the Arctic. There are several factors for that, for instance, the prospect of new maritime routes opening drives global investors to pay more attention. We saw a minister from the UAE here (at the annual Arctic Circle conference, ed), if you look at the agenda you think what has the UAE to do with the Arctic? But everybody is thinking about it,” says André Küüsvek, the president of the Nordic Investment Bank (NIB).

Founded in 1975 by the five Nordic countries, with the three Baltic states becoming members in 2005, NIB provides financing for projects across the region. According to its latest financial figures, the bank has €21,326 million in outstanding loans across its member states and €39,102 million in total assets.

NIB’s headquarters in Helsinki

NIB focuses on financing projects that improve productivity and benefit the environment in the Nordic–Baltic region with investments in various industries that include renewable energy, mineral extraction, tourism, as well as infrastructure investment. ABJ spoke with Mr Küüsvek following his talk on the future of Arctic investment, an area the bank has increasingly become focused on

“We started knowingly defining and measuring our investment in the Arctic in 2015, when the Arctic Lending Facility was created. Before that we had of course made a lot of investments into Iceland and had investments in the northern parts of Norway, Sweden and Finland,” says Mr Küüsvek. “Originally the amount was €500 million. Today we are very near the €1 billion mark, while investment in Iceland, which we see as part of our Arctic investment, is €2.5 billion.”

As Mr Küüsvek explains, NIB places much emphasis on investing in projects that are sustainable and not harmful to the environment. The bank doesn’t invest in fossil fuels and all loan projects are assessed for their environmental benefits.

“I would like to think we behave responsibly across the region. We don’t differentiate, we recognise that the Arctic is more sensitive, number one, because of the greater temperature rises and faster changes. In Svalbard, for instance, in the past 30 years, the average temperature has risen 5.6℃,” Mr Küüsvek says. “It’s the same in Greenland, people live mostly in the western south, and polar bears mostly in the east, but they are running out of ice so they are wandering into where humans live.”

One of the key challenges to building up industry in the Arctic is the lack of infrastructure. The movement of people and goods needs harbours and airports, both of which are more costly to construct in the High North than further south. Through their Arctic Lending facility, NIB has provided financing for two international airports in Greenland, which are currently under construction—in the western town of Ilulissat and the capital Nuuk. Both are scheduled to open in 2024 and are hoped to provide a boon to the local economy.

Heavy machinery loads rubble at a construction site beside the airport in Nuuk, Greenland on September 6, 2021. Once a major expansion is complete, Nuuk’s airport could accommodate direct flights from North America (Photo: Hannibal Hanschke / Reuters)

The investment in infrastructure is partially driven by the increased industrial output in the region, which is changing the industrial landscape in NIB’s member countries.

“While most of the people live in the south Much of the cheap hydro energy is produced in the north and now industry is moving to the north as many factories want to make use of the green and cheaper energy,” Mr Küüsvek says. “To name a few, in Norway we have financed the electricity grid company Arva and we are also financing the big Northvolt electric battery factory in northern Sweden.”

With new shipping routes opening up, a warming climate making certain areas more accessible and a build up of infrastructure, the Arctic seems set for interest in investing in the Arctic to continue to grow. But, as Mr Küüsvek explains, investing in a region that, throughout its history, has remained largely untouched, comes with important considerations.

“We need to be more responsible and watch that it is the correct investment so that the critical mass of the local population is benefitting.”