The Danish government is planning to make the guarantee framework under Impact Fund Denmark permanent and increase it from DKK 2 billion to DKK 12 billion by 2030. This follows a successful three-year pilot period, with the first guarantees already producing positive results around the world.
With the decision to increase the guarantee framework, Denmark sends a strong signal that we want to be a world leader when it comes to mobilising private capital for sustainable development. The guarantees make it possible put private capital to work to create green transition, jobs and growth in developing countries. This is not only good development politics, it is also good climate politics.
A development guarantee is a financial model that creates capital for impact investments by assuming part of the investment risk and making capital available for local banks or funds, where markets normally fail, especially in Africa, in climate projects and in vulnerable countries. This means that local banks have the courage to lend more money to companies and projects that create green transition, because they are backed by a Danish guarantee.
The beneficiary bank or the guarantor pays for the guarantee, and the scheme is constructed to be self-contained in the long term. Denmark uses its creditworthiness as collateral; however, this is not a grant. It is a financial arrangement where the risk is shared and markets that are normally overlooked get better access to capital.
The guarantees have two main objectives: supporting climate finance and green investments, as well as giving micro, small and medium-sized enterprises access to loans that would otherwise be unattainable. The guarantee scheme was established as a pilot project in 2022 by the Danish government and has since mobilised significant funds. From 2026, it will become a regular part of the Danish development cooperation. With the new guarantee framework, Denmark is expected to mobilise more than DKK 27 billion in private capital for sustainable investments in developing countries by 2030. The capital will create jobs, reduce CO2 emissions and strengthen equality and the local economy.
Examples from the pilot phase
- Asian Development Bank IF CAP: Denmark contributed DKK 650 million in guarantee, which is expected to mobilise DKK 2.9 billion for climate projects, including a plant in Pakistan that converts waste into sustainable aviation fuel and creates jobs for women.
- BP Bank in Rwanda: A guarantee of DKK 38 million has enabled DKK 54 million in new loans to SMEs, of which 25 per cent goes to climate investments.
SVP, Communication & Marketing
Charlotte Holst Frahm
+45 41 38 12 42
