Innovation – the promise of the future
Innovation is the driving force for clean energy, renewables and energy efficiency. Countries need to diversify their sources of energy and – where possible – deploy local power sources rather than using foreign exchange to import fuel.
In some countries, renewable technologies are becoming competitive in energy markets without the need for subsidies or incentives. As power grids evolve, renewables can also be grid-connected, enabling greater private sector investment in renewable energy markets.
IFC is one of the world’s leading private investors in emerging market renewable energy with a robust pipeline in the sector that consistently accounts for two-thirds of IFC’s direct power investments.
IFC invested close to $900 million in renewable energy in fiscal year 2015, of which 30 percent was in wind and 40 percent was in solar.
Another area that holds great promise is green buildings, offering huge potential financial savings by lowering utility costs through efficiency practices.
Last year IFC invested $391 million in green building finance through its own account and through financial intermediaries, bringing IFC’s total green building business to over $1 billion over the last five years.
IFC has also provided support on the regulatory front, working with governments to launch green building codes in Colombia, Indonesia, the Philippines and Vietnam.
Investments in energy efficiency and low-carbon infrastructure have shown outstanding results to date generating important GHG emissions reductions.
This year, IFC’s largest greenhouse gas benefit came from a low-carbon infrastructure project, China Gas, which is estimated to reduce 2.4 million tons of CO2e/year by developing natural gas distribution infrastructure and refilling stations that will reduce polluting coal and other fuels in industrial, residential and transportation use.
Catalyzing Public Funds to Unlock Private Investment
In cases where IFC identifies high-impact projects that would not attract financing on strictly commercial terms, blended finance comes into play. It’s a a tool that uses concessional funds from donors to stimulate investments with a strong transformational potential but that may not otherwise happen.
Since 2010, IFC has deployed close to $300 million of concessional funds and catalyzed close to $5 billion in other financing, utilizing finds from the Global Environment Facility, the Climate Investment Funds, and governments such as Canada.
Another effective way to unlock private funds has been the IFC Catalyst Fund, managed by IFC’s Asset Management Company. The fund has raised close to $418 million from institutional investors and sovereign funds interested in investing in green-growth opportunities.
Green bonds have been another innovative way to have private sector funds for climate action, with both the World Bank and IFC issuing bonds, a total of $8.5 billion and $3.8 billion respectively.
Proceed have been directed to a variety of high-impact projects ranging from infrastructure development, to water and irrigation systems, to sustainable agribusiness, to renewable energy.
And a recent auction to help cut methane emissions demonstrates the quest to try new ways to try and draw in private sector funding.
The Pilot Auction Facility – an innovative World Bank-managed facility developed jointly with IFC that auctions carbon credit price guarantees to private sector companies to cut their methane emissions.
Twenty-eight companies participated in the first auction, held in July, the proceeds of which raised more than $2.5 million and allocated almost 9 million metric tons of carbon dioxide equivalent of put options.
“Looking forward there are several areas where we have already done well but also see opportunities for substantially increasing our portfolio. These include clean energy – renewables as well as utility energy efficiency, telecommunications, sustainable cities, green buildings, waste management, transportation, sustainable agribusiness, and greater industrial efficiencies,” said Christian Grossmann, IFC Director of Climate Change, speaking at a forum organized by GreenInvest – a G20 initiative, as part of the World Bank Group – IMF 2015 Annual Meetings in Lima, Peru.
His comments point to both the challenges and opportunities of the future.