Meeting the challenge of climate change will require the involvement of the private sector to develop and introduce new technologies, as well as create supportive business models and marketing practices. IFC is calling on banks in developing countries to increase their lending to companies wishing to invest in climate-friendly technologies.
In a message delivered at a United Nations conference in Nairobi to discuss the future of the UN climate convention, Lars Thunell, IFC’s Executive Vice President, urged delegates to consider ways to empower the private sector. He said, “Private companies in developing countries can play a significant role in combating climate change, but they still face a number of obstacles, including access to finance for investing in clean technologies.”
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A report released October 30 by former World Bank economist Nicholas Stern,
Economics of Climate Change, finds that costs of stabilizing the climate are significant but manageable, whereas delay would be dangerous and much more costly.
Stern and environmentalists assert that climate change will have an impact on the daily lives of human beings in coming years. Shifting weather patterns will cause natural disasters that become human disasters, with increasing economic and social costs. With this in mind, protecting the environment has become a core part of IFC's business, as demonstrated by its growing and innovative initiatives across various regions and sectors.
Making a Difference
IFC provides financing for a variety of climate change mitigation ventures. Through innovative business models, IFC has been demonstrating the profitability of clean energy investments. Supporting private sector investment in climate-friendly technologies is particularly important in developing countries where companies have no obligation under the Kyoto Protocol to reduce their carbon dioxide emissions. Through its
Sustainability Energy Program, IFC has played a pioneering role in helping remove barriers for clean energy technologies and services in emerging markets.
| Examples of IFC Projects |
Africa: Affordable Lighting
IFC's Lighting the Bottom of the Pyramid project is an initiative to mobilize the private sector for a commercial solution to a global development challenge: 1.6 billion people without access to electricity, 500 million of them in Africa. The project aims to bring affordable, alternative sources of lighting to poor people through development of the light emitting diodes market.
IFC's pilot projects in Ghana and Kenya will identify existing market forces and technological changes that yield an affordable commercial solution with high developmental impact. Products will include portable, battery-based lighting solutions. The people who lack electricity, rather than being isolated from the economic system, are an integral part of the lighting industry. They collectively spend $38 billion per year on fuel-based lighting, representing 17 percent of the global lighting market.
China: A New Business Model
In China, IFC brought together for the first time a gas company, a supplier of clean energy equipment, and a commercial bank, Industrial Bank, to create a new financing model. The bank provides commercial credit to the customers of the Xinao Gas company to finance their clean energy projects. Xinao Gas offers advice on reducing energy consumption and pollution. It also provides the equipment – such as boilers and heating systems – and partners with Industrial Bank to provide loans for the equipment. The result will be $150 million worth of clean energy projects over six years, and a total carbon dioxide reduction of five to 10 million tons.
Central and Eastern Europe: Financing Efficient Energy
IFC has helped local banks finance energy efficiency projects in Central and Eastern Europe. These projects have led to reduced costs for businesses, profitable business lines for financial institutions, and better public services. They have also brought lower energy bills and a better living environment for local people.
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“We are already finding abundant private sector interest and opportunities for climate-friendly investment,” said Shilpa Patel, IFC’s
Sustainable Business Innovator Group Manager. “While only a first step, the expected commercial and developmental benefits of these initiatives are an encouraging basis for much larger efforts. These actions are a promising response to the needs outlined in the Stern report.”
In FY06, IFC leveraged over $1.5 billion in sustainable energy investment through 21 projects, ranging from biomass cogeneration facilities in sugar refineries and waste heat recovery in steel mills, to run-of-river hydro and wind power projects. IFC, in collaboration with
Global Environment Facility, has programs with local banks in eight countries to support their financing capability for sustainable energy, with commitments of more than $351 million in IFC funds.
IFC also has about $175 million under management in partnership with the government of the Netherlands, through which it purchases emission reduction credits from projects eligible under the Kyoto Protocol’s Clean Development Mechanism and Joint Implementation Mechanism.
For additional information contact:
Lucie Giraud
Communications Officer
Tel: +(202) 458 4662
E-mail:
lgiraud@ifc.org
Published on November 16, 2006
