Private sector innovation can lower the costs of mitigating and adapting to climate change.
In developing nations, basic resources such as food, water, and land are increasingly pressed by urbanization and population growth. Climate change intensifies those strains, especially for the poorest of the poor.
The private sector is essential in addressing the challenges—it will need to provide an estimated 80 percent of the investment required to stabilize climate change. Investment of that magnitude requires partnerships between governments, civil society, and international financial institutions. Private sector innovation, moreover, can lower the cost of mitigation and adaptation.
IFC is incorporating climate change into virtually every aspect of our business. We spur innovation by providing investment, including venture capital and blended finance, and advisory services—including standard setting and primary research into the business risks posed by climate change. Over the last few years, we have also established a strong record of projects involving climate-related public-private partnerships.
In FY12, IFC invested $1.6 billion in climate-related investments—more than 10 percent of our overall commitments for the year. Our target for FY15 is 20 percent of our long-term finance commitments. About 70 percent of our investments in the power sector involved energy efficiency and renewable energy—including Karadzhalovo, a landmark 60-megawatt solar farm in Bulgaria. We also implemented a $35 million global portfolio of advisory programs to support climate-related investment by the private sector. About 30 percent of our new mandates for public-private partnerships were climate-related.
Making offices, homes, and other buildings more energy efficient can have a big impact. Building-related greenhouse emissions could double by 2030, with most of the increase in developing countries. IFC is helping builders all over the world put a new emphasis on sustainability and energy efficiency—by ramping up investments and by developing building codes that lower operating costs, cut carbon emissions, and reduce vulnerability to severe weather events.
In Colombia, we are working with the central government and the National Chamber of Construction to develop the first national Green Building Code. The new code will be implemented in the construction of up to 700,000 low-income houses, which represent 72 percent of new construction by 2020. Similar work is underway in Bangladesh, Indonesia, Mexico, the Philippines, and Vietnam.
Local financial institutions also have a pivotal role in climate finance. By providing guidance and resources to Chinese policymakers and banks, we’re supporting a transformation of the Chinese financial sector. The ground-breaking Green Credit Policy encourages Chinese banks to invest more in energy-efficient and sustainable companies. This project is vital in a country that emits more greenhouse gases than any other—it will set a powerful example for the rest of the world.