While today half of the world’s population lives in urban areas, by 2050 that number will grow to 70%. Within the same time frame, the population in emerging markets will double in size, with the middle class growing by 90 million per year. Clearly, the very markets which have been traditionally ignored by investors will become the new engine for the green building economy.
IFC finances climate-friendly and affordable buildings in emerging markets through loans from our own account, as well as equity investments. But our greatest value-add is in our ability to leverage capital from other development finance institutions and local banks who understand that sustainability and profitability go hand in hand.
IFC’s product offerings are tailored to the needs of partner banks as well as to end borrowers. At the bank level, IFC offers risk-sharing products for partner financial institutions to support their transition into the green housing sector and allow them time to gain critical lending experience in a new product area. IFC’s risk-sharing products support commercial loans from partner financial institutions for green building renovations, providing critical collateral and risk mitigation to the bank and more comfortable living environments for tenants.
At the homeowner level, IFC works with other financial institutions to offer green mortgages. A green mortgage provides a borrower with a larger loan than normally permitted or a discount for making energy-efficiency improvements. A more energy-efficient home means lower utility bills and greater net income for the homebuyer, allowing the purchase of a home with greater re-sale value.
IFC’s investment in a risk-sharing facility with Hungary’s OTP Bank supported loans to improve conditions and lower energy bills at Hungarian municipal schools. The public private partnership included an energy efficiency company (ESCO) that leased its equipment to school operators, with lease payments paid for through energy savings. The upgrades in the mostly smaller, rural schools included heating and lighting, which resulted in a better learning environment and reduced greenhouse gas emissions.