ALP's EDGE-certified warehouses in Kenya
Climate is a strategic pillar for IFC and the World Bank Group. IFC is committed to growing its climate-related investments to an annual average of 35 percent of its own-account long-term commitment volume between 2021 and 2025 and working with financial institutions to finance projects that will support mitigation and adaptation.
IFC is the largest development finance institution supporting the private sector in emerging markets, and our Climate Business work allows us to invest directly and partner with financial institutions in climate-smart sectors. We collaborate with governments, the private sector, financial institutions, and other development banks in an effort to increase climate-related investments.
There are well over $30 trillion dollars worth of climate-smart investment opportunities in emerging markets. Financial institutions will need to provide the majority of the capital for these opportunities, helping enable the transition to a low-carbon global economy. We estimate that financial institutions must grow the share of climate-friendly projects in their portfolios from an average of 7 percent in 2016 to 30 percent by 2030 to finance the greening of the economy. That equates to an increase from approximately $1.5 trillion to $13.4 trillion, a growth opportunity too big for banks to miss.
IFC partners with financial institutions to deploy capital, mostly in the form of loans to businesses and other organizations, to implement climate-friendly projects.
Since 2005, we have committed $7.8 billion from our own account and leveraged an additional $3.8 billion through our 200-partner emerging-market financial institutions. These investments support partners in avoiding GHG emissions of 14.8 million tons per year. In partnership with IFC, our client financial institutions have built climate finance portfolios of $26.7 billion, avoiding annual GHG emissions of 85.5 million tons. This is the equivalent of taking approximately 18 million cars off the road every year, or of erasing the annual emissions of a country the size of Israel.
Greener Banks for Greener Markets
Over the past decade, our team has developed and maintained new markets and asset classes to achieve IFC’s climate ambitions and support clients in their own green transitions.
IFC was one of the earliest issuers of green bonds, launching a Green Bond Program in 2010 to help catalyze the market and unlock investment for private sector projects that support renewable energy and energy efficiency. As of June 30,2020, IFC has issued 172 bonds in 20 currencies, totaling $10.4 billion. IFC also supports clients in issuing green bonds and in many cases acts as an anchor investors. IFC has helped 19 banks issue $2.4bn of green bonds between 2015 and 2020.
In 2018, IFC launched the world’s largest targeted green bond fund focused on emerging markets, the Amundi Planet Emerging Green One (EGO). The fund, which closed at $1.42 billion, is expected to deploy $2 billion into emerging markets green bonds over its lifetime. Additionally, IFC’s Real Economy Green Investment Opportunity (REGIO) Fund, the first global green bond fund targeting “real economy” issuers in emerging markets, is expected to leverage $500 million to 700 million in multilateral and private sector capital to support well-diversified climate-smart investments in developing countries around the world.
To create and accelerate the growth of green bonds as a new asset class from emerging markets, our team works closely with the Sustainable Banking Network and support its Green Bond working group, and other regular impact reports. SBN members receives IFC technical guidance to develop their green bond guidelines based on best international standards and practices.
Market Accelerator for Green Construction
Green Buildings are a $24.7 trillion* investment opportunity in emerging markets. IFC’s Market Accelerator for Green Construction (MAGC) program works with developers and lenders to boost the uptake of energy saving and water saving technologies and practices in the construction markets of developing countries. In partnership with the UK’s BEIS, the program provides firm-level technical assistance, market capacity building, and concessional finance to financial institutions that want to build green building/green housing product lines. Green building projects to be financed under this program need to have EDGE Certification or other compatible certifications.
* Including general construction costs.
Energy Access and Lighting
At the direction of IFC, the off-grid solar sector has grown tremendously over the past 10 years into a vibrant, $1.75 billion annual market, which remains on a solid growth curve. In 2009, the World Bank Group launched Lighting Africa, followed by Lighting Asia, and Lighting Global to rapidly increase access to off-grid solar energy for the 789 million people living without access to energy. With our support, the sector has evolved to include more than 400 companies, includes a global industry association, a standards and quality verification organization, among other organizations.
The global off-grid lighting sector currently serves 420 million users and is projected to serve 823 million users by 2030. To sustain the current market growth trajectory, the sector will require an investment of US$ 1.7–2.2 billion in the next five years. Today, the sector continues to expand into markets for appliances and productive uses leveraging solar energy.
Green Banking & Transformation
Our clients often become climate-finance leaders in their local markets. We work with them in identifying climate-friendly investment opportunities and provide business-development support, and customized product training for loan officers. Our advisors build capacity for banks in climate business and facilitate their green transformation, starting from strategic commitments at the board and executive level, down to portfolio diversification and green KPIs at the loan origination units and front-line relationship teams. IFC supports the development of green banking by supporting:
The impact of IFC's climate-finance clients:
*Data as of March 2020