IFC May Pool Clean Projects Globally to Lure Climate Investors
(Bloomberg) — The World Bank’s private-lending arm is planning to pool renewable energy projects across emerging markets to attract large global investors to help meet rising demand for climate finance.
“You take a bunch of these assets from different economies, put them into a pool and then you go and get global investors to invest,” said Vivek Pathak, director and global head for climate business at the International Finance Corp. “So you automatically de-risk these assets significantly. I believe this is going to be one of the solutions ultimately.”
The IFC is in talks with three players in Latin America including Chile, Pathak told Bloomberg News in an interview before heading out for COP27 meeting in Egypt. The plan, still in its early stages, could help cut risks in land purchases and construction and can help boost credit ratings for the assets.
The private lender also plans to securitize finished projects across various renewable energy sectors, Pathak added.
The world’s emissions need to start falling rapidly before 2030 if there’s any chance of keeping global warming below 2-degree Celsius threshold, making it crucial for countries and companies to find new ways to fund renewable energy projects.
This is all the more urgent with Russia’s war in Ukraine, which has forced governments to prioritize securing oil and gas supplies over the transition to cleaner energy.
Emerging market and developing economies need to invest at least $1 trillion in energy infrastructure by 2030 and as much as $6 trillion across all sectors per year by 2050 to cut emissions, according to the International Monetary Fund. Adapting to the increasing extreme weather events may cost them another $300 billion by the end of this decade.
The IFC is also proposing a plan to fund climate projects with domestic savings from pension funds in markets like India to cut foreign currency borrowing risks and make more money available for clean energy, Pathak said.
The lender is pushing for blended finance — a mix of public and private funds — to fund clean technology projects at scale in middle-income countries including India, Vietnam, Thailand and Indonesia. Traditionally this type of financing was more readily available for low income countries, Pathak said.
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