IFC Financial Institutions Group (FIG) Climate Finance Industry Context Climate change represents both a challenge and an IFC Strategy and Portfolio opportunity for financial institutions in emerging markets. Since the 1980s, IFC has been a critical player Climate mitigation and adaptation needs in emerging markets in climate business and continues to be a and developing countries are significant, with estimates leader in this space. IFC’s climate business ranging between $1.7 trillion and $3.4 trillion annually by 2030 is focused in the near term on five strategic – an amount that cannot be financed by the public sector areas – clean energy, climate-smart cities, alone. The private sector has a critical role to play by investing climate-smart agribusiness, green buildings, in low-carbon technologies, creating jobs and skills, and and green finance. IFC is committed to working building resilience into its investments and operations. Indeed, with financial institutions to finance projects according to the IMF, 80-90% of the climate finance needed in that will support mitigation and adaptation. In emerging markets will have to come from the private sector. addition, IFC has committed to aligning 85% of Fortunately, financial institutions are increasingly building its new investment projects with the objectives climate finance into their long-term strategies and portfolios, of the Paris Agreement starting July 1, 2023, and and financial markets are integrating climate transition risks 100% of these investments starting July 1, 2025. and opportunities into investment decision making. FIG focuses on investing directly in and partnering with financial institutions in climate-smart sectors to reduce GHG As of June 2023, FIG committed emissions and support climate change adaptation. FIG’s climate finance strategy is guided by three priorities: • Help create a livable planet for all by ensuring climate markets and sustainability $15.2billion engagements support a just transition. • Create and grow climate markets through investment, mobilization, and institution to climate-related projects building. through 210+ emerging market • Enable emerging market financial institutions to meet their Paris Agreement commitments. financial institutions IFC’S CLIMATE BUSINESS WITH FINANCIAL INSTITUTIONS HAS SKYROCKETED • In FY23, FIG’s climate finance projects totaled $4.5 billion • IFC was the first issuer of a $1 billion benchmark green bond including mobilization across 51 projects, including $1.2 in 2012 and, by the end of FY23, had issued more than $12.5 billion for green buildings, $850 million for climate bonds, billion in 198 green bonds in 21 currencies. $600 million for climate trade, and $500 million for climate- • IFC’s advisory services facilitate global client financial smart vehicles. institutions to build climate finance portfolios, avoiding • FIG’s investments have supported partners in avoiding GHG additional millions of tons in annual GHG emissions. emissions of 30 million tCO₂e/year. Investment & Advisory Examples UPSTREAM GLOBAL BLUE BONDS INITIATIVE DISTRIBUTED SOLAR This global initiative has enabled IFC financing to over $1.5 Global investment in rooftop/distributed solar continues to billion in bonds/loans in FY22-23 across Asia, LAC and ECA, grow rapidly, despite the challenges inherent in financing further establishing IFC as a market leader in Blue Finance small projects. FIG has been scaling up its investment and globally. In FY20, IFC began the Upstream Global Blue advisory services work to help clients expand their Bonds initiative to develop a capital market instrument to investments in these projects. This includes investment help address the twin challenges comprising the rapid projects with banks, NBFIs, and debt funds for commercial depletion of both the blue economy and clean water and industrial solar and in a company financing off-grid resources. Blue Bonds, and Blue Finance more broadly, is solar and appliances (M-KOPA). FIG’s Global Climate team an innovative form of financing that earmarks funds leverages donor resources to support clients with their exclusively for ocean friendly projects and critical clean advisory needs for rooftop solar. water resources protection. As a result of the initiative, IFC launched the Blue Finance Guidelines in FY22. The Guidelines establish definitions, eligibility criteria, and GREEN BUILDINGS – ABSA guidance frameworks for Blue Finance, and support broader market awareness. IFC also developed the In South Africa, FIG committed $241 million to finance the Practitioners Guide to Blue Bonds along with the expansion of ABSA’s certified green building finance International Capital Markets Association (ICMA) and portfolio. This project is the largest to date supported by other Development Finance Institutions (DFIs). IFC’s Market Accelerator for Green Construction Program (MAGC), and will target both developers and mortgages and support affordable housing. IFC estimates that the E-MOBILITY – ALD SOCIÉTÉ GÉNÉRALE project will help reduce over 12,000 tons of emissions annually. The investment will also contribute to South FIG provided a $400 million, 4-year loan to Société Africa’s Nationally Determined Contribution (NDC) targets Générale’s vehicle leasing subsidiary ALD, to finance its under the Paris Agreement to reduce GHG emissions by Electric Vehicle transition across 7 emerging market 42% by 2025. countries. The deal was the largest e-Mobility project in IFC history and the largest climate project (at the time of commitment). The financing, which was intermediated by Société Génrale on behalf of ALD, is expected to add 15,000 green vehicles with the potential to reduce carbon emissions by 22,180 tons a year across the target countries by 2026. International Finance Corporation 2121 Pennsylvania Avenue NW, Washington, DC 20433 www.ifc.org | www.ifc.org/ClimateFinance