EMPOWERED How IFC Clients Are Financing Climate-Friendly Projects 1 ABOUT IFC IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In fiscal year 2018, we delivered more than $23 billion in long-term financing for developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org 2 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ARGENTINA CHINA COLOMBIA LEBANON Banking on biomass Innovating financial Building green growth Business saves with frameworks sustainable energy use Banco Galicia & • Bancolombia: The First Agribusiness: Farmers • China’s MRCB: A Latin American Bank to Fransabank: Forging the Reap Budgetary Benefits of Global Pioneer in Green Issue Green Bonds Ranks Green Path to Energy Self- Climate-Smart Cultivation Commercial Banking Globally in Sustainability Sufficiency • Agricultural Bank of • Davivienda: A Committed China: A Banking Giant Citizen Cultivates a becomes a Green-Finance Market in Colombia Powerhouse SRI LANKA UKRAINE YEMEN Forging a Green Future Turning toward the sun Solar-powered light brings hope to a fragile Commercial Bank of Ceylon: Ukrgasbank: Creating environment Bringing New Hope to the Markets for a Climate- Emerald Isle Resilient Ukraine Al Kuraimi Islamic Bank: Defying Darkness with Solar Solutions 1 IFC & FINANCIAL INSTITUTIONS: EMPOWERING THE GREEN ECONOMY I FC estimates that the actions required by the 2015 Paris Agreement will open up about $23 trillion in investment opportunities in 21 long-term financing to make the investments. These are some of the climate-finance gaps that IFC addresses. The stories in this book of the largest emerging markets between now discuss our Advisory and Investment Services, and 2030.1 The kinds of investments necessary which help banks to grow, adapt and create to stop, slow or adapt to climate change are markets for climate finance in the countries many and varied. The construction of green they serve. buildings and transportation systems, the development of infrastructure for renewable Much of the recent discussion about climate energy and storage, facilities for waste recycling change and the financial sector has focused and management, and equipment that is energy on risk, such as in the guidance on climate- efficient—these are just some examples of the related financial disclosures provided by the capital outlays needed. Financial Stability Board and the work of the Network for Greening the Financial System. Most governments lack the capacity to finance This is important work that the financial the trillions required for their nationally sector is just beginning to fully acknowledge. determined contributions (NDCs) to the Paris accords, which is why the private sector— We believe that the business of making climate including financial institutions—has stepped investments will prove far more compelling up. Even though banks by their nature are during the next decade. An innovative, high- conservative, banks in emerging markets growth industry, climate finance is particularly have recognized that climate finance presents attractive for banks in emerging markets. them with a huge opportunity. Based on IFC’s Among IFC’s financial-institution clients, we estimates, about 30 percent of banks’ loan have seen a steady increase in banks and non- portfolios could be climate-related by 2030, bank financial institutions offering climate- up from 7 percent today.2 related financing, up from 62 percent just Such a shift will require changes in the three years ago to 78 percent now. Their way banks operate. They now need the experience provides a demonstration effect for expertise to assess climate-related investment other financial institutions that aim to enter opportunities, the systems to monitor and the market for climate finance. Our client report on this business and its impact, and the banks’ stories also show how the rewards of climate investment accrue not only to banks 1 IFC, Climate Investment Opportunities Report (Washington, but to business owners, communities and to DC, IFC, 2016), iv, accessed June 19, 2019, https://www.ifc.org/ wps/wcm/connect/news_ext_content/ifc_external_corporate_site/ the emerging economies themselves. news+and+events/news/new+ifc+report+points+to+%2423+tril- lion+of+climate-smart+investment+opportunities+in+emerg- This book presents some of the banks ing+markets+by+2030. 2 IFC, G20 Input Paper – Raising $23 Trillion: Greening that, with IFC’s support, are seizing the Banks & Capital Markets for Growth (Washington, DC, IFC, market opportunity to make a meaningful 2018), 1, accessed June 19, 2019, https://www.ifc.org/wps/wcm/ contribution to our future. connect/758976f3-eca3-4666-a149-e880d7290a37/IFC_G20_ Climate-Input-PaperWEB+Nov+5.pdf?MOD=AJPERES. 2 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS CONTENTS BANCO GALICIA & AGRIBUSINESS: Farmers Reap Budgetary Benefits of Climate-Smart Cultivation 4 MRCB: A Global Pioneer in Green Commercial Banking 6 AGRICULTURAL BANK OF CHINA: A Banking Giant becomes a Green Finance Powerhouse 8 BANCOLOMBIA: The First Latin American Bank to Issue Green Bonds Ranks Globally in Sustainability 10 DAVIVIENDA: A Committed Citizen Cultivates a Market in Colombia 12 FRANSABANK: Forging the Green Path to Energy Self-Sufficiency 14 SRI LANKA’S COMMERCIAL BANK OF CEYLON: Forging a Green Future for the Emerald Isle 16 UKRGASBANK: Creating Markets for a Climate-Resilient Nation 18 AL KURAIMI ISLAMIC BANK: Defying Darkness with Solar Solutions 20 CONTACT US 22 3 Banco Galicia & Agribusiness Argentina has abundant renewable energy resources—mainly in the form Farmers Reap of biomass generated from agriculture. Since 2015, to meet its part toward Budgetary achieving its commitments in the Paris Agreement, the government has been greening the agricultural sector and its financial institutions. Its target is to Benefits of produce 20 percent of Argentina’s electricity from renewable sources by 2025. Climate-Smart Cultivation I FC and the World Bank have collaborated on a holistic approach toward helping achieve Argentina’s “green crusade.” While Climate Change as “the positive benefits related to the reduction of greenhouse gases. Examples include reduced air the World Bank began addressing regulatory pollution, greater innovation, diversity and and other public-sector requirements, improved security in the energy supply, IFC developed a strategy to create a new lower energy costs, and job-generation”). green market for Argentine banks. The This first step helped agribusiness leaders Climate Finance team planned investment to start appreciating the need to switch to and advisory solutions to build banks’ environmentally friendly agriculture. businesses in climate finance, with a specific focus on climate-smart agriculture (CSA) With the groundwork laid for CSA finance and resource efficiency. in Argentina and with IFC support, Banco Galicia issued a $100 million green bond Banco Galicia, the largest bank in Argentina, in June 2018. IFC supported the bank’s seemed an appropriate first partner for preparations for the green bond issuance the green-finance initiative. IFC’s Climate by shaping a green bond framework and Finance team and World Bank colleagues in aligning the bank’s organization and SOUTH AMERICA ARGENTINA the Agriculture, Energy and Water Global processes with the Green Bond Principles Practices engaged with Banco Galicia to and IFC’s climate vocabulary. measure its existing green portfolio and to investigate the kinds of resource-efficiency The first to be issued by a private financial projects that large farms and agricultural institution in the country, the green bond has a businesses could implement. seven-year tenor—supplying a much-needed source of medium- to long-term finance In parallel, the World Bank approved a $150 for green projects. IFC fully subscribed to million project to foster the development of a the $100 million bond, which has enabled risk-management system for the agricultural Galicia to increase its investments in climate- sector in Argentina. Of the total project change mitigation projects. These include budget, 77 percent went to initiatives aimed investments in energy efficiency, renewable directly at creating climate co-benefits energy, and sustainable construction projects (defined by the Intergovernmental Panel on that span corporate and agribusiness lending. 4 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS In fiscal year 2018, Banco Galicia financed $9.5 million in climate-friendly investments, which are expected to reduce GHG emissions by 190,000 tons CO2e, the equivalent of taking 38,000 cars off the road. Of the projects financed to date, the major categories are technology for utilities to scale their use of renewables (including biomass, to complement the bank’s agricultural lending) and to promote energy efficiency. By financing biofuels, Banco Galicia supports Argentina’s ¢ Banco Galicia’s climate-finance team joined their client’s climate objective of satisfying a large portion of the team in inspecting a biomass energy project. Photo © Banco country’s energy needs with biofuels. (These fuels use crop Galici residues to generate energy with a lower environmental impact and at lower prices.) As energy costs in Argentina cubic meters per year. Since the project was completed, have increased, Banco Galicia is in turn expanding the company consumes half that amount; it has also financing for energy efficiency and renewables projects halved its electricity consumption. that generate value for businesses and consumers. Its “The green bond reflects Banco Galicia’s commitment recent climate-friendly projects include the following: to the environment and consolidates its leadership in • In Provincia de Tucuman, Banco Galicia is investing sustainable banking in Argentina,” said Fabián Kon, Banco in a sugar-cane company that produces biomass from Galicia’s CEO. “We are committed to offering our clients bagasse. With the financing, the company expects to new financial instruments for projects that have a specific have an installed capacity of 2 MW and anticipates focus on the environment, such as renewable energy, energy generating 8,900 MW annually. efficiency, clean transport, and waste management.” • In Provincia de Corrientes, the bank has invested $30 “Our partnership with IFC has helped us to identify the million in a bioelectric company that produces biomass eligible operations in green projects and improve our from pine and eucalyptus plantations as well as sawmill environmental and social analysis in each of the projects waste. The company expects to start producing energy financed by green bonds. With IFC’s support, we have by 2020 with an installed capacity of 36 MW; it now developed a model of analysis, strengthened our anticipates generating 289,000 MW annually. application and formed Banco Galicia’s green portfolio,” said Laura Schiavone, the SEMS (Social and Environmental • In Provincia de San Luis, Tigonbú, a cattle and agriculture Management Systems) Officer at Banco Galicia. company that produces biofuel from corn waste, received $1.3 million in a first disbursement from Banco IFC estimates that the projects enabled by this bond will Galicia last May. Building a plant with an expected, reduce greenhouse gas emissions in Argentina by about installed capacity of 2.4 MW, the company estimates it 157,500 metric tons of carbon dioxide (CO2) per year. should generate 16,000 MW annually—reducing GHG By combining World Bank and IFC’s expertise, the partnership emissions by 8,164 tons annually. Farmers contributing with Banco Galicia generated a market for climate finance to the collection of the corn and manure waste to in Argentina. Issuance of the first green bond by the largest generate biomass energy are adding 30 percent and 70 private financial institution in the country paved the way for percent more, respectively, to their earnings. future issuances. Now Argentine agribusinesses, farmers and • In Provincia de San Luis, the bank has doubled the bankers will begin to see climate finance for the opportunity water and energy efficiency of a cattle company by that it provides. Banco Galicia’s success with its green bond investing in more efficient irrigation and pumping has triggered interest from several other banks in the country systems. The company previously consumed 2 million and across Latin America. 5 MRCB Over recent decades, China has achieved tremendous economic growth, but it’s A Global come with a costly environmental price tag. It’s estimated China will need $600 Pioneer billion in annual investments by 2020 to transition to a green economy. Until now, no commercial bank had dedicated its core business to the goal. That is on in Green track to change, thanks to China’s Ma’anshan Rural Commercial Bank (MRCB). Commercial Banking T he pioneering bank has embarked on an ambitious mission to become the world’s first green commercial bank and has embraced have supported more than $67.56 million in investments in renewable and clean energy projects, and a further $74 million in green development as its business philosophy. investments in industrial energy efficiency and By 2025, the bank aims to dedicate 60 percent green buildings. of its loan portfolio to climate-friendly projects. In addition, the bank has set goals to make 70 The results speak for themselves. In 2018, percent of its financial products green, and to MRCB reported that its green financing ensure MRCB’s operations are 100 percent had reduced greenhouse gas emissions by carbon-neutral. more than 600,000 tons—the equivalent of removing 127,000 cars from the road. In As the first pilot partner under IFC’s Green addition, the energy savings from its green Commercial Bank Framework, MRCB has loans are estimated to amount to almost already created financial offerings tailored 265,000 tons of burned coal. specifically for green buildings. More products for climate-smart agribusiness, transport, For MRCB, going green is much more than wastewater treatment, and waste-to-energy a marketing slogan. It brought that mission projects are in the pipeline. home when its headquarters became the first commercial bank in China to be certified “We are partnering with IFC to transform into to IFC’s EDGE green building standard. To a green bank in all aspects of our operation and achieve certification, buildings must use 20 business, including designing green financing percent less energy, 20 percent less water, and products that meet the unique needs of our 20 percent less embodied energy in materials clients in a variety of sectors. Our ultimate compared to conventional buildings. Moving aim is to incorporate climate finance into all forward, MRCB plans to apply the EDGE ASIA CHINA business lines and embed green elements in all standard to all its new office buildings. products and services. That is the heart of our business.” said MRCB Chairman, Sun Xiao. The bank is also digitizing its operating system and lending activities by using IFC’s Green Already, the bank’s climate-finance operations Finance Operating System. With technical 6 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ¢ Left, An agriculture-and-photovoltaic complementary power project under development at Fuhu Village, Yongqiao District, Suzhou City. Right, A roof distributed-power project at Hefei, the Plate Co., Ltd., MASTEEL Group. Photos © Ma’anshan Rural Commercial Bank (MRCB). support from IFC, MRCB is also developing quantitative talent needed to grow the green finance sector. assessment tools to identify, assess, and evaluate green projects. Using its global network of partners, IFC helped MRCB embark on collaborations with some of the world’s Information and awareness will be a key part of the green- preeminent innovators in green finance. The bank is banking revolution. To this end, IFC supported MRCB in working with Lawrence Berkeley National Laboratory in launching a green digital-finance platform. Green-fin.com California on ways to accelerate the research, development, provides all stakeholders with open access to the latest and deployment of new products that will unlock primary climate-finance policies, market information, business and secondary market capital and scale market adoption opportunities, project databases, and technical advice. of climate finance. MRCB also partners with the renowned The bank also developed a WeChat mini app. The app School of Environment and Natural Resources at Renmin captures and calculates the environmental benefits of the University and the International Institute of Green Finance bank’s climate-finance operations and encourages clients at China’s Central University of Finance and Economics and employees to offset their carbon footprints. in policy research, industry studies, tools, and market development papers. The bank’s environmentally friendly philosophy extends throughout its organizational culture. The most senior In partnership with IFC, MRCB’s innovative work is levels of management have taken a hands-on approach creating a roadmap for a sustainable future for small to MRCB’s green banking operations and to building its and medium-sized banks. By seizing on green finance and climate-smart brand. This cultural change has proven to be environmental standards as opportunities, rather than influential in its success. The bank also developed a green- impediments, MRCB is demonstrating that it’s possible financing manual for staff, and by 2025, the bank estimates to outperform competitors, expand market share, and 80 percent of all employees will have been trained through increase profitability while ushering in an era of green IFC’s Green Finance Certificate Program, which fosters the growth for China and the planet. 7 Agricultural Bank of China With the impact of climate change already being felt worldwide, often with A Banking devastating effects, the need to significantly scale up climate-smart solutions grows Giant becomes more urgent every day. That is why IFC’s partnership with the Agricultural Bank of China (ABC) is so vital. Together, they’ve turned this banking giant into a green a Green finance powerhouse. Finance Powerhouse C hina is one of the world’s biggest consumers of energy and it faces daunting environmental challenges. ABC—the world’s Since 2006, IFC had been at the forefront of efforts to support green banking through its China Climate Finance Program (formerly third-largest bank by asset size—wanted to known as CHUEE). By 2016, IFC’s work be part of the solution. So it sought out IFC’s with seven Chinese commercial banks had expertise, and within just three years, this reduced over 20 million tons of greenhouse collaboration has delivered remarkable results. gas emissions per year and helped these financial institutions to build a combined ABC’s green portfolio has jumped by 62 percent, green portfolio of more than $100 billion. while its climate-smart investment through lending nearly doubled from $97 billion in However, its partnership with ABC took this 2016 to $157 billion by the end of 2018. This impact to the next level and ushered in a new translates to greenhouse gas reductions of than era of impactful green financing. 60 million tons annually—the equivalent of removing more than 12 million cars from the With IFC’s support, ABC became the first road or eliminating emissions from over 15 of China’s Big Four banks to launch and coal-fired power plants. implement a standalone green finance strategy. This leveraged ABC’s enormous branch “As one of the Big Four banks in China, we feel network and client base to scale up green a great sense of responsibility to take up the finance volumes in the banking sector, which environmental challenges facing our country in turn supported secondary markets. The and the globe,” said Zheng Qiao, head of ABC’s strategy paid off. By the end of 2018, ABC’s green finance office. “We’re proud of what renewable energy portfolio was valued at $45 we’ve been able to do through our partnership billion and its energy efficiency portfolio rose EAST ASIA CHINA with IFC. It’s setting a precedent for banks, no to $8.2 billion. matter what their size, to emulate.” Deploying its expertise and experience, IFC Using advice and technical support from advised ABC on the issuance of the first green IFC, ABC established and strengthened its Assets-Backed Securities (ABS) in China. IFC mechanisms and capacity to build a sustainable also provided third-party verification of the —and scalable—green finance business. environmental performance of the securities’ 8 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ¢ Top, A sintering-process waste-heat recovery system for power generation in an iron and steel factory. Lower left, An industrial wastewater treatment plant for generating biogas for power-generation. Lower right, a plant that uses chicken manure to generate biogas power to operate a chicken farm. Photos © Agricultural Bank of China (ABC). underlying assets. green bonds, with its Green Financial Bond Directive underscoring the need for banks to play a central role in Since partnering with IFC, ABC has become much more solving China’s environmental problems. than one of the most active banks in green finance in China. It’s also the first Chinese bank to issue green bonds in the ABC’s success in green lending and green bonds has had a international financial market. ripple effect through the wider market. It’s encouraged other players to embrace green finance, ramping up much-needed Such moves were made possible because China had already support and demand for climate-smart development. established a leading role on the global climate stage. It was one of the first countries to issue green credit policy By demonstrating the positive impact of green finance on its guidance. This requires China’s top 21 banks to report bottom line—and providing a model of how to bring this regularly on green lending and their impact on greenhouse to scale—banking giants like ABC are critical to ensuring emissions. efforts to combat climate-change pay dividends for future generations in China and worldwide. In 2016, China also became the world’s largest issuer of 9 Bancolombia Colombia is now the third-largest economy in Latin America—and it’s building. The First Latin It has one of the 20 fastest-growing construction sectors in the world. With American demographic patterns shifting toward cities—75 percent of the population lives in urban centers—urban buildings present one of the largest opportunities for climate- Bank to Issue friendly projects. And with 30 percent of its portfolio in the construction market in Green Bonds Colombia, the country’s largest bank, Bancolombia—working with IFC’s Climate Now Ranks Finance team—is poised to help Colombia’s construction industry to go green. Globally in Sustainability In 2016, the bank engaged in an advisory for the residents paying the utility bills; it services project with IFC’s EDGE (Excellence was also possible to construct green buildings in Design for Greater Efficiencies) and Climate within strict budgetary guidelines. Finance teams. The goal was to improve the energy-efficiency in buildings in large cities Since 2008, Bancolombia has had an internal with populations of 400,000 or more. IFC task force assigned to continuously evolve provided training for Bancolombia staff and improve its sustainability strategy and and developers from the cities, and several working plan. To evaluate progress, the buildings were constructed or upgraded to be bank has assessed its operations through the more energy-efficient. Dow Jones Sustainability Index (DJSI). The Index measures the sustainable performance At the project’s close, 10 buildings had applied of companies in economic, social and for EDGE certification; three had obtained environmental matters.3 Established in 1999, the certification. The certified buildings were the Index is a benchmark for foreign investors SOUTH AMERICA COLOMBIA all Social Interest Housing apartments—or that include the management of sustainability subsidized apartments for residents who as a criterion for investment decisions. Scoring apply via a government program to purchase 87 out of 100 in 2018, Bancolombia was the units. The government certifies that the named the most sustainable bank in the world. apartments meet strict pricing and size caps. Bancolombia continued expanding on its Before IFC’s engagement with Bancolombia, commitment to climate finance when it policymakers in the country had considered became the first private financial institution green building technology too expensive to issue green bonds in Latin America in late for Social Interest Housing budgets. The 2016. IFC supported the issuance by sharing EDGE certifications enabled the government, construction and banking sectors to show 3 Eco-bank, Bancolombia, https://www.grupobancolombia. that green building was not only affordable com/wps/portal/about-us/corporate-information/sustainability/ ecobank, Accessed May 19, 2019. 10 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ¢ Headquartered in Medellin, Colombia, Bancolombia also serves Bogota, pictured here. This city ranks among the 20 fastest- growing urban areas in the world. Photo © International Finance Corporation our expertise in the green bond market with the bank and green-bond projects consist of small, hydroelectric power by fully subscribing to the issuance at $115 million. “Our plants that operate on the edge of water sources without a partnership with Bancolombia on the green bond was dam and have a capacity of less than 20 MW. The remaining a milestone for the bank and has paved the way for its 44 percent are sustainable construction projects with further issuances and those of other financial institutions LEED certification. Projects aimed at mitigating the risk of in the country and region,” said Allen Forlemu, the Senior flooding and promoting water management, reducing CO2 Regional Industry Manager of IFC’s Financial Institutions emissions, and generating thermal energy are also eligible. Group in Latin America and the Caribbean. The issuance is enabling Bancolombia to diversify “Sustainability is in our DNA, in the decisions that we make its sources of funding while demonstrating its strong every day. We want to reduce our direct environmental commitment to sustainable finance. For Colombia, the footprint and encourage clients and partners to do the bond issuance with IFC stimulated domestic capital same. We’re doing this by providing services and products markets. It also created a new market in the country for that enable our clients and partners to invest in renewable climate-friendly investments. energy and sustainable buildings. We want to help improve life in the communities we serve,” said CEO Juan Carlos “The first green bond we issued, with IFC, catalyzed the Mora Uribe. market for green-bonds and gave us a strong business case for issuing a second bond in 2018. This was a public The proceeds of the bond issuance are financing sustainable bond, for green construction finance as well as renewable construction, cleaner energy production, energy efficiency energy” said Mora. This second bond was oversubscribed and renewable energy (water, biomass, wind and by 2.8 times its value. photovoltaic solar energy) projects. So far, 56 percent of the 11 Davivienda Colombia’s bold goal of reducing greenhouse gas emissions by 20 percent A Committed by 2030—in the midst of rapid urbanization—requires not only creativity Citizen and commitment, but also the good citizenship of its corporations. In 2017, demonstrating its commitment to financing projects with positive environmental Cultivates impacts, Davivienda distinguished itself as a forward-thinking corporate citizen. a Market in It launched the then-largest green bond by a financial institution in Latin Colombia America. IFC fully subscribed to the $150 million bond. T he bank’s green bond also set it apart in the market by enabling it to increase financing for climate-smart projects. pivotal green bonds can be to establishing a foothold for new, climate-friendly industries.” Colombia’s need for climate finance by 2030 Formolu explained that one key to IFC’s is estimated to be $195 billion.4 Initiating strategy in Colombia is strengthening its the green bond meant that Davivienda capital market as a financing source, which seized the opportunity to mobilize some reduces the country’s dependence on foreign of that capital. It enabled the bank to drive debt while bolstering its capacity to absorb Colombia’s growth by generating new jobs economic shocks. in environmentally healthy industries and by “At Davivienda, we knew that we were expanding its domestic capital markets. moving in the right direction, by committing “With this issue, Davivienda fostered the to finance more climate-smart projects. We development of the green bond market in saw this not only as good citizenship, but also Colombia and in Latin America more broadly. as an opportunity to show how a bank could drive innovation and future prosperity by SOUTH AMERICA COLOMBIA The bank also showed it’s committed to mitigating the effects of climate change,” said funding new industries,” said the bank’s CEO, Allen Formolu, the Senior Regional Industry Efraín Forero. Manager of IFC’s Financial Institutions Group The issue was part of Davivienda’s Sustainability in Latin America and the Caribbean. “By Strategy, which has the aim of mitigating subscribing fully to the bond, IFC nurtured environmental impacts, adapting to climate the capital market and demonstrated how change and strengthening its community- building initiatives. In 2012, Davivienda signed 4 Forecasting the Growth in Banking Sector to Support a voluntary agreement, the “Protocolo Verde” Low-Carbon Transition in 21 Emerging Markets, Table 1.A in Annex 1 of “Raising $23 Trillion: Greening Banks and Capital (Green Protocol), a pact between the banking Markets for Growth,” G20 Input Paper on Emerging Markets, sector and the government of Colombia to IFC, pp. 19–20, https://km.ifc.org/sites/ifig-new/Documents/ IFC_G20_Climate-Input-Paper%20Raising%2023%20Trillion. promote sustainability. “We seek to promote pdf, accessed June 6, 2019. 12 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ¢ Banco Davivienda—one of the leading banks in Colombia—has partnered with IFC to help furnish the $195 billion needed to help the nation address the effects of climate change. Photo © International Finance Corporation and implement good practices that encourage the sustainable eliminating 40,000 tons of emissions by 2021. consumption of natural resources,” said Forero. The bank’s green bond is financing the construction of Seventy-five percent of Colombia’s population now lives in two large climate-friendly office buildings. One of the urban centers, which are striving to meet the demands of their structures is expected to use about 48 percent less water burgeoning population. Befitting the bank’s logo, a cheerful- than other office buildings around the same size; its energy looking red family home, much of the green-bond funds will consumption is also anticipated to be about 35 percent be used to finance sustainable-construction projects. less than older construction. Both new facilities will give preferred parking spots to vehicles with low emissions. New buildings in the country are expected to consume 10 to 45 percent less energy and water. These reductions are In addition, green finance will support cleaner energy expected to cut nearly 190,000 metric tons of greenhouse production, energy efficiency and renewable energies— emissions by 2021. The building codes—created in particularly hydropower, biomass, wind and photovoltaic consultation with IFC’s EDGE program5—will enable the solar energy. Projects aimed at mitigating the risk of capital city of Bogota to reduce emissions by 16 percent flooding and promoting water management are other in 2019, relative to 2007 figures. Davivienda’s own green examples of projects that could access these resources. The bond will mean that the bank will be responsible for advisory component of IFC’s engagement with Davivienda helps the bank identify and classify potential projects that 5 IFC’s EDGE software and certification help planners design resource-efficient would be suitable for green finance. With the market for buildings. Builders, planners and architects have used EDGE in the construction of residential and commercial buildings in about 120 countries. Learn more at green finance growing and still taking shape, IFC’s advisory https://www.edgebuildings.com/. role supports banks in successfully navigating the space. 13 Fransabank Lebanon’s energy sector has faced numerous challenges during the past several Forging the decades. The civil war that stretched from 1975–1990 destroyed or damaged Green Path to the power-generating infrastructure and impaired the operational, technical and financial capacities of the state-owned power generator and distributor, Energy Self- Électricité du Liban (EDL). Output lagged behind global and regional standards. Sufficiency Most of the intermittent grid power came from an unsteady supply of imported fossil fuels and on generators illegally established to supply the needed demand. D espite the power crisis in the early 2010s, the tough operating conditions and political turmoil, Fransabank, the country’s bond program consisting of several issuances and totaling $150 million. fourth-largest bank, made a commitment to To introduce green bonds in the Levant region, environmental sustainability. Chairman Adnan IFC SEF Advisory Services first engaged with Kassar signed on to the UN Global Compact, the Capital Markets Authority to develop aligning with former Secretary General Kofi guidelines for the Green Bonds’ issuances. Annan, and promised to make sustainability After the first bonds were issued and the a priority in Lebanon. With IFC’s support, major investors, IFC and the European Bank the bank launched the first-ever green-finance for Reconstruction and Development (EBRD), initiative in the Lebanese banking sector. subscribed at $45 million and $15 million, respectively, experts were convinced that the In 2013, IFC, in partnership with the Canadian green bond program of $150 million could Climate Change Program (CCCP), began generate enough capital to initiate Lebanon’s discussions with the bank toward providing it transition to renewable energy. The bond with sustainable energy financing (SEF) credit received Moody’s highest green bond rating, lines for $40 million. “This was to support GB1 – Excellent. the bank’s strategy toward expansion into the MIDDLE EAST LEBANON green-lending space,” said Marcel Rached, Once the financing was available, the challenge the IFC Investment Officer in charge of the became persuading customers that they needed relationship with Fransabank. to go green. “The biggest challenge we faced was convincing our clients to make the switch IFC’s SEF Advisory Services team ramped up to renewable energy sources” said Carine the bank’s capacity and its staff’s technical skills Azkoul, the Project Manager for Green Projects in climate finance, establishing Fransabank as at Fransabank. “They became convinced when a market leader in green finance. This success they learned about the cost savings.” prompted the bank’s management to deepen its commitment by developing a first-ever green- With IFC’s help, the bank launched a 14 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS market-outreach strategy. IFC conducted energy audits and assessments for customers representing vital sectors of the Lebanese economy—such as agriculture and manufacturing. When undergoing the audits, clients started to see Fransabank as a strategic partner. The bank was helping them reduce costs by investing in energy efficiency and renewables. The CEO and owner of Zeenni Steel Industries & Trading, Ziad Zeenni, reported, “We did an energy audit and found out that we had imbalances in consumption that we could remedy by making small investments that would save us up to 65 percent of our previous energy costs.” With the efficiency measures and renewable energy ¢ Solar panels on the roof of the Lebanese Ministry of Energy & Water. Photo © Marwan Namaani/International Finance features Zeenni added at the factory, the company saves Corporation up to $340,000 per year in fuel costs and prevents 1.3 million kilograms of CO2 emissions from being spewed that we can recruit a wider group of potential customers,” into the atmosphere. Zeenni is glad he decided to have said Riccardo Ambrosini, the Regional Climate Finance the energy audit. His experience exemplifies Fransabank’s Specialist with IFC. In this way, Fransabank has provided green-finance goal—to encourage projects that benefit the climate finance to a university library—thus contributing end user, the environment, and market stakeholders. through energy-cost savings to making education more To ensure the bank reached a wide range of customers, affordable. The bank has also financed green projects it collaborated with IFC on a multi-layered marketing for several small and medium-sized enterprises (SMEs), strategy. Groundwork was key. There was a need to farmers, office buildings, and others, creating success organize stakeholders and influencers to produce, promote stories across Lebanon and setting yardsticks for targets to and participate in regional and sector-specific green achieve and examples to follow. workshops, roadshows, client visits and energy audits like To date, Fransabank’s Sustainable Energy Finance the one at Zeenni’s factory. portfolio reports strong results, such as the following (as For this, the bank and IFC built strategic alliances, of March 2019): cultivating an ecosystem of market partners that could • More than 138 disbursed sustainable-energy loans (44 efficiently reach clients that wanted to green their with green bonds) totaling more than $76 million operations. This ecosystem now covers key decision makers, policy influencers, market players—such as the • More than 20 sustainable-energy loans for the Lebanese Center for Energy Conservation, the Association industrial sector of Lebanese Industrialists, the Ministry of Industry, the • 20.5 GWh of fossil-fuel energy savings (16.6 GWh Tripoli Chamber of Commerce and municipalities. All with green bonds) play vital roles, building awareness and offering incentives to key communities and organizations, such as the • 15,200 tons of equivalent CO2 emissions (12,500 tons Order of Engineers and Architects, independent energy of that with green bonds) experts, renewable energy integrators and energy-services Considering the growth in the global market for green bonds companies, to adopt energy-efficiency and renewable- and the vast climate-investment opportunities available energy measures. in the Levant region, Fransabank’s decision to go green is “We reach out through communities and networks so looking wise, profitable and environmentally conscious. 15 Sri Lanka’s Commercial Bank of Ceylon The Indian Ocean nation of Sri Lanka has long been known as the Emerald Isle, Forging a with lush tropical rainforest and coastal areas teeming with wildlife drawing Green Future tourists from across the globe and supporting fishing and other key local industries. for the Emerald Isle R ecognizing the need to preserve this stunning environment — and build sustainability into its business — Sri Lanka’s projects supported by CBC, along with the first commercial-scale solar power project developed in the country. largest private financial institution, the Commercial Bank of Ceylon (CBC), teamed In 2018, the bank financed over $31 million up with IFC to significantly expand financing in green initiatives. To date, renewable energy for climate-smart projects across the island. projects account for approximately a quarter of the bank’s green loan disbursements. It is In 2017, IFC committed $100 million to help also supporting energy and water efficiency, CBC boost its lending for local renewable waste management, emission reductions, and energy and energy-efficiency projects. environmentally-friendly transport projects. Leveraging IFC’s financial backing, advice, and technical support, the bank was able to However, to make a truly lasting impact, harness a jump in private sector interest in both IFC and CBC recognized that this green green projects. financing initiative needed to do more than benefit the environment; it had to make good “IFC has been an invaluable partner in our business sense for the bank and its clients too. ‘green’ journey, providing us guidance to develop a robust green financing strategy,” That’s why IFC’s seven-year financing said CBC’s Chief Executive Officer, commitment was combined with a holistic Sivakrishnarajah Renganathan. program of training, capacity building, and technical assistance. SOUTH ASIA SRI LANKA “This partnership has been instrumental in Commercial Bank’s enhanced ability to make Creating a profitable pipeline of green finance financing available to our customers, who are deals would be critical for success, and over committed to contributing to a cleaner and 18 months, IFC and CBC worked together more sustainable environment by mitigating to develop and implement a green banking or adapting to climate change risks,” he strategy that would grow the bank’s loan added. portfolio in a sustainable manner. Sri Lanka’s first commercially-viable wind Focus sessions helped CBC relationship power project is among the pioneering managers identify and map potential clients. Teams established eligibility criteria for loans 16 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ¢ IFC helped the Commercial Bank of Ceylon (CBC) to finance the first commercial-scale solar project in Sri Lanka. Photo © Commercial Bank of Ceylon and developed a range of green finance products tailored By incorporating train-the-trainer programs, the CBC specifically to the needs of the Sri Lankan market. has been able to continuously strengthen and broaden its green finance operations with an eye to the future. In IFC methodology and tools provided the bank with the fact, it has already expanded its array of green banking means to assess the technological and financial viability offerings, adding new leasing products for electric and of proposed green projects, and teams visited client hybrid vehicles, residential solar panels, efficient lighting operations to conduct preliminary technical assessments. systems, and other climate-smart products. The bank expanded its network of partners and clients CBC’s commitment to green banking has garnered by leveraging IFC’s long-standing relationships with international recognition. In 2018, the bank was named developers, government counterparts, and key stakeholders “Green Company of the Year” at the Asia Corporate in climate finance, such as energy-service companies Excellence and Sustainability Awards. specializing in energy efficiency. With the Sri Lankan government setting a 2030 goal for IFC also worked with CBC to strengthen its communications achieving energy self-sufficiency, using domestic renewable capacity, meet international best practices, successfully energy supplies and natural gas to transition away from its market its climate finance offerings to key clients, and reliance on polluting coal and oil, CBC is well positioned establish the bank as a market leader in green financing. to continue leading the banking sector in greening the economy on the Emerald Isle. 17 Ukrgasbank Like its national flower, Ukraine is turning toward the sun. Solar power, like Creating the nation’s abundant sunflowers, looks to be the favorite renewable energy Markets for for customers flocking to Ukrgasbank, an IFC client that has transformed itself into the country’s preeminent green financial institution. The bank finances a a Climate- spectrum of renewable and efficient-energy projects, but solar represents the Resilient largest category. Almost half the bank’s green portfolio consists of investments in Nation solar-power plants. I n December 2018, Ukrgasbank had financed every second megawatt of new renewable energy in Ukraine—a swift change for a bank 1.5 to 11 percent; decreasing gas imports by 40 percent; and reducing consumption by 9 percent. Ukraine had also set the goal that only two and a half years before had of ensuring that by 2035, 25 percent of the adopted a strategy to become the country’s nation’s energy would come from renewable climate-finance bank of record. It also became sources. the first commercial green bank in Eastern Europe. Committed government leadership and IFC’s partnership helped the bank to quickly The transformation began in 2015, when the promote and implement its forward-thinking government started to overhaul the banking climate strategy. IFC had estimated that system after an economic crisis in which the Ukraine had a green-finance gap worth $73 International Monetary Fund intervened with billion6 and consumed three times more energy a $17.5 billion assistance package. In a plan than its neighboring countries in Europe. to privatize state banks, the government first By bringing in IFC as a strategic partner in sought to reform and strengthen the country’s its transition, Ukrgasbank could rely on an financial institutions. This gave the leadership organization with technical knowledge in at Ukrgasbank the opportunity to rebrand environmental-impact assessment, investment and build an undeveloped market for climate analysis and green banking. finance. “In May 2016, IFC and Ukrgasbank started EUROPE UKRAINE Greening Ukrgasbank would also help the a joint green-finance development project for government (the 95 percent owner of the companies interested in implementing projects bank)—beset with land degradation, radiation contamination and inefficient Soviet-era 6 IFC Climate Finance Team, Raising $23 Trillion: Greening infrastructure—achieve its 2020 energy Banks & Capital Markets for Growth, G20 Input Paper on Emerging Markets, p. 20. https://www.ifc.org/wps/wcm/con- targets. These include increasing the share of nect/8c90dd80-8c62-4efa-964b-e378ca55815e/Raising_23_Tril- renewables in total energy production from lion_Greening_Banks_and_Capital_Markets_for_Growth. pdf?MOD=AJPERES, accessed May 21, 2019. 18 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS in renewable energy, energy efficiency and environmental protection,” explained Viktor Duma, Deputy Head of External Relations at the bank. Carefully tailoring its approach, IFC provided Ukrgasbank with a comprehensive set of advisory services, including training programs, extensive support for credit managers in the technical aspects of project evaluation, assistance with developing policies and procedures for green loans, and help with identifying target markets for green finance. With IFC’s assistance, Ukrgasbank instituted a green finance team, which includes experts to monitor the technical side of climate-finance projects. IFC also helped the bank incorporate the IFC Performance Standards into ¢ A worker adds finishing touches to a control panel. green-loan agreements. Photo © Ukrgasbank Training more than 100 participants in at least 40 business consists of eco-loans. workshops, IFC covered a wide range of topics—from assisting SMEs and corporations in improving their “We estimate that collectively, the projects we have environmental performance and identifying potential financed prevent about 1 million tons of CO2 emissions a energy-saving projects to environmental and social-risk year, and we continue to expand this part of our business,” management and communications strategy. Motivated by said Kyrylo Shevchenko, the bank’s CEO. The bank’s green the chance to do something helpful for the environment, lending amounts to 27 percent of the total customer loan bank staff eagerly joined in training. portfolio; the plan is to nearly double the share of green- energy loans by 2021. On the demand side, IFC supported the bank in organizing conferences and seminars to raise awareness of the need In Ukraine before IFC’s engagement with Ukrgasbank, to switch to energy-efficient technology and renewable no role models existed for commercial banks wishing sources of energy—with the help of climate finance from to develop healthy climate-finance businesses. IFC and Ukrgasbank. IFC and the bank helped SMEs understand Ukrgasbank solved this problem for the private sector by the potential cost and energy savings that climate-related showing how successful the transformation of a bank into projects can yield. “We’ve developed and implemented a a specialized green-finance institution could be. The bank’s range of green products for all customer segments, including experience showed that sustainable energy finance could corporates, SMEs and retail,” said Kyrylo Shevchenko. be viable even in a challenging market, with political and macroeconomic instability. Ukrgasbank created a strong Fitting its pioneering role in green banking across Eastern demonstration effect not only for Ukraine, but also for the Europe, Ukrgasbank provided the first green loan for the Eastern European region. installation of treatment facilities at one of the largest metallurgical plants in Europe, PJSC Zaporizhstal And since last year, the bank has begun serving as an Integrated Iron & Steel Works. active partner in the Carbon Pricing Leadership Coalition, a group that benchmarks carbon pricing to drive the Since embarking on its green journey with IFC, market for green technology and finance toward increased Ukrgasbank has disbursed finance more than 400 loans competitiveness, innovation, job growth and greater for mid-to-large-scale climate projects. The partners have emissions reduction around the world. Now, privatization mobilized more than $800 million as a result of the three- is sure to lead to even greener pastures for Ukrgasbank year engagement. More than half of the bank’s new SME and its customers. 19 Al Kuraimi Islamic Bank Yemen’s largest city of Sana’a is recognized globally for its unique and ornate Defying architectural history. However, many of its heritage buildings have been badly Darkness with damaged by years of deadly armed conflict. But today there are also signs of resilience—in the form of solar power panels glittering on the city’s rooftops. Solar Solutions S ince 2015, an upsurge in violence has wrought terrible hardship on the residents of Sana’a and across Yemen. Half of the and vast branch network across the country. Then, in 2010, not long after receiving a microfinance bank license, it began working country’s population lives in poverty. Jobs with IFC and the World Bank to expand its and economic opportunities are scarce. With operations. most of the electricity grid destroyed, locals have increasingly turned to solar energy to While the ongoing conflict prompted many power their homes, hospitals, schools, and financial institutions to scale back their businesses. presence in Yemen, KIB strengthened its commitment to serving the community. However, the cost of solar powered lights and Its financing, deposit, transfer, and salary appliances is still out of reach for most people, payment operations are now a crucial and an influx of poor-quality products in the financial lifeline for many local people and market threatens to lower confidence in the small-scale entrepreneurs, and in 2018 it was fledgling industry. Recognizing the need for granted a full commercial banking license. a more robust renewable power sector, IFC partnered with Al Kuraimi Islamic Bank (KIB) Even before the escalation of armed conflict, to develop a green financing model to support the World Bank estimated 60 percent of the sustainable and affordable solar projects in population could not access the national the country. power grid. Both IFC and KIB saw that the nascent solar industry in Yemen possessed the “Our solar financing products reach out potential to be a game-changer—generating to key sectors in the country so they can new business for the bank and its clients, while benefit from solar power, reduce their costs, delivering much needed energy to the country. and sustain their businesses under very hard circumstances,” said KIB’s Head of Financing So in 2018, IFC and KIB began work to EUROPE YEMEN Sector, Taha Eskandar. identify and map the existing scope and future potential of the solar photovoltaic IFC and KIB have a long-standing and positive (PV) market. Demand among residential relationship. KIB originated as a family- customers has boomed. In fact, the run money transfer and currency exchange widespread destruction of Yemen’s already business in 1995. It built a strong reputation limited conventional power infrastructure led 20 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS ¢ Left, a wind farm is helping to supply power in this conflict-affected nation. Right, The solar team meets during a site visit. Photos © Al Kuraimi Islamic Bank (KIB) to annual growth rates in the solar industry that normally the KIB team connect with solar suppliers and other key take a decade or more to achieve. players in the Yemeni market. Providing the agricultural sector with access to financing Minimizing risk was another key component in the is also key to shoring up the foundation of the Yemeni strategy to build KIB’s climate finance business. IFC helped economy and combatting widespread famine, which the the bank adapt internal audit and compliance procedures, United Nations warns could soon be the deadliest in history. and put in place screening criteria for solar suppliers, as well as tools and methods to evaluate the technical and So, IFC and KIB began to pilot green finance solutions that financial viability of potential solar projects. would enable farmers to replace their expensive diesel and electric water pumps. Demand proved strong, and in just a “We aim to be the leaders in this sector and create new few months, KIB financed over 73 solar-powered pumping opportunities that benefit clients, solar suppliers, and the systems. environment,” said Eskandar. “With the help of IFC we were able to build a solid structure The KIB-IFC partnership has already produced impressive internally to support our loan officers in the field and help results, with the bank financing over $1.4 million dollars them go after renewable energy projects,” said Eskandar. of solar products for agricultural, residential, and small business customers, avoiding 1000 tons of greenhouse gas IFC and KIB developed a go-to-market strategy that emissions, and building a healthy pipeline of future projects. included designing finance products specifically tailored to meet local market needs. There’s no denying that Yemen still faces many daunting challenges. From the rooftops of the old city of Sana’a KIB created a dedicated solar support unit within the to the country’s remote farming fields, IFC and KIB are bank, and IFC facilitated training to build the capacity of committed to helping the community bring power and staff to manage climate-finance projects. IFC also helped light back into their lives. 21 CONTACT US Peer Stein, Senior Adviser, Global Head of Climate Finance, Financial Institutions Group at IFC PStein@ifc.org Quyen Thuc Nguyen, Senior Operations Officer, Climate Finance, Financial Institutions Group at IFC, NQuyen@ifc.org REGIONAL CONTACTS AFRICA REGION • Quyen Thuc Nguyen – nquyen@ifc.org • Riccardo Ambrosini – Senior Operations Officer, Climate Finance – rambrosini@ifc.org ECA REGION • Martin Dasek – Senior Industry Specialist, Climate Finance – mdasek@ifc.org • Roman Novikov – Climate Finance Operations Officer – rnovikov1@ifc.org LAC REGION • C. Marcela Ponce – Climate Finance Operations Officer – cponce@ifc.org • Luis Maria Fuente Arruga – Climate Finance Operations Officer – lfuentearruga@ifc.org ASIA-PACIFIC REGION • Pushkala Lakshmi Ratan – Senior Industry Specialist, Climate Finance – pratan@ifc.org • Helen Lun He – Senior Operations Officer, Climate Finance – hhe1@ifc.org • Nishantha Jayasooriya – Operations Officer – njayasooriya@ifc.org MENA REGION • Riccardo Ambrosini – Senior Operations Officer, Climate Finance – rambrosini@ifc.org • Marcel Rached – Country Officer – mrached@ifc.org • Fares Kikano – Consultant – fkikano@ifc.org 22 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS CREDITS Produced by the Climate Finance Team in the Financial Institutions Group at IFC. Project Lead: Quyen Nguyen Writers: Elizabeth P. Gibbens and Gina D. Wilkinson Designer: Lauren Kaley Johnson, The World Bank Photos courtesy of IFC, Agricultural Bank of China, Al Kuraimi Bank of Yemen, Banco Davivienda, Banco Galicia Argentina, Bancolombia, Commercial Bank of Ceylon, Fransabank, Ma’anshan Rural Commercial Bank and Ukrgasbank. Produced with the support of Denmark and Japan Cover Photo: IFC and its client, Al Kuraimi Islamic Bank (KIB), are defying the darkness which ensued from the conflict in Yemen. This wind farm is one of the projects KIB financed. © Al Kuraimi Islamic Bank (KIB) © International Finance Corporation 2019. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. 23 2121 Pennsylvania Ave., N.W. | Washington, D.C. 20433 USA www.ifc.org June 2019 24 | GREEN CHAMPIONS: HOW IFC CLIENTS ARE FINANCING CLIMATE-FRIENDLY PROJECTS