Bonds back stake in green projects
The International Finance Corporation, a member of the World Bank Group, expects to issue at least US$1 billion (Bt28.7 billion) in green bonds annually to support private investment in renewable energy, energy efficiency and other climate-friendly sector
“Climate change is one of the most urgent development challenges of our time, and only markets can mobilise the investment necessary for mitigation and adaptation,” Jin-Yong Cai, executive vice president and chief executive officer of the IFC, said yesterday.
The proceeds are earmarked for projects and technologies that reduce greenhouse emissions.
“We are ramping up our green bond programme to meet the growing demand for this asset class and enable investors to support climate-smart investment in developing countries,” he said.
According to the International Energy Agency, $5 trillion is needed worldwide by 2020 for renewable power, energy efficiency and cleaner transport to contain rising global temperatures. The United Nations estimates that 80 per cent of the capital needed to address climate change will come from the private sector.
Green bonds, also known as climate bonds, are a relatively new asset class. The IFC has issued $2.2 billion in green bonds since 2011. Criteria for the use of IFC green bonds proceeds are certified by the Centre for International Climate and Environmental Research-Oslo (CICERO), an independent body associated with the University of Oslo.
In February, the IFC issued $1 billion worth of green bonds, the largest climate-friendly issuance to date. The three-year bonds were a benchmark issue available to investors globally. The issue was 80 per cent oversubscribed and sized to address the demand from an increasing number of investors interested in climate-related opportunities.
Climate change
Addressing climate change is a strategic focus for the IFC. In fiscal 2012, it invested $1.6 billion in climate-related investments – more than 10 per cent of the institution’s overall commitments for the year.
About 70 per cent of its investment in the power sector involved energy efficiency and renewable energy. By fiscal 2015, the IFC expects to double its climate-related investment to roughly $3 billion per year.
The IFC has also launched a 500-million-yuan (Bt2.3-billion) financing and advisory programme with the Bank of Shanghai to support energy-efficiency projects in China, the latest step in the IFC’s global effort to combat climate change by steering bank lending to environmentally sustainable private-sector projects.
In China, one of the world’s biggest emitters of greenhouse gases, four banks have joined the IFC’s China Utility-based Energy Efficiency Finance Small and Medium Enterprises (CHUEE SME) programme over the past half-year.
The scheme expands access to finance to SMEs by mitigating banks’ default risk on smaller firms’ climate-friendly projects such as insulating production plants to improve energy efficiency or using solar energy.
The IFC established CHUEE in 2006. By last year, banks participating in the programme had provided loans of $783 million to 178 energy-efficiency and renewable-energy projects, reducing greenhouse-gas emissions by 19.3 million tonnes a year, roughly the equivalent of the annual emissions of 40 medium-sized coal-fired power plants.
CHUEE is expected to promote loans of $558 million for up to 350 sustainable energy projects, helping to reduce 1.5 million tonnes of greenhouse gases annually.
The IFC’s global sustainable energy finance initiatives span 27 countries across five continents and have supported a loan portfolio of more than $1.7 billion.
