Scaling up Climate Finance in the
Private Sector
Leveraging Public Funding to
catalyze the private sector
Introducing IFC
We create opportunity for people
– to escape poverty and improve their lives
• The world’s largest private sector-focused development bank.
• Established in 1956, most of our 3,354 staff work from about 100 offices in 86 countries.
• We invest, advise, mobilize capital, and manage assets.
Committed portfolio for FY10: $38.9 billion; 1,656 firms.
Investments in FY10: $12.7 billion for IFC’s own account, $5.3 billion mobilized
Under management within the Asset Management Company: $4 billion.
Advisory expenditure for FY10: $286 million
• IFC started formal environmental and social screening of its investments in the early
nineties and became the acknowledged world leader on these issues when the Equator
Principles were launched in 2004.
• The biggest challenge to development today is climate change. While public policy is
key, the private sector must also play a leading role. That is why
Climate Business is a core priority for IFC.
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IFC’s Climate Business: technology, products and
services that “do more with less”
Private sector solutions for climate mitigation / adaptation and inclusive development
ENERGY: Low carbon generation,
energy efficiency, storage, smart
grids.
TRANSPORTATION: Vehicles,
systems, fuels and logistics
WATER: Capture, treatment,
conservation, wastewater
treatment
AIR & ENVIRONMENT: Emission
control, trading and offsets
BUILDINGS: Low carbon strategy,
energy efficiency, sustainable
materials.
MANUFACTURING: Green chemicals,
RE/EE supply chain, cleaner
production.
AGRICULTURE & FORESTRY: Land
mgmt, low carbon and adaptation
strategies, biomass.
RECYCLING & WASTE: Recycling
and waste treatment services
Climate business will only scale and have impact with significant private
sector participation – that is where IFC has an important role to play
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commercial finance
Recent Renewable Capacity Investments
Wind
Mexico
Wind
Eurus
$75,000,000
Bulgaria
Hydro
AES Kavarna
Zhongda Hydro
$52,000,000
Sub Debt and Debt
Lead Lender of
US$23,200,000
Loan Project Financing
US$375m financing
Loan Project Financing
Lender
May 2010
China
Lender
December 2008
October 2009
Solar
Thailand
Small Hydro Colombia
Century Caruqia
Solar
Solar Power Company
US$1,700,000
Senegal
Equity
$13,500,000
Biomass
Subordinated Debt
and Debt
Office National
d’Electriciie
Lender
May 2010
$750,000
May 2008
Auro Mira
$3,100,000
Equity
Wind
India
Chile
Loan Project Financing
June 2009
Lender
Norvind
$30,750,000
December 2009
Loan Project Financing
Lead Lender of
US$60.75m financing
February 2009
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commercial finance
Recent Investment in Resource Efficiency, Sustainable
Energy Supply Chains and Sequestration Russia: Borets
Turkey:
Trakya Cam (energy
efficiency and solar
glass) $55m loan
Mexico:
Optima
Energia
(hotel ESCO)
US$10m loan
(energy efficient
motors/pumps)
$33m loan(*)
China:
Suntech (solar
cells) $50m
convertible debt
Ghana:
Ashesi
University
(“green
building” incl.
biogas use)
$0.2m loan(*)
Note (*) financing for climate
friendly project; was part of a
larger total IFC investment
Philippines:
Sunpower
(solar cells)
$75m loan
India:
VicatSagar (cement) $9m loan(*)
Tanzania:
Green Resources
(biomass/plantation)
$18m loan
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Apollo Tires III (low rolling resistance
tires and waste heat recovery)
$30m loan
Jain Irrigation (micro/drip irrigation
systems) $60 million loans/equity
commercial finance
IFC has invested $154 million in 8 Climate Change Funds
China:
China Environment Fund III, $15m
Southern Africa:
Evolution One Fund, $20m
GEF Africa Forestry Fund, $20m
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South Asia:
East Asia:
GEF South Asia Clean Energy
Fund, $10m
Asia Environment
Partners, $25m
Aloe II (Green Investment
Asia Sustainability Fund I)
$19.2m
Clean Resources Asia
Growth Fund, $25m
• Asia Water Fund, $20m
commercial finance
Recent Growth Capital Investments in Cleantech
China:
Shuoren (furnace energy efficiency) US$8m
Tianjin Haitai (green asphalt) US$8m
India:
Husk Power (biomass-fired microgrids) $0.4m
Applied Solar (sustainable energy for mobile base stations) $15.4m
For portfolio updates:
www.ifc.org/cleantech
Azure Power (grid-connected solar) $10m
Attero Recycling (e-waste recycling) $5m
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carbon finance
Significant experience in carbon markets*
ING Bank
Ukraine
550,000 ERUs
2007
Coal mine
methane
AgCert International Plc
Mexico/Brazil
€7.7 million equity
2005
Animal waste management
Rain CII Carbon
(India) Ltd.
India
850,000 CERs
2007
Waste heat recovery
Enercon
India
€6,600,000
2006
Wind farms
Carbon Delivery Guarantee
Estre Ambiental S.A.
Brazil
$20 million senior loan
$4.5 million sub debt
2009
Solid waste management
Brascan Energetica
Brazil
€ 8,500,000
2005
Run-of-river hydros
* Selected credit purchase, delivery guarantee,
and carbon-linked financing transactions shown.
Phascon
China
€16,000,000
2008
Landfill gas to power
IHDC
India Hydropower
Development Company
IHDC
India
€4,800,000
2006
Run-of-river hydros
Deqingyuan
China
€3,500,000
2008
Biogas to power
Ecopower
Sri Lanka
€3,600,000
2005
Run-of-river hydros
Omnia Fertilizer
South Africa
900,000 CERs
2008
N2O destruction
Carbon Delivery Guarantee
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IFC recently launched the €150M
Post-2012 Carbon Facility to extend
carbon markets and increase access
for projects that reduce emissions.
commercial finance
Climate Change and Sustainability Investments through
Financial Institutions
•Trade in
Latin
America
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• Network of over 600 clients
• Total volume over $1.25
billion through over 40
lenders
• Leverages over $2.5 billion
• Supports SME EE and small
renewable energy
concessional finance
IFC has a long track record in concessional finance.
Over a decade of innovation and more than $350 million under
management from GEF, CTF and bilateral donors for climate.
Examples of intervention types:
•Capital cost buy-down
•e.g. grid connected PV in the Phillipines, fuel cells in South Africa
•Concessional debt to accelerate technology roll-out
•e.g. La Ventosa wind farm in Mexico
•Risk sharing facilities
•eg. to help lenders scale up renewable and energy efficiency portfolios, such as CHUEE in China
•Patient equity
•e.g. for young cleantech companies such as a micro-turbine manufacturer in India and an
energy efficient water purification company in India, Bangladesh, Phillipines and Ghana
•Competition prizes
•e.g. for companies innovating light and energy solutions for underserved / off-grid populations.
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IFC’s Experience Leveraging Donor Funds
Level of Market Development
HIGH
Leverage Factor (LF) = Private $ mobilized per Donor $
•OTP US$250 mm
facility
•IFC RE Mezz facility
(2009)
•LF 100 times
•CHUEE II(2007): US$350 mm
facility
•LF 30 times
•CHUEE (2005): US$50 mm facility
•LF 10 times
•CEEF (1997) L F = 1 times
Across various IFC projects
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The Barriers and Maximizing the impact of donor
funds for scaling up the FI-SEF program
• Transaction Costs
In creating the pipeline of projects for financing
Creating capacity and lowering transaction costs for early
entrants
• Project developers/equipment vendors/clean tech sales
• Financiers
• Addressing risk perceptions of the private sector and financing
the pipeline
First loss funds
DFIs to offer products beyond subsidized credit lines
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Financial products and their use
(working with Financial Intermediaries)
Financial
Product
Potential for use
Leverage
(IFC :
local FI)
Donor role
Donor
leverage
(donor to
FI)
Trade finance
Addresses trade in EE/RE
equipment
1:1:3
None/potenti
ally a subsidy
NA
Long term credit
line
Asset liability matching and
liquidity for projects with
longer paybacks
1:1.3
Interest or
capital
subsidy
NA
Pari-passu Risk
sharing facilities
(funded/unfunded)
Addresses risk perception
(soft) and exposure barriers
>1:2
First loss or
subsidy
>1:5
Subordinated risk
sharing facilities
(funded or
unfunded)
Addresses financing gaps,
risk appetite
>1: 3
First loss or
subsidy
>1:15
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Decreasing
simplicity
Increasing
development
impact and
more
catalytic
Increasing
leverage and
value add
Critical Questions to engage the private sector
• How much subsidy is enough ?
• Spending money (grants) vs providing first loss (and improving
the private sector returns)
• Its never just the risk : Its always the risk and the return
• Markets don’t move because
There are gaps in the risk return appetite in the market for a project
Transaction costs for the first mover
• Scaling up will require
Increasing the size of the pie
• Making Financing available to marginally viable / higher perceived
risk business
Long term
• Financing high cost technologies with the assumption that scale will
eventually make these viable.
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Thank you.
Ajay Narayanan
Head – Climate Business and
Sustainability
Global Financial Markets Department
IFC, Washington
Najay@ifc.org