IFC report finds policy reforms, innovation can unlock trillions in climate finance

10:23 | 06/11/2017 Environmental Resources

(VEN) - On November 2, 2017, IFC, a member of the World Bank Group launched its new report Creating Markets for Climate Business. The East Asia and Pacific region is a major driver in global growth of demand for climate smart technologies, according to the report.

Waste of electrical equipment

The report points to China’s leading role in grid tied renewables and Japan as the second largest investor globally in rooftop solar. And it points to expected increase in green infrastructure in the region. Generally, in East Asia, the total regional investment opportunity is over US$3 trillion through to 2025 – just in green buildings alone. It also highlights expected trillions of dollars of investments in transport infrastructure.

Other major markets include Indonesia and Vietnam. And the Pacific Islands are becoming attractive markets for off grid solar and mini grid systems.

The report identifies seven industry sectors that can make a crucial difference in catalyzing private investment: renewable energy, off-grid solar and energy storage, agribusiness, green buildings, urban transportation, water, and urban waste management. Already, more than $1 trillion in investments are flowing into climate-related projects in these areas. But trillions more could be triggered by creating the right business conditions in emerging markets, the report found.

The report finds developing countries can meet climate targets promised in the landmark Paris Agreement by catalyzing trillions of dollars in private investments through a combination of smart policy reforms and innovative business models.

“The private sector holds the key to fighting climate change,” said IFC CEO Philippe Le Houérou. “The private sector has the innovation, the financing, and the tools. We can help unlock more private sector investment, but this also requires government reforms as well as innovative business models—which together will create new markets and attract the necessary investment. This can fulfill the promise of Paris.”

IFC’s Creating Markets for Climate Business report offers several examples of such an approach. On Sunday, Egyptian officials signed an agreement to create the world’s largest solar park.IFCprovided a landmark $653 million debt package that will finance the construction of 13 solar power plants near the Egyptian city of Aswan.The agreement occurred only after a series of reforms by the government and the creation of innovative financing structures. It is expected tolower electricitygeneration costs and reduce Egypt’s dependence on imported fossil fuels.

The report’s findings point to specific investment opportunities including:Renewable energy investments could climb to $11 trillion cumulative by 2040; Investments in off-grid solar and energy storage can reach $23 billion a year by 2025; Trillions of dollars of agribusiness investment can become more "climate-smart"; Investments in green buildings could reach $3.4 trillion cumulative by 2025 as key emerging markets; trillions of dollars in investments in sustainable urban transportation can be mobilized in the coming decade; Investments in water supply and sanitation could exceed $13 trillion cumulative by 2030; Investments in climate-smart urban waste management could reach $2 trillion.

Addressing climate change is a strategic priority for IFC. Since 2005, IFC has invested $18.3 billion of its own funds in long-term financing for climate-smart projects and mobilized an additional $11 billion from other investors. The latest report is a follow-up to the Climate Investment Opportunities report issued by IFC last year, which found that the Paris Agreement could create $23 trillion in investment opportunities for 21 emerging-market countries.

Minh Ky