The World Bank’s International Finance Corporation financed and mobilized $7.7 billion in capital for climate-related programs in the year to June as it continues to help public sector projects and private sector to access financing despite rising interest rates and a weakening economic outlook.
The multilateral lender invested $4.4 billion in development programs and financing arrangements from its own account and mobilized $3.3 billion from the private sector in the past fiscal year. ends on June 30, said Vivek Pathak, global head and director of climate activities at the IFC. The National.
The $7.7 billion – about 35% of IFC’s account – made in the 12 months to June 30 matches the $7.6 billion total made for the same period in 2021, but the multilateral lender is aiming to exceed the count of 2022 in the current. 12 month period.
“The climate change action plan that we presented to the board about 15 months ago is basically that we are doing 35% of our own account in the climate [financing]said Mr. Pathak.
“However, we have ambitious objectives within the framework of our capital increase commitments. Yes, we need to do more…obviously, as a climatologist, I want to do more.
The IFC sees “new opportunities emerging” in climate credit, and “we hope we can at least meet that target, if not exceed the 35% we have set ourselves,” he said.
Compared to commercial banks and some other financial institutions, reaching the 35% target is “ambitious, I would say,” Pathak added.
Climate finance has taken center stage as the global economy continues its fragile recovery from the pandemic-induced downturn.
Investments in clean energy in developing and emerging economies alone need to grow more than sevenfold – from less than $150 billion in 2020 to over $1 trillion by 2030 – to put the world on on track to achieve net zero emissions by 2050, according to a joint report by the International Energy Agency, the World Bank and the World Economic Forum.
The frequency and severity of climate-related disasters have intensified over the past two decades, with droughts in North Africa, Somalia and Iran; locust outbreaks and infestations in the Horn of Africa, fires in Australia and severe flooding in Pakistan that killed thousands and caused damage exceeding $30 billion.
So far this century, weather-related disasters in the Middle East and Central Asia have injured and displaced 7 million people, caused more than 2,600 deaths and caused $2 billion in damage in an average year, Kristalina Georgieva, Director general of the International Monetary Fund, said in March.
The commitment to mobilize $100 billion a year in financing from developed countries to developing countries has yet to materialize. However, if world leaders unite for a systemic transition to net zero, the global economy could benefit from a $43 billion boost over the next 50 years, an increase of 3.8% the size of the global economy by 2070, according to a Deloitte report.
Inaction on climate change, however, could cost the global economy $178 billion over the next five decades, the report adds.
Despite pressing financing needs, the cost of borrowing for public and private developers for climate-related projects has risen amid soaring inflation and subsequent interest rate increases by central banks around the world.
One way governments can counter this is to engage private sector investors as partners for bankable climate projects, Pathak said.
“We encourage governments to reform, open up sectors and make them attractive to private capital. The more private capital you attract, the more competition there is, the lower the prices will be,” he said.
Governments and the private sector should invest in climate-related environmental, social and governance projects as part of their spending plans, rather than treating them as separate items.
“Yes, interest rates are rising [but] I don’t see climate or ESG as a separate investment. It must be integrated into everything we do,” he said.
Overall, climate should be integrated into “the daily thinking of our customers”, who may sometimes need “upfront concessional funding” for projects, which is very essential to keep products and services affordable. In certain regions.
IFC, based in Washington, is the world’s largest development institution focused on the private sector in developing countries.
It partners with entities ranging from start-ups to venture capitalists, financial institutions and private companies to stimulate economic activity in support of climate and gender agendas.
In fiscal year 2022, the IFC invested $23.1 billion in long-term financing and $9.66 billion in short-term financing in private companies and financial institutions.
Until the end of May this year, the IFC’s total cross-border investments in GCC companies amounted to $5.1 billion in its account and $3.4 billion it has mobilized, financing 148 projects worth $22 billion.
The IFC is leading a $94 million financing package for a subsidiary of Abu Dhabi‘s clean energy company Masdar that will finance the first wind power plant in Uzbekistan.
In May, the lender provided a $30 million loan to help waste management company Averda continue its planned growth in Oman, Morocco and South Africa.
Last year, Abu Dhabi‘s National Central Cooling Company, known as Tabreed, partnered with IFC to expand into India through a jointly owned holding company.
The lender will continue to form partnerships with UAE-based entities because “they have the capital” as well as the “ambition”, Mr Pathak said.
“So they really are perfect partners for us as they expand into emerging markets.”
Updated: October 04, 2022, 03:32