Climate Mitigation Finance Update: Guidance for Aligning Infrastructure Investments w/ Sustainability Objectives

April 13, 2018

Photo by American Public Power Association

STORY HIGHLIGHTS

The Inter-American Development Bank has produced guidance on aligning development and infrastructure with sustainability objectives and published its 2017 Sustainability Report. A report from Carbon Tracker Initiative has shown that US$1.6 trillion of carbon-intensive infrastructure investments are at risk by 2025.

The first meeting of the International Solar Alliance saw the announcement of several agreements and financing commitments.

The past month has seen the release of several reports and publications relating to: aligning climate financing and sustainable infrastructure investments with sustainability objectives; announcements around solar energy, including the meeting of the International Solar Alliance; and project funding for energy efficiency and renewable energy in several countries and regions.

Aligning Investments with the Paris Agreement and SDGs

The Inter-American Development Bank (IDB) has called for an ambitious growth agenda for Latin America and the Caribbean (LAC) focused on boosting infrastructure investments and productivity, in line with sustainability objectives. Announced at the Bank’s annual meeting, IDB’s 2017 Sustainability Report identifies the particular vulnerability of the LAC region to climate change impacts such as worsening natural disasters and extreme weather events, and gives an overview of measures the Bank is taking to reduce these impacts by aligning its strategy with the SDGs and the Paris Agreement. These measures include climate finance commitments and a pledge to screen all relevant projects for climate risks by 2018, particularly for countries that are most vulnerable to the impacts of climate change. The report also highlights the urgency of sustainable infrastructure investment. It is accompanied by a paper released in April 2018, titled, ‘Crossing the Bridge to Sustainable Infrastructure Investing,’ co-written by IDB and Mercer. Underscoring that “infrastructure must be sustainable, low-carbon and climate resilient,” this paper provides an overview of the “infrastructure imperative,” the state of play and challenges to overcome, followed by guidance to enable investors to make the move to sustainable infrastructure investments. [IDB Sustainability Report][IDB Sustainability Report 2017][Crossing the Bridge to Sustainable Infrastructure Investing]

In related news, the Carbon Tracker Initiative has released findings showing that US$1.6 trillion of investments are at risk of becoming stranded assets by 2025, based on the expected enhancement of countries’ climate policy ambition to implement the Paris Agreement. The publication notes that limiting warming to well below 2 °C, and striving to limit warming to 1.5 °C is incompatible with the current level of energy investments in coal, oil and gas. The report highlights the risk for the different energy sources, identifying planned investments in several G20 countries as the most at risk of this “unneeded spending.” The report also estimates that the falling costs of electric vehicles and solar technology could halt global demand for oil and coal from 2020 onward, highlighting the rapid growth of clean technologies as a further risk undermining the business case for fossil fuel investment, irrespective of climate targets. [Press Release]

Investments and Agreements to Promote Solar Energy

The first meeting of the International Solar Alliance (ISA), co-hosted by India and France, on 11 March 2018, saw several announcements for solar energy finance. Host country India pledged extending lines of credit of US$1.4b to support solar energy in 15 developing countries, and France committed to invest €700m in solar projects by 2022, in addition to €300m committed at ISA’s launch in 2015 during the Paris Climate Conference (UNFCCC COP 21). [ Press Release]

New agreements were also signed in the margins of the summit. The European Investment Bank signed a €150m loan with the Indian Renewable Energy Development Agency (IREDA) to support a €500m renewable energy investment. The funding will be used for the construction of photovoltaic solar power schemes and on-shore wind farms at sites in India, expected to benefit over 1.1m households across the country. [Press Release]

The Asian Development Bank and the ISA signed an agreement to promote the deployment of solar energy in the Asia and Pacific Region. The cooperation arrangement provides for ADB to commit US$3b per year by 2020 to clean energy, including solar power generation, solar based mini-grids, and transmission systems for grid-integrating solar energy, in its developing member countries. [Press Release]

The African Development Bank (AfDB) and the ISA signed a joint declaration aiming to promote solar energy in Africa, through cooperation on: developing innovative financial instruments to reduce risks and costs associated with solar investments and to leverage climate financing and commercial co-financing; supporting technical assistance and knowledge transfer for solar development and deployment; support for the AfDB’s 10 GW “Desert to Power” solar initiative; and developing finance instruments for off-grid solar projects, as well as large-scale solar independent power producers for African ISA member countries. [Press Release]

Further developments in Africa have seen the launch of an investment insurance initiative from Munich Re, the African Trade Insurance Agency (ATI) and the EIB. Provided by the Africa Energy Guarantee Facility (AEGF), the initiative is the first dedicated reinsurance for sustainable energy projects across Africa, which is planned to support US$1.4b in investments in sustainable energy projects to expand access to clean energy, support investments in energy efficiency, and contribute to the achievement of the SDGs in the continent. [Press Release]

In solar energy project funding, the World Bank Group has announced a US$50m grant to finance off-grid solar systems in Yemen. the project aims to restore or improve access to electricity for 1.4m people, half of which are women, and create jobs in the growing commercial solar energy sector. The undertaking will also fund solar power for infrastructure facilities including hospitals, schools, water corporations, and rural electricity providers. [Press Release]

Energy Efficiency Project Funding in Viet Nam and Greece

The World Bank and the Ministry of Industry and Trade, Viet Nam, have launched a US$102 million project to support the adoption of energy-efficiency technologies and practices in Viet Nam’s industrial sector, through an energy efficiency credit fund. In Greece, the EIB and Piraeus Bank have launched a €100m initiative to provide financing for investment to reduce energy consumption by small-scale energy users. [Press Release]

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