Washington, D.C., November 2, 2017—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, according to a
new report by IFC, a member of the World Bank Group.
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 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.
IFC provided 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 to lower electricity generation costs and reduce Egypt’s
dependence on imported fossil fuels.
The report’s findings point to specific
investment opportunities including:
energy investments could climb to $11 trillion cumulative by 2040—reforms
such as renewable energy auctions, land title reforms, and supportive energy
storage policy frameworks would make this possible.
in off-grid solar and energy storage can reach $23 billion a year by 2025
—if countries use differentiated tariffs, clear technical and
safety standards, and targeted financial incentives while supporting new
business models for community based solar such as Pay-as-You-Go and innovative
finance solutions such as securitization assets.
of dollars of agribusiness investment can become more "climate-smart"—if
governments ensure property rights, good transportation infrastructure,
and regulations and fiscal policies that encourage climate-smart investment
while promoting improved farmer-training practices and using financial
innovation to provide working capital for farmers.
in green buildings could reach $3.4 trillion cumulative by 2025 in key
emerging markets—if countries adopt better building
codes and standards and create targeted financial incentives such as green-building
certification and mandatory benchmarking of energy use. Other important
reforms should encourage new utility business models, such as green mortgages
and energy service companies.
of dollars in investments in sustainable urban transportation can be mobilized
in the coming decade—if governments issue mandates to enable infrastructure
investments and adopt municipal transit plans that can spur innovations,
such as light rail.
in water supply and sanitation could exceed $13 trillion cumulative by
2030—for this governments would need to establish water pricing
at predictable and sustainable levels to increase the creditworthiness
of utilities while entering into public-private partnerships and adopting
in climate-smart urban waste management could reach $2 trillion—if
cities work to attract private sector participation through improved regulatory
and enforcement frameworks, using economic incentives and cost-recovery
mechanisms such as feed-in tariffs, and driving waste-conscious consumer
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
report issued by IFC last year, which found that the Paris Agreement
could create $23 trillion in investment opportunities for 21 emerging-market
IFC, a member of the World Bank Group,
is the largest global development institution focused on the private sector
in emerging markets. Working with more than 2,000 businesses worldwide,
we use our capital, expertise, and influence to create markets and opportunities
in the toughest areas of the world. In FY17, we delivered a record $19.3
billion in long-term financing for developing countries, leveraging the
power of the private sector to help end poverty and boost shared prosperity.
For more information, visit www.ifc.org