The Blended Finance Unit (BFU) manages concessionary donor funds to be deployed for investment and advisory projects. These funds aim to address climate change by catalyzing private sector investments and advisory projects that would not otherwise happen under current market conditions. Blended Finance can take the form of a variety of products and structures including risk sharing products, lower interest rates, longer tenors, subordinated rank in loans, or lower returns for equity investments.
BFU manages approximately $700 million in funds from the Climate Investment Funds, the Global Environment Facility, and the Canada Climate Change Program. These funds are often matched by IFC resources and can be deployed as softer loans, guarantees, equity, and grants for projects that would generally not be taken up by the private sector alone due to high project risks, technology costs, or technology risk. Blended finance enables projects to take place over time, demonstrating their viability and paving the way for financing on fully commercial terms. Concessional funds also support standard-setting innovations and advisory services to build local capacity within firms and governments, and to develop new financial products allowing firms to identify opportunities to reduce GHG impacts and countries to adopt more favorable regulatory and business environments for renewable energy, energy efficiency, and cleaner technologies.
Examples of projects supported by BFU include:
Wind farm in La Mata and La Ventosa in the state of Oaxaca, Mexico:
IFC is financing a 67.5MW wind farm which is expected to produce about 290 GWh of electricity annually. The project will increase Mexico’s installed wind power generation capacity by about 30 percent and is expected to generate about 0.9MtCO2e of GHG savings during the five-year period, 2010 to 2014.
Carbon Efficiency Index for Emerging Markets:
IFC with Standard & Poor’s launched the world's first carbon-efficiency index for emerging markets, which aims to mobilize more than $1 billion for carbon-efficient companies over the next three years. The index will encourage carbon-based competition among emerging-market companies, give carbon-efficient companies access to long-term investors, and reduce carbon emissions in developing countries.