Infrastructure

April 15, 2011—IFC recently received about $300 million (CA $291.5 million) from the Canadian government which will primarily be used to provide guarantees and loans at concessionary rates for a broad portfolio of clean energy projects in developing countries. In addition, a percentage of the funds will be used by IFC’s Advisory Services to help remove barriers to private clean energy investments and to build technical expertise.

Concessional finance refers to any donor funding provided to an IFC client in a non-grant product (e.g. loans, guarantees, equity) at terms that are more favorable than the market or IFC terms. IFC uses concessional finance, alongside its own resources, to address market barriers and catalyze investments that would not otherwise happen.

"This financing is the result of IFC’s long-standing partnership with the Canadian government, and it demonstrates their confidence in our ability to manage concessional funds to catalyze investments without distorting markets," said IFC VP Rachel Kyte. "IFC is helping donors set the standard on how best to engage with the private sector to deploy concessional financing to achieve development objectives."

The Canadian concessionary funds are part of a commitment made by developed countries during the 2009 climate change talks in Copenhagen to mobilize funds to address the needs of developing countries to mitigate climate change and fast-track their adaptation efforts. IFC will use these funds to address market barriers that prevent the adoption of low-carbon technologies and business models that address climate change.

The signing of the agreement with the Canadian government was coordinated by IFC’s Financial Mechanisms for Sustainability (FinMech) unit. Formed in July 2008, FinMech manages funds provided by donors to be deployed in concessional ways in investment and advisory projects which address climate change. More information about the agreement with the Canadian government as well as other similar agreements can be found at the newly launched FinMech internal Web site.

FinMech’s active portfolio stands at $190 million in concessional financing and advisory services, which has mobilized $1 billion from IFC and third parties. Currently, the FinMech team is managing more than $700 million in funds from the Climate Investment Funds, the Global Environment Facility, and the Canada Climate Change Funds.

Contributed by Stacy Swann, Sustainable Business Advisory/Financial Mechanisms for Sustainability and Emmy Markoglou, Sustainable Business Advisory/Communications Practice Group