The Inter-American Development Bank has approved financing to establish a regional Energy Efficiency Green Bond Facility.
The program was selected to receive up to US$217 million in additional funding as one of eight projects worldwide in the first round of allocations announced by the Green Climate Fund on November 6. “This private sector program stands out for its innovative financial approach, involving small and medium enterprises and the potential mobilization through capital markets of funds from different institutional investors such as pension funds and insurance companies,” said Gema Sacristan, IDB’s Financial Markets Division Chief.
Providing an alternative financing mechanism for energy efficiency projects through the issuance of green asset-backed securities, the program will also contribute to the development of capital markets in the region. The program will introduce green ABS following the Green Bond Principles standards and will foster socially and environmentally responsible investments.
“The approval of this program furthers our commitment to supporting Latin American and Caribbean countries in the implementation of their proposed Intended Nationally Determined Contributions,” said Amal-Lee Amin, IDB’s Climate Change and Sustainability Division Chief. “Tapping into domestic capital markets for refinancing of energy efficiency is key for increasing scale of investment for de-carbonization over the medium and longer-term.”
Mexico will be the first country to implement this program, followed by the Dominican Republic, Jamaica, and Colombia. The IDB’s loan of up to US$400 million will be complemented by a loan of up to $50 million from the China Co-Financing Fund, administered by the IDB, in connection with the first utilization of the Facility in Mexico.