Washington-based International Finance Corp. (IFC) of the World Bank Group has introduced financing support for Philippine banks that will lend to climate adaptation and mitigation projects amid a push for “green” recovery from the COVID-19 pandemic to generate trillions of dollars in fresh investments.
“The program, ‘Scaling Up Climate Finance through the Financial Sector,’ is designed to increase climate lending by participating banks in Egypt, Mexico, the Philippines and South Africa to 30 percent of their portfolios by 2030, while reducing exposure to coal,” in line with the Paris Agreement, the IFC said in a statement.
The IFC said the German government’s International Climate Initiative would extend initial funding for the program, whose partnership with Washington-based multilateral lender World Bank and Germany’s aid agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH would “develop conducive regulatory frameworks and create an appropriate market environment for climate lending, climate risk management and climate finance.”
The program will also “provide financial institutions with new tools to identify, manage, and reduce the climate- and carbon-related risks in their portfolios” as well as “allow banks to better integrate green finance strategies—such as green bonds—into their funding plans, supporting the growth of domestic capital markets financing for climate business,” the IFC said.
Earlier, IFC estimates showed banks must jack up their climate lending to 30 percent of their portfolio in the next 10 years so that energy efficiency, green buildings, renewable energy and sustainable transport infrastructure could flourish.
In a recent report, the IFC said the Philippines and three other big emerging markets in East Asia and the Pacific region stood to gain $5.1 trillion in fresh investments if they traverse the route toward “green” recovery postpandemic.
The IFC report titled “A Green Reboot for Emerging Markets: Key Sectors for Post-COVID Sustainable Growth” projected a total of $10.2 trillion in fresh investment opportunities across 21 emerging markets from 2020 to 2030 if they would adopt green recovery measures.
Half of these potential investments would be cornered by China, Indonesia, the Philippines and Vietnam, the IFC said. In turn, such investments would generate 98.8 million new direct jobs across these four countries, or nearly half of the 213.4 million employment to be created worldwide.
Besides the economic gains, shifting to “green” would reduce greenhouse gas emissions by 2.01 billion tons in the four East Asia-Pacific nations, over half of the four billion tons globally.
To take advantage of these huge investment, employment and environmental rewards, the IFC urged emerging markets to build climate-smart cities, turn to “green” their existing and future energy infrastructure, as well as speed up the transition to green recovery.
In particular, the IFC said emerging markets could become “green” by doing the following: decarbonizing the grid with renewable energy; scaling up distributed generation and storage; retrofitting buildings for energy efficiency; investing in low-carbon municipal waste and water; expanding green urban transport; creating nature-based urban infrastructure; decarbonizing heavy industry with carbon capture, utilization, and storage and green hydrogen; scaling climate-smart agriculture; reinventing textile and apparel value chains; as well as incentivizing low-carbon airlines and shipping.
The 21 emerging-market economies covered by the IFC report represented 62 percent of the global population which, in turn, accounted for 48 percent of harmful emissions damaging the planet.