Durban, South Africa, December 8, 2011
—Governments and international financial institutions can significantly accelerate the growth of climate-related private-equity investments in emerging markets by encouraging the formation of funds that specialize in such investments, according to a new report released today by IFC, a member of the World Bank Group.
The report argues that private-equity and venture-capital funds are uniquely suited to financing climate-friendly investments because they tend to back risky or innovative projects, support early-stage companies, and help such companies improve their business and technical capacity. These funds are expected to provide only a small part of estimated $4.6 trillion in climate investment needed worldwide, but they can fill a key niche in emerging markets.
Climate-friendly investments by such funds totaled $20 billion a year in 2010, according to the report, but most of the investments were in developed countries. Less than 10 percent of climate-friendly deals were in emerging markets, mostly in India and China. “As a result, less than 2 percent of PE/VC fund activity is spread out across all the emerging markets outside of India and China,” the report says.
International financial institutions can commit capital to anchor new funds and help identify promising fund-management teams. Public sector institutions for their part, can provide capital to support new types of investment, the report says.
"The findings of this report demonstrate the crucial role that private equity can play to help raise the financing needed to address climate change,' said Nena Stoiljkovic, IFC Vice President for Business Advisory Services."Supporting the private sector's efforts to mitigate and adapt to climate change is a central part of IFC's strategy."
Monique Barbut, CEO and Chairperson of the Global Environment Facility, which co-financed the report along with the Governments of Japan and the United Kingdom, said: “This report highlights untapped opportunities in the private equity world for financing investments aimed at mitigating climate change. The report provides an important tool that will help investors and public-sector organizations shape the design and structure of any future public private climate fund.”
Stephen O’Brien, the U.K Under-Secretary of State for International Development, said: "It is the world's poorest people who will suffer most from the consequences of climate change. Securing more private investment is key to mitigating these effects, helping to support promising climate-related businesses to grow and develop. This report proves that the UK Government's work to harness the dynamism of private enterprise through public private partnerships can help developing countries to address the impact of climate change."
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal 2011, amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities—all while driving our investments to an all-time high of nearly $19 billion. For more information, visit
www.ifc.org
.
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