At IDB Invest, we believe climate change is so central to the fabric of business today—both in terms of risks and opportunities—that we are weaving this issue into everything we do.
Climate finance accounted for more than one third of the IDB Group’s private sector lending in six of the seven years from 2011 through 2017. In that period, the IDB and IDB Invest—together, the IDB Group—channeled more than $5 billion to private sector climate change projects in the region.
The needs are vast and growing. The population of Latin America and the Caribbean—estimated at 625 million people in 2016—is expected to reach 680 million by 2025 and 779 million by 2050, according to United Nations statistics. The region will have to find ways to increase its electric power capacity, especially from renewable energy sources, and curb consumption of fossil fuels, particulary in the transportation sector.
At the same time, much of the region is vulnerable to major economic damage from the physical impacts of climate change—which could amount to $100 billion per year by 2050, according to IDB estimates. The 2017 hurricane season that caused such devastation in the Caribbean and the United States provided a stark reminder of what ever-stronger storms can do.
As a major multilateral development bank serving the region, the IDB Group has a responsibility and a commitment to do everything within our power to help both countries and companies navigate the challenges of climate change and implement mitigation and adaptation strategies.
In 2016, the Boards of Governors of the IDB Group decided to significantly increase our climate portfolio.
At the annual meeting, held in the Bahamas, they set a target to allocate 30 percent of the IDB Group’s combined financing—total approvals of loans, guarantees, investment grants, technical cooperation and equity operations—for climate change-related projects by the end of 2020. That would be double the average annual volume of the IDB Group’s climate finance between 2012 and 2015.
Our actions on climate are in line with a set of voluntary principles the IDB Group and 25 other institutions from around the world adopted in 2015. These principles call for financial institutions to:
- Commit to climate strategies—This involves setting strategic policies and priorities at the highest levels to integrate climate change considerations into lending and advisory activities.
- Manage climate risks—Financial institutions should assess their own portfolios and new investments, and work with clients to determine how to increase resilience and sustainability.
- Promote climate-smart objectives—The idea here is to generate new tools and products to mobilize more financing for climate change action.
- Improve climate performance—This principle addresses the need to have the appropriate operational tools in place to track climate performance.
- Account for climate action—Financial institutions should be transparent about their own climate performance and, when possible, report on how their investment portfolios are doing in this regard.