Cleantech for IFC is any tech or business innovation that does more with less and creates less mess – or environmental damage. Our main focus is climate change mitigation – although we are also looking at adaptation-focussed technologies and businesses.IFC works across a broad spectrum of cleantech – reflecting the breadth of our existing portfolio and in house technical expertise
Digging in deep round 1, thursday, finance ifc
SUSTAINABLE VALUE CHAIN FINANCE
IFC – over $100 Billion Invested in Emerging Markets since 1956 Largest multilateral source of loan/equity financing for the emerging markets private IFC FY10 Highlights sector Portfolio * $48.8 billion Founded in 1956 with 182 member countries Committed * $18.0 billion Mobilized $ 5.3 billion AAA rated by S&P and Moody’s # of companies 1776 Provides financing (equity, quasi-equity, # of countries (portfolio) 129 loans, risk management and local currency # of countries (committed) 104 products) and advisory services * Includes for IFC’s own account and mobilization Takes market risk with no sovereign Advisory Services $300 m guarantees Composition of FY10 Transaction Volume Promoter of environmental, social, and Sub-Saharan Middle East & Africa Global corporate governance standards N.Africa 19% 1% 12% South Asia Resources and know-how of a global 8% development bank + flexibility of a merchant Europe & bank Central Asia 23% Holds equity in over 800 companies worldwide Latin East Asia and America the Pacific 24% 12% 2
IFC’s Global ReachIFC has reach in 100+ country and regional advisory services offices worldwideDrawing on our experience and lessons-learned, we share sector best practices to the benefit of ourclients Dakar Nairobi 3
Our Beliefs Private sector solutions for sustainability and inclusive development WATER: ENERGY: Low carbon TRANSPORTATION: Capture, treatment, conservation AIR & ENVIRONMENT: Emission generation, energy Vehicles, systems, fuels and , wastewater treatment, water control, trading and offsetsefficiency, storage, smart grids. logistics efficiency, access to water BUILDINGS: Low carbon MANUFACTURING: Green chemicals, AGRICULTURE & FORESTRY: RECYCLING & WASTE: Recycling strategy, energy RE/EE supply chain, cleaner Sustainable Value Chains, EST and waste treatment services,efficiency, sustainable materials. production. standards, Land mgmt, low resource efficiency carbon and adaptation strategies, biomass Can only scale and have impact if significant private sector participation is achieved
Sustainable Value Chains: Current Reality1. Increasing recognition of the risks and opportunities value chain sustainability practices represent to lead companies2. Increasing recognition of the role lead companies can play in international development3. Increasing recognition of the business case for sustainability; many investment opportunities pay for themselves in 2-3 years from savings4. Many companies are making public statements of commitment to this effect but are struggling to make tangible progress5. Considerable challenges to sustainability upgrades – limited awareness, access to technology, implementation capacity and lack of long term financing key obstacles IFC is trying to address
Sustainability Value Chain Finance: IFC Approach
Sustainable Global Value Chains: A Collaboration 1. Value Chain Lead Company Role: Engages firms in its value chains Provides incentives to supply chain partners • Price incentives/financing • Stronger contracts • Preferred supplier status • other Benefits: Reduced operational risk Reduced regulatory risk Reduced green-house gas emissions associated with company Improved reputation and public relations Brand differentiation Better relationship with suppliers and distributors
Sustainable Global Value Chains: A Collaboration 2. Producers & Distributors in the Value Chain Role: Implement sustainability upgrade Benefits: Improved profitability & competitiveness Meet lead company requirements Improved reputation Reduced regulatory risk
Sustainable Global Value Chains: A Collaboration 3. Financial Intermediary Role: Offers sustainability finance solutions to suppliers and distributors in lead company’s value chain Benefits: Offering new product to address needs of blue chip clients Reduced risk of large clients Pipeline development and new business opportunity Differentiation from competitors Reduced greenhouse gas impact of portfolio
Sustainable Global Value Chains: A Collaboration 4. IFC Role: Provide financial support to address financing gaps (credit lines, risk sharing, portfolio guarantees, etc.) for value chain sustainability upgrades Capacity building for value chain producers and distributors in various areas of sustainability upgrades Benefits: Scaling up sustainability finance in order to meet climate change and poverty reduction objectives
Examples Food retailer or food brand company concerned about the environmental and social practices of its suppliers and sub-suppliers, a considerable reputational and operational risk, wants to improve visibility and encourage the improvement of environmental and social practices (including energy efficiency, renewable energy, water conservation, etc) in its entire value chain, including at the level of farmers, processors, manufacturers and logistics providers in its value chain Large electronics company is kept responsible by the public for greenhouse gas emissions in its entire value chain, even though it does not own most of the companies involved. Therefore it decides to encourage value chain companies to implement greenhouse gas emissions reducing investments, such as energy and resource efficiency measures.
Examples (cont’d) Paper brand is worried about the source of its pulp, in particular the reputational issues related to the deforestation of old growth forests. Therefore it decides to move towards the use of certified wood which requires its suppliers to make investments in sustainability measures and certification. Chain restaurant wants to improve its image and promote green construction retrofits of its franchisees and make its supply chain more sustainable. Consumer goods brand is considering reaching remote areas with its products and developing a distribution network, but wants to do it in a responsible way.