IDB Invest, Finland launch climate fund for LatAm and Caribbean

IDB Invest and Finland have announced the establishment of the Finland-Latin America and the Caribbean Blended Finance Climate Fund. 

The fund is a continuation of the cooperation with Finland and other donor countries to provide financing for private investment projects in Latin America related to climate change. The blended finance fund will receive a 50mn-euro (US$53mn) contribution from the Finnish government. 

“The fund will co-finance alongside IDB Invest and will be used to provide debt or mezzanine instruments, guarantees and risk mitigation instruments, and/or equity investments, among other financial instruments. Funds will be disbursed once eligible projects complete IDB Invest approval process and reach financial close,” the agency told BNamericas in an email. 

The new mechanism will focus on mitigation projects aimed at reducing greenhouse gas emissions and increasing the capacity of carbon sinks, as well as adaptation initiatives to support sustainable businesses across Latin America and the Caribbean.

Those interested in obtaining financing from the new fund will have to follow the same process as for standard financing from IDB Invest, and applications will be assessed on a rolling basis, meaning that there will not be a deadline for applications. 

“IDB Invest will apply its own legal, integrity, environment, social and governance standards to the transactions supported by this fund. If the company is eligible for IDB Invest financing and a due-diligence for potential financing is started, teams will also assess if concessional financing is needed,” the agency said.

If concessional financing is needed, IDB Invest will carry out an additional review to determine if the application is eligible. 

Public-private partnerships (PPP) will also be eligible, provided they do not benefit from sovereign guarantees. 

Over the past five years, IDB Invest and its parent institution, the Inter-American Development Bank (IDB), have provided more than US$26bn in climate financing for Latin America and the Caribbean, which represents 60% of the climate financing provided by multilateral institutions in the region during that period. 

During 2021, IDB Invest also issued US$1.6bn-worth of green, social and sustainable bonds.

The proceeds were allocated to 54 projects across the region, which included efforts to increase water and sanitation services in Brazil, aiding Engie to accelerate decarbonization efforts in Chile and helping Jamaica’s JMMB bank to strengthen its Environmental and Social Management System (ESMS) portfolio, among other initiatives, in accordance with the agency’s green bond allocation and impact report.