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The Inter-American Development Bank is seeking to shift Latin America's infrastructure investment paradigm towards greater sustainability, as the recent launch of its NDC Invest platform and accompanying multi-donor trust fund demonstrate, three bank specialists told BNamericas.
With the approval this week of the NDC Pipeline Accelerator Multi-Donor Trust Fund (ACL), which is a component of the recently-launched NDC Invest platform initiative, the bank is looking to help its member countries turn their national commitments under the Paris Climate Agreement (NDCs) and sustainable development objectives into actual investment plans that can help fill the region's infrastructure gap, according to Jennifer Doherty, a climate change specialist at the bank.
"The impact of any infrastructure that is developed today in the region will last for the next 70 years," Doherty said. "Any project portfolio seeking to attain emission reduction and climate change adaptation goals needs to involve not only the participation of environmental ministries, but also that of finance ministries, so that they can identify opportunities to incorporate climate change considerations into their infrastructure investment decisions," she noted.
The fund, which aims to obtain US$20mn in funds for its first phase, is seeking to support public and private partners from the planning stage of a project, including pre-investment activities, to make them more sustainable.
"We're based on the idea that if you want a certain infrastructure to be really sustainable, you need to intervene during a project's initial phases. That's when the most critical decisions for a project are made," said María Cecilia Ramírez, consultant at the bank's climate change division.
According to Ramírez, based on the bank's definition of sustainable infrastructure, projects need to be sustainable from an environmental, social and economic standpoint. As such, they should minimize environmental damage, include climate change considerations, be economically efficient and also be adapted to the needs and possibilities of the area where they are being developed.
"Sustainable infrastructure is another way of referring to well-planned works that take into account the resources that are available to them," Ramírez pointed out.
According to Ramírez, the ACL will not only focus on specific projects, but also on developing sustainable project portfolios that countries can subsequently present to potential financing sources.
So far, the only contribution to the fund is 10mn euros (US$11.1mn) from the Nordic Development Fund (NDF). However, other parties have already expressed interest in contributing to the initiative, and the bank is seeking to have national governments and other multilaterals as donors in the project, according to Miguel Aldaz, an operations lead specialist at the bank.
Aldaz noted that the ACL will provide non-refundable aid in the form of direct technical cooperation to country members, so that they prepare projects that can subsequently be subject to financing from the bank or another lender.
The bank is hoping to secure the remaining funds to achieve the ACL's target amount shortly, although there is no a set date to do so, according to Aldaz.
The ACL is expected to support between 10-15 project planning activities, depending on each project's cost and difficulty level. The bank is estimated to provide an average of US$1.5mn in aid to each activity.
Ramírez said that practically any type of project can be eligible for the support of the fund, as long as the initiatives are focused on being sustainable from a climate change standpoint. Projects will be selected based on their potential impact and transformational features.
More information on the IDB's NDC Invest platform initiative is available in English here.