November 25, 2020

Latin America is a leader in attracting investments to combat climate change, says report

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The region has become an attractive market for investment in infrastructure and sustainable urban transport, and is expected to reach more than $ 1 trillion in investments by 2030.

The report identifies seven areas of enormous potential to attract private investment: renewable energy, energy storage and solar off-grid, agribusiness, green building, urban transport, water supply and urban waste management.

Washington, DC, November 2, 2017 – and the Caribbean is a leading region in attracting investments key to combating climate change sectors, according to a new report by the International Finance Corporation (), a member of the Group World Bank. According to the report, it is expected that the transportation and climate smart infrastructure generate more than $ 1 trillion in investments by 2030 in the region.

The report Creating Markets for Business Climate indicates that to develop the potential and catalyze private investment should be promoted a combination of policy reforms and innovative business models. This would help Latin America and developing countries to achieve climate targets in the historic Paris Agreement. Thirty-three countries in the region have signed this agreement.

It has come a long way. Five of the largest countries of , Chile, , Mexico and Peru lead the region’s sustainable development in sectors such as renewable energy, urban environmental infrastructure and energy efficiency as well as smart cities. Costa Rica aims to be the first carbon neutral nation by 2021, and to have production of 100% renewable energy by 2030.

The investment potential is huge: In Mexico for example, indicates that potential investment from now to 2030 is $ 791 billion, mainly in renewable energy and sustainable urban infrastructure. In Argentina the potential is $ 338 billion, while in Colombia is $ 195 billion, in Brazil, the investment potential is even greater with $ 1.3 trillion.

“The private sector is the key to fighting climate change,” said IFC Executive Director, Philippe Le Houérou. “The private sector has innovation, funding and tools. It is in our hands to help unlock greater amount of private sector investment, but it also requires governance reforms and innovative business models that together will create new markets and attract the necessary investment. This will be able to fulfill the commitment set in Paris. ”

The commitment to smart cities and renewable energy

With 80% of its population living in cities, Latin America and the Caribbean is the most urbanized region in the world. The way to grow your cities will be critical to achieving the goals of climate change mitigation.

In the construction sector is forecast to green buildings provide $ 80 billion in investment opportunities through 2025. Countries such as Colombia, Costa Rica, Mexico and Peru recently adopted green building codes. As a result, it is expected that new buildings in these countries consume between 10 and 45% less water and energy.

Latin America became a leader in developing systems bus rapid transit (BRT). Key examples include the BRT system in Curitiba, Brazil and Buenos Aires, Argentina. Buenos Aires, which accounts for nearly half of the GDP of Argentina and home to six million passengers every working day has begun an ambitious transportation plan of $ 400 million to boost urban connectivity, reduce congestion and reduce pollution by reducing the use Of automobiles. The urbanization of Latin America also drives demand for intelligent urban waste water and waste solutions in the region.

Regarding renewable energy, annual investments in energy storage technologies in the region will reach $ 2 billion by 2025.

Capital markets can also be green

As countries mobilize capital to mitigate climate change and to fund green infrastructure, green bonds market is expanding rapidly. In fiscal year 2017, IFC issued 19 green bonds in six currencies. In Latin America and the Caribbean, the gains of the Green Bonds last year IFC financed $ 534 million in project commitments. In fact, Latin America leads all other regions in terms of investment commitments IFC green bonds.

IFC also supported innovative efforts of the Colombian banking sector to implement instruments that extend financing to mitigate climate change. Two of the largest banks in the country, Bancolombia and Davivienda became the first private financial institutions in Latin America to issue green bonds fully subscribed by IFC. The funds obtained -equivalent to approximately $ 265 million dollars will be used to finance climate-smart projects in the country, setting an example that might encourage other financial institutions in the region to make similar bond issues.

The seven climate key to boosting global business sectors

The report identifies seven areas of enormous potential to attract private investment. These are: renewable energy, energy storage and solar energy off the grid, agribusiness, green building, urban transport, water supply and urban waste management. However, the report notes that it is to achieve essential to create the conditions conducive investment through regulations and incentives, and for that the role of governments and regulators will be essential.

The conclusions of the report identified seven sectors with the greatest opportunities for private sector investments worldwide:

Investments in renewable energy worldwide could reach $ 11 trillion by the year 2040 accumulated dollars. This would be possible if reforms to facilitate renewable energy auctions, titling reforms and regulatory frameworks to promote energy storage are implemented.
Investments in solar and energy out of network storage can reach $ 23,000 million a year by 2025 if countries use differentiated tariffs, clear technical and safety standards, and specific financial incentives while supporting new business models for community solar energy as Pay-as-You-Go and innovative financial solutions.
Investment in agribusiness multibillion dollar may be increasingly “climate smart” if governments guarantee property rights, good transport infrastructure and regulations and tax policies that promote climate – smart investment, while promoting best practices training farmers and use financial innovation to provide capital for farmers.
Investments in green building or green could reach $ 3.4 trillion accumulated for 2025 in emerging markets, if countries adopt best codes and building standards and create financial incentives such as green building certification and the establishment of mandatory parameters on energy use. Other important reforms should promote new business models and utility green mortgages.
They can be mobilized trillions of dollars in investments in sustainable urban transport in the next decade if governments issue regulations to allow investments in infrastructure and adopt municipal transit plans that can promote innovations, such as light rail.
Investments in water supply and sanitation could exceed $ 13 trillion dollars accumulated by 2030, as governments need to set the price of water predictable and sustainable levels to increase the solvency of public services by establishing public-private partnerships and adopt performance-based contracts.
Investments in management of intelligent urban waste could reach $ 2 trillion, if cities work to attract private sector participation through improved regulatory frameworks and compliance, using economic incentives and mechanisms for cost recovery and boosting figure-conscious consumer waste.

Addressing climate change is a strategic priority for IFC. Since 2005, IFC has invested $ 18.3 billion of its funds in long-term financing for climate-smart projects and leveraged $ 11 billion additional dollars from other investors. This latest report is a continuation of the report Climate Investment Opportunities (Opportunities Related Investment Climate) issued by IFC last year, which announced that the Paris Agreement would create $ 23 trillion in investment opportunities for 21 emerging market countries . This includes $ 338 billion in Argentina, Brazil $ 1.3 trillion, $ 195 billion in Colombia and $ 791 billion in Mexico.

About IFC
IFC, World Bank Group, is the largest global development institution focused on the private sector in emerging markets. With more than 2,000 companies worldwide, we use our capital, expertise and influence to create opportunities where they are needed. In fiscal year 2017, our long-term investments in developing countries amounted to $ 19,300 million, helping the private sector to play an essential role in the global effort to eradicate extreme poverty and increase shared prosperity. For more information, visit www.ifc.org
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