IFC, a member of the World Bank Group, is launching a new financial mechanism that blends private and public funds to promote homegrown “green” innovation in developing countries while encouraging the transfer of clean technologies from developed countries to developing countries.
The $60 million Cleantech Innovation Facility will target small, highly innovative start-up companies that offer products or services that mitigate carbon emissions. It builds on IFC’s equity investments in this sector, which now total about $150 million in commitments. The facility includes concessional funding from the Global Environment Facility, allowing work with companies at an earlier stage of development. On average, investments will range between $3 million and $4 million, with a maximum exposure of $10 million in any one company. Innovation is about building companies and achieving scale as much as it is about having access to risk capital. Hence, besides investment provided by the facility, there will be a parallel technical assistance component to provide advice and guidance to companies on governance, management, strategy and business development. “This initiative is a practical way to address a market gap within climate finance,” said Mohsen Khalil, global head of IFC’s Climate Business Group. “It will support clean-tech companies originating from or moving to developing countries—companies that have the potential to be scaled up and make a real impact, but cannot access commercial risk capital.” Khalil said that the facility is a pilot that should help to identify alternative business models that can effectively promote innovation and entrepreneurship globally. Once the model is validated, third-party investors could be invited to expand “green” investments and further clean-tech innovation in developing countries. The facility structure is innovative because it offers another mechanism to leverage concessional funds to mobilize private capital for climate investments at a time when public funds are scarce and capital needs are high. IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal 2011, amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities—all while driving our investments to an all-time high of nearly $19 billion.
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