A project to support development of a market for private financing of energy efficiency in Colombia.
Colombia has been in a state of steady growth for the past two decades. As the country grows, it faces a number of challenges associated with development, including urbanization, land use change, and increased greenhouse gas emissions. In 2010, the Colombian government identified energy efficiency and public transport as key strategic areas for reducing greenhouse gas emissions and promoting greater environmental sustainability.
In 2008, Colombia’s annual per capita greenhouse gas emissions were 1.51 tons C02e from the energy sector alone, and this is in spite of the country’s rich endowment of potential energy sources. With electricity demand consistently growing at a rate of three to four percent a year, Colombia is seeking methods of maintaining an electricity sector that is relatively emission-free while also increasing energy efficiency. One aspect of promoting cleaner and more efficient energy use is equipping financial institutions with the tools for promoting greater efficiency at a large scale.
Objectives and Outputs:
This project began in 2011 as a partnership between the Government of Colombia, IFC, IDB and CIF. CIF’s contribution to the project totals $6.7 million in CTF funding. The project’s purpose is to mainstream energy efficiency and cleaner production (EE/CP) projects into the private sector. To do so, it will scale up the access to finance for EE/CP projects by encouraging financial institutions to develop lending programs for private companies.
Two components are associated with successful completion of the projects: an investment component and an advisory services component. To implement the investment component, the project partners will collaborate with at least three out of Colombia’s top five large private banks. Participating banks will benefit from a combination of advisory services and financing products. While loans will be given to financial institutions for EE/CP projects, a more important result of this component will be the development of risk-sharing facilities, which will allow partner banks to bypass the perceived high risks of EE/CP finance.
The advisory services component will create a strong correlation between advisory work and investment project financing and implementation. Financial institution capacity building projects, sector studies for identification of relevant target segments, and energy audits are some of the sub-projects that will take place under this component.
In addition to environmental benefits resulting from increased overall energy efficiency, this project offers many economic benefits. Because long-term funding will be offered to participating banks, these organizations will be able to give loans with longer tenors, thereby increasing the likelihood of successful investment in EE/CP. Additionally, borrowers will benefit from improved competitiveness as a result of increased long-term sustainability. Finally, development of the EE market will lead to an overall net increase in jobs, particularly those related to energy efficiency.
This project summary is drawn from draft project proposals [such as the PAD, PID, SAR, and country investment plan] and may not contain the most up-to-date information.
In the News:
IFC and Asobancaria Promote Opportunities for Sustainable Energy Finance in Colombia (IFC, May 22, 2013)
Approved on May 2-3, 2013 (Approved Decision)
Project Proposal | IFC Project Portal | Proposed Decision
Approved on December 21, 2010 (Approved Decision)
USD 17.5 million