Fast-Tracking Climate-Smart Solutions
Long-term financing options that provide both high risk tolerance and low costs are limited in today’s market. To remove these obstacles, significant financial innovation is needed.
Together with the IDB Group, the government of Canada established the Canadian Climate Fund for the Private Sector in the Americas (C2F). The first of its kind for Latin America and the Caribbean, the US$250 million fund catalyzes private sector investments in climate change mitigation and adaptation across the region. The C2F co-finances climate-friendly investments that require concessional resources to become viable. It offers cheaper, longer tenor, and higher risk loans when they are needed to jump-start a project.
Across developing countries, the investment needed to tackle climate change exceeds several hundred billion dollars each year. Climate-friendly investment has been growing, but continues to face risks and cost barriers compared to traditional alternatives.
A gap often exists between the cost and the risk expectations of private sector investors versus the costs and returns of clean energy, low carbon, and climate resilient projects:
• High costs – Climate-friendly investments, particularly renewable energy projects, often have high up-front costs or take several years before yielding financial returns.
• High risks – Companies often cannot take on the risks – market, off-taker, resource, regulatory or financial – involved in adopting new technologies.
That’s where C2F comes in. It fills the investment gap by providing blended financing to overcome these barriers. By lending at below market rates and taking more risk, the fund will enable the IIC and private investors to support projects that otherwise would not be viable.
Through this fund, Canada and the IIC aim to shift billions of dollars from business-as-usual investment into lower-carbon and more climate-proof investment.