CIF seeks to unlock $5 bln in financing for Brazil, Mexico
Climate Investment Funds (CIF) approved $500 million in catalytic financing for Brazil and Mexico as part of an effort to unlock more than $5 billion in combined co-financing from multilateral development banks and private-sector.
The countries, Latin America’s two largest economies, will each get $250 million from the World Bank-managed fund to support decarbonization efforts in sectors such as steel and cement.
In Mexico, the funds are expected to mobilize $1.68 billion in co-financing, including $1.2 billion from private investors; and in Brazil they are projected to catalyze more than $3 billion, including $1.36 billion from the private sector, CIF said in a press release on Wednesday.
Concessional resources will be deployed on a project-by-project basis through a range of financing instruments, including senior, subordinated and mezzanine debt, and in some cases, equity investments and guarantees, the multilateral fund told LatinFinance via email.
In Mexico, participating institutions include the IDB Group and World Bank Group’s private and public sector arms, and in the case of Brazil, local development bank BNDES, which will act as a financial intermediary. Additional co-financing is expected to be mobilized from commercial lenders and private investors, CIF said.
CROWDING-IN
Catalytic financing is designed to reduce risk and crowd in private, public, and institutional capital that might otherwise avoid a project.
Brazil and Mexico are the first countries to receive backing under CIF’s industrial decarbonization program.
In Mexico, CIF’s funding will target four industrial sectors: iron and steel, aluminum, cement and chemicals. Brazil’s plan focuses on the iron and steel, cement, chemical and fertilizer sectors.
“Decarbonization will be achieved through investments in low-emissions processes, energy efficiency, and industrial cluster development,” the release added.
Combined, the two programs are expected to prevent the release of nearly 2 million metric tons of CO₂ into the atmosphere annually—roughly equivalent to the CO2 absorbed by 33 million trees—while supporting the creation of green jobs, the release said.