Germany has launched a 'climate protection' fund to help local banks invest in energy efficiency and renewables for small businesses and households in developing countries, seeding it with more than $100 million.
Germany’s Federal Ministry of the Environmental (BMU) and state-owned development bank KfW have jointly pledged the sum, saying they are expecting to attract further public and private investors to swell the fund to $500 million in the next five years.
“As a result of the BMU providing equity capital and hence taking on some of the commercial risk, we are creating the necessary incentives for private investors to take a stake,” said environment minister Norbert Röttgen.
Development banks such as the European Investment Bank are likely to be among the other public investors, a KfW spokesman said.
The fund will support small and medium-sized companies and households in making energy efficiency improvements and installing renewable energy generation. The money will be made available through local banks, with the fund essentially refinancing the local lenders and making a return on the interest rate charged.
The lending will focus on countries with a significant industrial base and large population, including Brazil, China, India, Indonesia, Philippines, South Africa, Turkey and Ukraine.
“The funds are used on a rolling basis, allowing the money which is paid back to flow into the fund assets,” the organisations said.
A tender is out to select a private-sector fund manager to operate the fund. The spokesman said the winner would be announced within weeks.
The BMU’s funding of €20 million ($28 million) comes from its international climate protection initiative, which is financed through the auctioning of emissions allowances in the EU Emissions Trading Scheme. KfW has promised more than $75 million for the fund.
By. Christopher Cundy
Source: Environmental Finance