IKI and IDB strengthen climate and biodiversity action

The International Climate Initiative (IKI) has been working with the IDB for over eight years to promote climate action and biodiversity conservation through joint projects.

Partnerships and alliances are pivotal in advancing the climate and biodiversity and natural capital agenda in Latin America and the Caribbean (LAC), as they foster collaboration among diverse stakeholders to address complex development challenges while helping the region unlock its full potential. By forging alliances between governments, international organisations, civil society, academia, and the private sector, synergies can be leveraged to drive impactful solutions. These partnerships facilitate the exchange of best practices, innovative technologies, and financial mechanisms, enabling the scaling up of decarbonisation, adaptation and climate resilience efforts.

The Inter-American Bank (IDB) manages and promotes partnerships and alliances with hundreds of diverse partners who share their resources and knowledge to complement and maximise the goal of sustainable and inclusive development. Since 2008, the IDB hase continuously connected with over 550 partners from the public sector, private sector, global and corporate foundations, and academia from across the world. In this period, the IDB hase mobilised over $67 billion towards LAC’s development needs.

The International Climate Initiative (IKI) has been working with the IDB for over eight years to promote climate action and biodiversity conservation through joint projects. As of today, the IKI has provided EUR 78.8 million for diverse IDB projects and initiatives.

The LAC Green Finance Facility has played a crucial role in addressing financial and non-financial barriers to climate investments across various sectors.

Specifically, the Facility targets unlocking private investment for climate mitigation and sustainable businesses through Public Development Banks (PDBs). It achieves this by tailoring financial strategies for each PDB, using a mix of instruments like guarantees and extended credit lines, while also providing non-financial support such as technical assistance and capacity building.

Since its inception in 2016, the Facility has provided support to a variety of entities, including PDBs, government institutions, financial innovation labs, and green finance dialogues. The program has leveraged public and private investments by supporting eleven green credit lines, four green or sustainable bonds, two Green Climate Fund proposals for energy efficiency and bioeconomy in the Amazon and analyzing the incorporation of sustainability criteria into pension fund investments in Chile.

Furthermore, it supported the creation of the Green Bond Transparency Platform, the LATAM Projects Hub platform, the knowledge web-platform GreenFinanceLac, and the piloting of climate risk heatmaps to help Public Development Banks identify the physical climate risks of their portfolio. It has catalysed over $700 million in sustainable investments in Brazil, Chile, Colombia, Mexico, Paraguay, and Uruguay.

Building on the success of this initiative, at the end of last year, Germany’s Federal Ministry for Economic Affairs and Climate Action (BMWK) pledged EUR20 million in grants to establish the LAC Facility for Greening Public Development Banks and the Financial Sector. This facility aims to assist public development banks in evaluating their portfolios, integrating climate and socio-environmental risks into decision-making processes, promoting increased green lending, and facilitating access to climate and capital markets finance.

Furthermore, this new facility introduces an innovative sustainability-linked performance mechanism, incentivizing public development banks to strengthen their institutions and increase their portfolio share aligned with the objectives of the Paris Agreement. This transition represents a shift from a transaction-based approach to a holistic strengthening of public development banks. The facility objectives are aligned with the recently approved IDB Institutional Impact+ Strategy, specifically with the two pillars of Innovative Instruments and Mobilisation and Institutional Capacity by developing an enabling environment for private sector development.

The facility will also support the Green Coalition of Public Development Banks by increasing institutional capacity and sustainable financing in the Amazon region. The facility will also catalyse and mobilise private climate funding, with an expected leverage of more than $1billion.

Moreover, alongside the IDB and other key partners such as FEMSA Foundation, The Nature Conservancy (TNC), and the Global Environment Facility (GEF), The IKI has also supported Water Funds with a total funding volume of EUR 5 million over a period of around six years. This support involves providing scientific knowledge to achieve and sustain water security through nature-based solutions in Brazil, Colombia, Guatemala, Ecuador and the Dominican Republic. IKI facilitates the systematisation, management, and dissemination of knowledge, as well as capacity-building and technical monitoring in the context of the Water Funds interventions. Together, partners have invested over $17.4 million in the region, leading to the creation of 26 Water Funds. These initiatives have benefited more than 125,000 beneficiary families and have contributed to the restoration and conservation of 500,000 hectares of land, engaging more than 300 local partners.

The longstanding collaboration between the IDB and the German government through the IKI has facilitated the implementation of climate and biodiversity action across the region, as well as the further development of regulatory and fiscal frameworks to support innovation, scale up efforts, and establish incentives for investments. This partnership reflects in the importance of maintaining critical collaborations that attain climate and development challenges in Latin American and the Caribbean.

Text: Matías Bendersky, Manager of the IDB’s Office of Outreach and Partnerships (ORP), Juan Pablo Bonilla, Manager of the IDB’s Climate Change and Sustainable Development Sector (CSD), Emilio Pineda, Manager of the IDB’s Institutions for Development Sector (IFD)