Dec 03, 2023
United States Secretary of the Treasury Janet L. Yellen affirmed the U.S. continued support to the Climate Investment Funds (CIF) through a new $568m loan to CIF’s Clean Technology Fund (CTF) and U.S. support for a 2024 launch of the CIF Capital Markets Mechanism (CCMM) at the COP28 Ministerial event ‘Scaling Up Just Energy Transitions to Enable Industry Decarbonization’. The loan to CTF, announced by Vice President Kamala Harris during her visit to COP28 on December 2, will support the development of low carbon technologies in emerging and developing economies. The loan will complement the forthcoming CCMM, an innovative climate finance vehicle being developed by CIF and the World Bank.
The $7.9bn CTF provides concessional, risk bearing finance that enables transformational, first-of-their-kind investments in clean energy and technology. CTF features an unparalleled 1:11 co-financing ratio. This means that this new $568m US Treasury loan could mobilize up to $6.25bn in additional financing from CIF’s six partner multilateral development banks, recipient countries, and the private sector, for projects with significant potential for long-term greenhouse gas emissions reduction. In addition to the United States, CTF contributor countries include Australia, Canada, France, Germany, Japan, Spain, Sweden, and the United Kingdom.
Unveiled at COP26, the CIF Capital Market Mechanism will enable CIF to attract private sector capital and accelerate availability of climate funding by frontloading CTF reflows through the issuance of debt in the form of bonds in capital markets, starting in 2024.
CIF, the World Bank as Treasury Manager and Trustee, and CTF’s six multilateral development bank implementing entities, have collaborated closely to design and structure CCMM, with significant progress made over the past two years. Lead managers have been appointed and external legal counsel provide ongoing support for CCMM.
The bond proceeds will be channeled to the CTF Trust Fund and deployed as concessional finance to provide much needed resources to developing countries.
CTF will be the first pure play capital market issuer in the MDB space that finances projects to apply low carbon technologies that can significantly mitigate greenhouse gas emissions. For the first time, it will enable fund-raising for multiple multilateral development banks from private capital markets through a single platform.
CCMM will allow CIF’s CTF to commit $500m a year for ten years to support clean technology projects in low- and middle-income countries. This will boost current CIF efforts to accelerate industry decarbonization in the developing world, through the newly launched CIF Industry Decarbonization investment program, as well as to pursue holistic approaches to support clean and just transitions in developing countries.
Quotes:
Janet L. Yellen - United States Secretary of the Treasury
“I welcome the World Bank’s announcement that it will launch the CIF Capital Markets Mechanism in 2024. This mechanism is an innovative cross-MDB initiative to support CIF programming by tapping into capital markets. This will create a new channel for private sector investors to support the climate transition in developing countries, crucial to increasing private sector mobilization. And I call on the World Bank and the many others involved in this important work to accelerate progress to launch the CCMM well ahead of COP-29.”
Claire Coutinho – Secretary of State for Energy Secretary and Net Zero, United Kingdom
“When it comes to climate finance the UK are world leaders, investing more than any other country to the Climate Investment Funds. This will ensure that developing countries have the funding and knowledge that they need to unlock private investment and roll out low-carbon technologies. Today’s funding from the United States will be an important step in the CCMM initiative, which will improve access to climate finance and help tackle climate change.”
Axel van Trotsenburg - Senior Managing Director, Development Policy and Partnerships, World Bank
“We must be bold and innovative to end poverty and preserve a livable planet for all. The Capital Market Mechanism will be a powerful instrument for multilateral development banks, including the World Bank, to channel climate finance to those who need it most – to the people and communities in developing countries that are on the frontlines of climate change. CIF is a good example of MDB cooperation. When the MDBs work together, we can deliver truly transformational results.”
Luis Tineo - Interim CEO, Climate investment Funds
“We are grateful to the United States for this contribution and their ongoing support. CIF’s unique and proven business model delivers rapid, agile and concessional climate finance support to low- and middle-income countries who want to accelerate their low carbon development. CIF’s CTF has been a game changer for our multilateral development bank and developing country partners, and we are excited by progress on opening the CIF Capital Market Mechanism to investors by 2024.”
Dr. Kevin Kariuki - Vice President for Power, Energy, Climate and Green Growth, African Development Bank
"The African Development Bank commends the United States for the generous contribution to the Clean Technology Fund. This contribution will enhance CTF’s capacity to promote low-carbon technologies, which portends great promise to harnessing Africa’s abundant renewable energy potential, and therefore opportunity to embed sustainable development on the continent.”
Fatima Yasmin - Vice-President (Sectors and Themes), Asian Development Bank
“CIF is a vital partner of ADB in delivering much needed investments to help Asia and the Pacific win the battle against climate change. The new contribution by the US is a testament to the success of this model. ADB will continue to mobilize CIF for transformative projects that support climate action and contribute to sustainable development and poverty alleviation in the region.”
Mark Bowman - Vice President for Policy and Partnerships, European Bank for Reconstruction and Development
“Given the climate crises our planet is facing, we need a strong CIF to continue delivering rapid and predictable concessional climate finance at scale through innovative instruments. The CIF’s Clean Technology Fund (CTF) -now boosted by the generous US contribution- is a key instrument to advance our joint efforts in tackling climate change. Industrial decarbonization is a key priority for the EBRD and we hope for additional contributions from other donors to address this urgent challenge.”
Ana María Ibáñez Londoño - Vice President for Sectors and Knowledge, Inter-American Development Bank
“We applaud the U.S. for its recent contribution to the Clean Technology Fund. The Fund has provided key resources to increase Latin America's and the Caribbean's ambition in electromobility, renewable energy, and energy efficiency, among other areas. The IDB is ready to work with other MDBs to deploy these resources effectively in crucial projects that will drive decarbonization under a just transition approach.”
Susan Lund - Vice President, Economics and Private Sector Development, IFC
“CIF is a long-standing partner of IFC, and with this additional funding for climate, we hope to take that partnership to the next level. This includes mobilizing more private capital in support of innovative projects that accelerate energy the transition in emerging economies”
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The Climate Investment Funds (CIF) is one of the largest multilateral climate funds in the world. It was established in 2008 to mobilize finance for low-carbon, climate-resilient development at scale in developing countries. 15 contributor countries have pledged over US$11 billion to the funds. To date CIF committed capital has mobilized more than $64 billion in additional financing, particularly from the private sector, over 70 countries. CIF’s large-scale, low-cost, long-term funding lowers the risk and cost of climate financing. It tests new business models, builds track records in unproven markets, and boosts investor confidence to unlock additional sources of finance. Recognizing the urgency of CIF’s mission, the G7 confirmed its commitment to provide up to $2 billion in additional resources for CIF in 2021.
MEDIA CONTACT:
Charlotte Grant
Cgrant1@worldbank.org
