Feb 13, 2025
In March 2022, Produbanco, an Ecuadorian bank, raised the country’s first sustainable private sector bond, worth $50 million. Out of the total package, $40 million was earmarked to support local small and medium-sized enterprises (SMEs). The remaining $10 million in blended finance was allocated for green financing measures, such as investing in efficient agricultural technologies, and energy efficiency and renewable energy projects.
In exchange for reduced interest at the bond’s maturity, Produbanco made three ambitious commitments:
- To set emissions reduction targets for its lending portfolio and develop an action plan to reach them;
- To comply with climate-related financial disclosure standards; and
- To grow its green portfolio to at least $75 million.
A key ingredient to advancing these commitments was the technical assistance that helped the Ecuadorian team learn how other banks approached net zero efforts, developed their own approaches to green finance, and mainstreamed decarbonization into overall business strategies.
Enhancing investment environments
A new study, “Outcome-Based Concessional Blended Finance for Sustainable Financing: Key Lessons and Insights from Latin America,” digs into two case studies to share lessons on how technical assistance can support green financing endeavors, particularly in financial institutions. The first case study is that of Produbanco, the other focused on a Brazilian cooperative bank, Sicredi.
This study is funded by the Climate Investment Funds (CIF) through its Technical Assistance Facility (TAF), and is published jointly with its implementing partner, the Inter-American Development Bank (IDB). It teases out key aspects of how blended finance transactions can support climate action and sustainable practices and highlights the critical role technical assistance can play in enhancing these efforts.
The second case study examines how Brazil’s Sicredi looked to expand investments in solar photovoltaics as well as achieving gender diversity. With it being the bank’s first concessional finance operation, supportive technical assistance “was a great starting point for us,” says João Pedro Segabinazzi Stephanou, Sicredi’s Manager of Structured Operations and Sustainable Finance.
Today, Sicredi is the top financier in Brazil for distributed solar energy. It also created new credit lines for energy efficiency and electric vehicles. “It has been a journey where we learned more about sustainable finance markets with each operation,” says Stephanou.
Since its launch in 2019, the CIF’s Technical Assistance Facility has funded processes that support clean energy interventions such as strengthening policy and regulatory frameworks or creating financial instruments that enhance investment environments. The facility has also built in a learning and knowledge sharing component, through which it commissioned this study to explore how technical assistance can support financial institutions in their green lending aspirations.
“The idea is that with TAF, we can fund upstream activities like mapping energy resources or developing new policies that borrowers might not undertake on their own—but they will with our support,” says Daniel Morris, CIF’s Clean Energy Lead. “The outcomes of those activities can lead to even more ambitious actions down the line and, eventually, to transformational impacts, which is CIF’s ultimate goal.”
Five key lessons on technical assistance from this report:
- Link concessional finance to outcomes to enhance the alignment of financial institutions with global standards, which can amplify the impacts of sustainable finance.
- Tailor the support to the unique challenges faced by each financial institution and working to build its capacities.
- Reward the achievement of outcomes with a below-market interest rate or other cost-saving components, a good incentive for financial institutions.
- Assess outcomes at the end of the maturity period, to provide flexibility, accommodate long timelines, and support ambitious goals.
- Align technical assistance with outcomes, tailoring support to the unique challenges faced by each financial institution and working to build its capacities.
- Ensure outcomes are ambitious, but also attainable, recognizing the maturity level of each financial institution and its operating market.
* A virtual launch of the report was held on December 11, 2024. Watch the replay here:
