Climate Investment Opportunities in Emerging Markets An IFC Analysis About IFC IFC, a member of the World Bank Group, is the © International Finance Corporation [2016]. All rights reserved. largest global development institution focused on 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 the private sector in emerging markets. Working Internet: www.ifc.org with 2,000 businesses worldwide, we use our six decades of experience to create opportunity The material in this work is copyrighted. Copying and/or transmitting portions or all where it's needed most. In FY16, our long-term of this work without permission may be a violation of applicable law. 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The Vladimir Stenek, Daniel Street, Sean Whittaker and lead authors were Tom Kerr, Aditi Maheshwari and Nina Zegger. The following World Bank colleagues also John Sottong. Thanks to Kruskaia Sierra-Escalante and provided important contributions: Sebastian Wienges, Marcene Broadwater and Steve Hammer, Manager Stephane Hallegatte, Julie Rozenberg, and Ulf Narloch. of the World Bank Climate Change Policy Team, for The following regional colleagues provided invaluable the helpful support of their teams. Sona Panajyan data and input: Simon Andrews, William Trant Beloe, managed the communications around the report and Julia Brickell (climate anchor), Tom Jacobs, Autif Sayyed, Riham Mustafa supported the media outreach. Esther Eugene Sullivan, Noel Verdote, Ronald Ping Hei Wu, Rojas-Garcia led on research and data analysis for Yuan Xu and Dianjun Zhang for the East Asia and the the report, with additional support provided by Tom Pacific Region; Patrick Avato (climate anchor), Katerina Witt and Yunziyi Lang. Report design and production Levitanskaya and Ilya Minyaev for the Europe and assistance was provided by Maria Cristina Sy and Central Asia Region; Kristtian Rada (climate anchor) Neetu Aulakh. Creative design for the report came from and Oceane Seuleiman for the Latin America and Corey McPherson Nash and Clarity Editorial edited the Caribbean Region; Jaikishin Asnani, Ahmed Ali Attiga, document. Printing and layout services were provided Eric Becker, Aurelien Boyer, Joumana Cobein, Youssef by the World Bank’s in-house printing and multimedia Habesch (climate anchor), Cedric Joutet, Alexandre team, led by Gregory Wlosinski. Leigh, and Bryanne Tait for the Middle East and North The authors are very grateful for insightful peer review Africa Region; Chandrasekar Govindarajalu and Rajesh and expert input from IFC colleagues in Washington, Miglani (climate anchor) for the South Asia Region; and DC, including Steven Baillie, Scott Cantor, Peter Cook, Eme Essien, Saleem Karimjee (climate anchor), Zoe Lees Charlene Coyukiat, Lisa Da Silva, Corinne Figueredo, and Dan Shepherd for the Sub-Saharan Africa Region. Shari Friedman, Prashant Kapoor, Geoff Keele, Berit The authors also wish to thank Caroline Holtum from Lindholdt Lauridsen, Jeremy Levin, Liane Lohde, the We Mean Business Coalition for her contribution. Contents iv Foreword v Executive Summary Climate-Smart Investment Opportunity after the Paris 1 Agreement Unlocking Climate 101 Investment Opportunities 13 31 47 East Asia Pacific Latin America and South Asia Annex I: Methodology for estimating 114 climate-smart investment potential Climate-Smart the Caribbean Climate-Smart Investment Potential Climate-Smart Investment Potential Annex II: Data sources informing Investment Potential 117 estimates of investment potential COUNTRY PROFILES: COUNTRY PROFILES: Annex III: Data sources for country China COUNTRY PROFILES: Bangladesh 125 indicators Indonesia Argentina India Philippines Brazil Vietnam Colombia Mexico ii Climate Investment Opportunities in Emerging Markets | An IFC Analysis GLOBAL THEMES 24 Achieving green growth in emerging economies 40 Sustainable cities 54 Green buildings 64 Adaptation and the private sector 86 Public-private partnerships for climate investment 94 Climate smart agriculture 104 Carbon pricing is gaining momentum BOXES 3 What is a Nationally Determined Contribution? 4 Growing climate risks 5 Private sector taking climate action 6 The World Bank NDC platform 59 75 89 7 IFC: ramping up climate investments 10 Estimating climate investment Sub-Saharan Africa Eastern and Central Asia Middle East and potential Climate-Smart Climate-Smart North Africa 18 Venture capital for alternative energy transport technologies Investment Potential Investment Potential Climate-Smart Investment Potential 58 EDGE – Excellence in Design for COUNTRY PROFILES: COUNTRY PROFILES: Greater Efficiencies Côte d’Ivoire Russian Federation COUNTRY PROFILES: 68 Scaling Solar: unlocking private Kenya Serbia Egypt investment in large scale solar Nigeria Turkey Jordan 107 Green finance South Africa Ukraine Morocco 109 Financial innovation for tackling climate change 110 Using blended climate finance to mobilize private sector capital Contents iii Foreword There has never been a better time to invest in climate than $15 billion in long-term financing for renewable power, solutions. The cost of clean technologies has fallen energy efficiency, sustainable agriculture, green buildings and dramatically, governments are embracing policies that private sector adaptation to climate change, while further encourage climate investment, and the Paris Agreement has mobilizing an additional $10 billion from other entities. IFC galvanized support for measures that keep global warming is one of the world’s largest financiers of renewable energy under two degrees Celsius. for developing countries. In fiscal year 2016, IFC invested and mobilized $776 million in renewable energy generation and This report shows that the historic Paris Agreement on climate component manufacturing. IFC’s cumulative financing for change that has recently come into force will help to open up green buildings has now surpassed $2 billion. nearly $23 trillion in opportunities for climate-smart investments in certain emerging markets between now and 2030. Based We are not stopping there. IFC has pledged to step up its on the national climate-change commitments and underlying climate investments to 28 percent of annual commitments to policies of 21 emerging-market economies, representing 48 a goal of $3.5 billion a year by 2020, and leverage an additional percent of global emissions, it identifies sectors in each region $13 billion of private sector cofinancing annually by 2020, while with the greatest potential for investment—from climate- also managing climate risk and increasing impact. We are Philippe le Houerou resilient infrastructure in South Asia to clean energy in Africa. helping the private sector confront climate change through Executive Vice President, IFC investments, innovative financing, and advisory services, and As a result of massive cost reductions, solar photovoltaic (PV) we are working closely with our World Bank colleagues