The private sector has a vested interest in engaging in climate initiatives. Many private entities face serious risks from climate impacts and must manage those risks. At the same time, private enterprises are uniquely positioned to contribute to climate action, such as in innovative technologies to reduce greenhouse gas emissions, innovative business models around sustainable supply chains, and climate-resilient infrastructure design.
Climate action can also generate lucrative business opportunities, particularly in technologies that are attractive to private enterprise, as demand increases for renewable energy, efficient power plants, better public transport, high quality agricultural products, and climate-resilient infrastructure, among others.
For the Climate Investment Funds (CIF), engaging the private sector is critical to ensure transformation by stimulating markets, increasing investment potential, and enabling financial gain in climate-friendly enterprises and businesses.
CIF-backed private sector projects are financed in two ways:
- Through initiatives engaging the private sector via the public sector arms of CIF partner multilateral development banks (MDBs), such as public-private partnerships
- Directly through the private sector arms of the MDBs
Through partner MBDBs, the CIF offers a range of financial instruments that provide financing to accommodate a range of risks. For the private sector, these options include:
- Mezzanine financing
- Convertible loans
Enhancing private sector engagement
A refined private sector approach is being developed to encourage countries and MDBs to allocate an increased share of CIF funding to private sector investments, and to expand financial options to enable the use of equity and other investment mechanisms where appropriate.
The approach calls for creation of operational guidelines to help promote more diversity in financial instruments, including potential use of local currencies in CIF-funded programs.
Frequently Asked Questions
Please contact the CIF focal point of the multilateral development bank (MDB) working in your area of interest. Or contact the CIF Administrative Unit for further assistance.
The CIF provides direct financing to real sector companies and indirect financing through financial intermediaries that provide, in turn, financing to real sector companies in the local markets.
The CIF is relevant and can deliver beneﬁts for a wide range of private companies operating in developing countries or planning to do so. Sectors include, but are not limited to, energy (renewable energy and energy efficiency), transport, forestry, as well as those highly vulnerable to climate change, such as infrastructure, agriculture, and supply chains of agribusinesses.
Public sector programs ﬁnanced by the CIF can have a longer term impact on the private sector operating in respective countries. Participation of the private sector is key for designing practical models for future financing mechanisms.
The CIF is channeled through multilateral development banks (MDBs), to support effective and flexible implementation of country-led programs and investments through their global and regional market outreach in developing countries. The funds are designed to complement existing bilateral and national financial mechanisms and, as such, their operations are well coordinated. To ensure this, an important feature of the CIF’s programming is MDB coordination with the leadership of the country, United Nations agencies, and bilateral development and investment agencies with a view to mobilizing co-financing and harmonizing policy support.
In each of the MDBs, the private sector arm helps provide a crucial bridge between investments in development and climate. They provide advisory support to improve the enabling environment for the private sector, as well as direct financing to private sector projects and entities implementing low carbon technologies and climate resilient initiatives. They serve as a catalyst for the growth of innovative markets and industry in the countries they support.
The CIF recognizes the value of business input into the design of the CIF investment plans, programs, and instruments. To enable this input, the CIF engages the private sector through:
- An active pool of private sector observers in each of the CIF governing bodies
- Consultations with private sector representatives during joint missions and investment plan inception
- Regular active engagement and dialogue with the private sector
- CIF 2012 Private Sector Forum
- Private Sector and Clean Technology Fund
- Private Sector and Pilot Program for Climate Resilience
- Private Sector and Forest Investment Program
- Private Sector and Scaling Up Renewable Energy Program
- Multilateral Development Bank Directory
- Contact: CIF Administrative Unit
- Private Sector Observers to the CIF