IFC, a member of the World Bank Group, and the government of Canada have formed a blended finance partnership that will use public funds to unlock larger amounts of private sector investments to expand renewable energy in Sub-Saharan Africa.
The program, called Canada-IFC Renewable Energy Program for Africa, involves a contribution of 150 million Canadian dollars from the Canadian government. IFC will use these funds to catalyze private sector investment in renewable energy by providing concessional financing blended alongside IFC’s own account resources to mitigate a variety of risks that can deter private investment in renewable energy. This is expected to improve access to affordable and sustainable energy services, reduce the dependency on fossil fuels, and bring African countries a step closer to accomplishing their sustainable development goals.
“Tackling climate change is a main priority for this generation and harnessing the abundance of natural resources in Africa to provide clean and sustainable energy is a step in that direction. Canada is proud to be a part of this initiative that builds on our successful blended finance partnership with the IFC-Canada Climate Change Program,” said the Honourable Marie-Claude Bibeau, Canada’s Minister of International Development and La Francophonie.
“Creating opportunities for investment in renewable energy is essential for the people of Africa—and good for the world," said IFC CEO Philippe Le Houérou. “The expansion of renewable energy in Africa has already generated tens of thousands of local jobs, and there is significant potential for additional economic and development gains in new areas like energy storage and off-grid solar."
The partnership reflects Canada's commitment under the 2015 Paris Agreement to support developing countries in their transition to sustainable and resilient low-carbon economies. The contribution is aligned with the principles of the Africa Renewable Energy Initiative, which aims to scale up renewable-energy generation in Africa.
In 2011, Canada was the first bilateral partner to provide IFC with a contribution to support blended finance investments and advisory services in all areas of IFC’s climate work around the world, via the establishment of the 276 million Canadian dollars IFC-Canada Climate Change Program.
Blended finance is a promising tool that IFC uses to unlock private capital. Private investors often avoid projects that involve untested approaches—or are in markets perceived as too risky. Blended finance entails using concessional funds to help mitigate specific investment risks, opening the door to greater sums of private capital. During the last fiscal year, IFC used $188 million of concessional funds to catalyze $726 million in private sector investment.