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IFC Establishes Risk-Sharing Facility with Industrial Bank to Boost Energy Efficiency Project Lending in China

Submitted by: International Finance Corporation

Categories: Environment

Posted: May 17, 2006 – 12:00 AM EST

 

Shanghai--The International Finance Corporation, the private sector arm of the World Bank Group, today signed an agreement to provide Industrial Bank with risk-sharing coverage of RMB 200 million ($25 million). This will help Industrial Bank establish a loan portfolio of RMB 460 million ($58 million) of energy efficiency equipment loans to small and midsize energy users in China. The risk coverage will be provided under IFC's China Utility-Based Energy Efficiency Finance Program (CHUEE). The program is expected to have a significant developmental impact in promoting energy efficiency, reducing pollution and greenhouse gas emissions, and expanding lending to small and medium enterprises in China. The program is also supported by grant funding from the Global Environmental Facility and Finland's Ministry of Trade and Industry.

"IFC's energy efficiency program in China provides a great opportunity to develop market-based solutions that address environmental issues," said IFC Executive Vice President Lars Thunell, who signed today's agreement. "IFC is proud to partner with Industrial Bank and to help the Chinese government achieve a key policy objective--reducing energy consumption through energy efficiency and conservation measures."

IFC's program brings together, for the first time, three key players--utility companies, suppliers of energy efficiency equipment, and commercial banks - to create a new financing model for the promotion of energy efficiency. Industrial Bank will provide commercial lending, while utility partners and equipment suppliers will act as marketing agents and service providers. Overall, IFC's program will support over $150 million in energy efficiency projects and equipment investment, which in turn are expected to achieve greenhouse gas reductions of about 5 to 10 million tons.

Industrial Bank's President Li Renjie stated, "Industrial Bank has been focusing on financial innovation. The new program is a successful example of partnership to create a new financing model for energy efficiency. This model is a win for all of us, and Industrial Bank can use the market-based financing model to leverage IFC's risk-sharing facility on a more scalable basis. It not only solves the problem of SME energy financing, but also supports China's energy conservation business. It achieves both social and economic benefits."

The new financing model is a result IFC's energy efficiency experience in other countries and its experience in China's financial sector. IFC found that utilities, such as gas or electricity distributors, can be effective agents for marketing and delivering energy efficiency projects. Utilities can act as a "one-stop shop," offering advice on reducing energy consumption and pollution, and providing equipment, such as gas boilers and heating systems, to realize these improvements. At the same time, utilities can partner with commercial banks that provide loans for the equipment.

About IFC

The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.

The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.

IFC fulfills three functions related to environment and social development: managing environment and social risks associated with the projects it finances via environmental and social standards that are required of its client companies; collaborating with client companies to find business opportunities arising from the protection of the environment and social development; and exploring and developing new financial products to create new business opportunities linked with the environment and social development.

For more information, please contact:

Lucie Giraud International Finance Corporation
Phone: 202 458 4662

For more from this organization:

International Finance Corporation

 

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