Submitted by International Finance Corporation
"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.
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.
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services.
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