Oct 21, 2010
IDB'S Multilateral Investment Fund launches targeted US$50 million facility to boost carbon market access for low-income communities, small firms
MicroCarbon Development² Fund (MCD² F) to invest in energy efficiency projects throughout region
The Multilateral Investment Fund (MIF), the Inter-American Development Bank's private-sector arm that promotes opportunity for small and microenterprises, has launched the MicroCarbon Development² Fund (MCD² F), a fund that will invest in energy efficiency programs that help small firms and low-income households and municipalities throughout the region to enjoy the benefits of more efficient energy and access to carbon markets.
“Access to carbon markets and energy efficient technologies has been closed to all but the largest investors in Latin America and the Caribbean.” said Julie T. Katzman, General Manager of the Multilateral Investment Fund. “The MicroCarbon Development Fund is a truly innovative way to spread the benefits of energy efficiency and carbon finance to lower income households, microenterprises, small companies and forest communities, while combating climate change.”
The MCDF is expected to reach a total capitalization of $50 million and extend financing and grants to 6-10 projects, each ranging from $2 to $8 million, capable of earning carbon credits under the Clean Development Mechanism (CDM) of the United Nations' Kyoto Protocol as well as under other protocols and carbon standards.
Fund investments will consist of residential, commercial and municipal appliance and equipment replacement programs such as compact fluorescent lamps, LED-powered street lighting, air conditioners, refrigerators, solar water heaters, and other systems that promote greater energy efficiency and reduce greenhouse gas emissions.
It may also invest up to 20% of its total committed capital in forest preservation and reforestation as well as in other land-use based carbon projects. Land-use investments may utilize emerging carbon protocols such as the Voluntary Carbon Standard and the Climate Action Reserve, boosting their marketability chances in the crucial U.S. market.
The first projects are expected to be mainly in Colombia and Mexico, with others also being considered in Brazil, Ecuador, Central America and other regional countries.
The investment period will last up to five years from the first closing, and the Fund’s duration is 10 years, with the possibility of two one-year optional extensions. At the end of the program, at least 3.5 million Certified Emissions Reduction (CER) carbon credits at the small firm, household, or community level are expected to be issued, with at least 10,000 households and 1,500 small- and mid-sized enterprises (MSMEs) benefiting.
The MIF will invest up to $5 million in equity and an additional $540,000 in non-reimbursable, technical cooperation funding. While the MCDF is expected to reach a total capitalization of $50 million, the threshold to launch operations and trigger the MIF investment is $35 million.
The Fund will be managed by MGM Innova Capital, LLC, which is wholly owned by MGM Innova, LLC, a Delaware-based global project development company and provider of integrated low carbon solutions with a focus on emission reduction projects under CDM and other carbon trading standards.