Colombia to Accelerate its Just Energy Transition with Support from IDB and Climate Investment Fund

The Inter-American Development Bank (IDB) has approved a $138.5 million investment program to speed up Colombia’s just energy transition, along with a $3.6 million technical cooperation grant from IDB CLIMA, which hinges on meeting performance indicators linked to nature and climate. An additional $1.4 million grant for structuring projects has also been approved.

The loan, which has been approved by the IDB Board of Executive Directors, includes the first operation of the IDB CLIMA pilot program. This results-based initiative rewards countries that achieve targets related to protecting nature and combating climate change.

The program will directly benefit the end users of the electricity infrastructure, including industries, businesses, stores and homes. The Colombian population will also indirectly benefit from its positive environmental and economic impacts, particularly reduced pollution and increased local income.

The “IDB CLIMA: Energy Transition Support Program” for Colombia aligns with  Amazonia Forever, the IDB’s program to provide comprehensive support for sustainable development in the Amazon. The project in Colombia will accelerate financing for just energy transition projects and strengthen the tools and capabilities of the Colombia’s Financiera de Desarrollo Nacional (FDN) development bank so it can access thematic green capital markets.

This project will boost financing for non-conventional renewable energy projects in the National Interconnected System, as well as in Non-Interconnected Areas. This includes scaling up technologies to enable these energy sources to come online, and support to achieve the sector’s specific goals for decarbonizing the economy.

To this end, the program will finance interventions that support just energy transition projects; that strengthen the technical capacities of the FDN to identify, design, and manage a portfolio of climate projects; and that improve FDN’s climate monitoring, reporting, and verification capacities.

The $1.4 million technical cooperation grant will fund actions such as structuring projects that could be financed by the loan’s resources. It will support the process of strengthening policies and plans for mainstreaming gender and diversity at the FDN and among its borrowers and preventing gender violence in energy projects.

The $138.5 million loan consists of a $72 million tranche from the IDB’s ordinary capital, with a 24.5-year repayment term, 6-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR), along with the IDB Clima grant described above.