Fund will help overcome financial barriers with small-scale loans to reduce costs and curb emissions

The Inter-American Development Bank (IDB) announced the approval of $50 million for the Energy Efficiency Finance Facility, to finance companies making investments in energy efficiency and self-supply renewable energy projects in Latin America and the Caribbean. The IDB Facility will be supported by €7 million ($8.6 million) from the Nordic Development Fund (NDF) to mitigate risk of the Facility through the provision of partial guarantees to the IDB-financed subloans, which will range in size from $500,000 to $5 million. An additional €1 million ($1.3 million) from the NDF will provide technical assistance grants related to project identification and feasibility and engineering studies.

The Facility will address funding needs in the currently underserved sector of energy efficiency and small-scale renewable energy generation, whereborrowers often encounter high risk premiums, high collateral requirements and inadequate tenors. The Facility will focus on projects with potential for high financial returns, including increasingly economical technologies such as smart-grid, advanced lighting and solar or biomass power.

"This is a new market in which small loans can produce significant returns," said Kelle Bevine, head of the Strategy Management Unit in the Bank's Structured and Corporate Finance Department. "Amid increasing demand for energy in the region, we can help reduce consumption by making investments in low carbon technologies more financially viable."

The new facility aims to realize up to $100 million in climate friendly investment and continues the Bank's collaboration with NDF, which over the past year has provided technical assistance funding for a variety of energy audits and small-scale energy projects for companies in Central America. The NDF resources may be complemented by funding from other IDB-administered funds also aimed at incentivizing climate friendly investment, including the Sustainable Energy and Climate Change Initiative (SECCI) fund and the Canadian Climate Fund for the Private Sector in the Americas.