Financial instruments that add up US$6 billion (around R$32 billion) were announced by the IDB (Inter-American Development Bank) in this first week of COP30. In common, they must provide gains in scale and increased risk reduction for investments.
In an interview with Broadcast/Estadão, the institution’s president, Ilan Goldfajn, said he sees companies and governments heading in the right direction, although he recognizes that there are questions about the speed implementing climate and financing targets.
Ilan Goldfajn was elected multilateral bank president in November 2022. At COP30, in the latest announcements this week, he has defended a change in logic in the allocation of resources for the climate. Instead of focusing on simple donations, for example, it is necessary to expand the viability of profitable investments in the green economy, in his opinion.
See details of the main announcements:
Currency hedge of US$3.4 billion
Agreement reached with the Central Bank of Brazil (BC) to release up to US$3.4 billion in foreign exchange hedges to, according to the IDB, reduce currency risk and attract more private investment in sustainable projects. The initiative starts with EcoInvest, which offers protection instruments against exchange rate volatility.
Specifically, they will benefit projects considered strategic from the point of view economic and environmental in areas such as green industry, biome recovery, infrastructure to deal with the effects of climate change.
The arrangement is based on International Swaps and Derivatives Association (ISDA) standards. The IDB will offer long-term derivatives (assets that are linked to other assets) to investors. The Brazilian BC, in turn, connects the bank to local institutions to transfer these instruments at a lower cost, without exposing their balance sheets to exchange rate risk.
Pro-Biomas BNDES
A signed letter of intent with BNDES to structure US$1 billion in financing for micro, small and medium-sized companies operating in the Cerrado, Caatinga and Pantanal. According to the IDB, the program seeks to expand credit for urban and rural businesses linked to the bioeconomy, sustainable agriculture and renewable energy. Around 75% of the resources will be directed to the Amazon biome.
US$1 billion for cities
It will be destined US$1 billion in financing for cities in with favorable conditions and high needs. This is an alliance of Pan-Amazonian countries called “Resilient Infrastructure and Cities”. This project is within the scope of the IDB’s Amazônia Semper Program.
During the launch of the proposal, the Minister of Planning and Budget, Simone Tebet, said that the proposal arose from conversations about the need for a specific medium and long-term program, considering the Amazon countries, in negotiations between the IDB technical team and the Ministry of Planning and Budget (MPO).
There are three pillars: water security, clean energy and resilient urban infrastructure. The project is led by the Network of Finance and Planning Ministries of Amazon countries and supported by the IDB Group. The mechanism responds to the fact that more than 70% of the Amazon population lives in cities with deficits in water, sanitation, energy, mobility and risk management.
Clean energy – US$800 million
Alongside the Danish Impact Fund, the Norwegian Development Cooperation Agency (Norda) and the Swedish International Development Cooperation Agency (Sida), the IDB signed a letter of intent to facilitate a new guarantee that should release around US$800 million in additional credit capacity for clean energy projects in the Amazônia Semper and América no Centro programs. According to the bank, the partnership expands the space to finance access to energy, network modernization, sustainable transport and emerging technologies in the Amazon and Central America.
Submarine fiber optic cables
The IDB Group and the AFD Group French Development Group announced in Belém co-financing of US$324 million to install submarine fiber optic cables in Maranhão and Pará. The goal is to bring high-capacity internet to around 15 million people in the Amazon.
According to information released, there is a prospect of creating a regional data center. There is participation from state governments and also non-reimbursable resources from the European Union. The project establishes, according to the IDB, the first transboundary submarine network dedicated to the Amazon Basin, supporting digital inclusion, online public services and integration between Brazil, French Guiana and Europe.
Forest restoration in the Amazon
The Board of Directors of the Inter-American Development Bank (IDB) approved the first guarantee from a multilateral development bank for a forest restoration concession in Brazil. The instrument, worth US$15 million, will support the concession of the Triunfo do Xingu Recovery Unit, in Pará. The term is 20 years.
The idea is to replicate it in other states. In practice, the IDB is providing a guarantee to the government of Pará. The State, in turn, assumed some risks in the concession to the private sector, since the area is heavily deforested and hypothetically there could be a fire and invasion, for example. This mechanism is considered pioneering for reducing risks in environmental public-private partnerships (PPPs).
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The IDB Group launched the Power Transmission Acceleration Platform (PTAP) to expand power transmission networks in Latin America and the Caribbean, with planned support of 15 million euros from Germany through the International Climate Initiative. The IDB, the Ministry of the Environment and the BNDES signed, also in Belém, a letter of intent to facilitate a contribution of R$2.7 billion (US$500 million) from the IDB to the Climate Fund.
