Climate finance has of late emerged as a major business opportunity, according to Alzbeta Klein, Director and Global Head, Climate Business, IFC. The market is showing keener interest in investing in green business than ever before even without the lure of government sops, she said here on Wednesday.
For instance, renewable energy projects the world over attracted $250 billion of investments in 2016 and almost all of it came from the market, Klein told BusinessLine. She was here to attend the IFC Climate Business Forum.
The share of international multilateral agencies such as IFC and ADB in this pie is just $5 billion, she further said.
This is one of the major fundamental changes that have happened since the Paris climate treaty two years ago. “Nowhere else is it more visible than in India, which is tapping its tremendous renewable energy potential under the current dispensation,” Klein observed.
More significantly, this surge in investments in renewable energy in India and other emerging economies is happening without technology transfer from developed countries or government subsidies. “This is because the cost of technologies has come down by a whopping 90 per cent over the last 10 years,” she said.
Seeing merit
According to Klein, businesses are seeing merit in going for greener technologies. Green buildings are a good example. While the cost of construction of a green building is 2-5 per cent higher, depending on the country or the conditions, the savings in operational costs are as much as 20 per cent per year. “This is huge for any builder,” she pointed out.
She further said the green buildings sector would be critical for India. “Half of the urban centres in India are not built yet and will be built by 2030. If these were to be built, they better be green buildings,” Klein said. As of now, only 5 per cent of new buildings constructed in India are green.
Another example is green bonds, which are gaining popularity in the market. The global market for green bonds is seen to cross $120 billion by the end of the year, up 50 per cent from last year’s $80 billion. “Imagine — green bonds, which are also here in India, started out of nothing in 2007,” said the IFC official.
There is an increased focus on green business in IFC as well. “Over a quarter of our investments are in climate-smart projects. Out of $12 billion that IFC funded last year, $3 billion is for green projects,” she said. In addition, IFC managed to raise $1.8 billion for climate finance through syndication.
According to Aditi Maheswari, IFC climate change policy specialist in Washington, the agency has invested $1.7 billion in climate-smart projects in India between 2010 and 2016. Out of this, $604 million was invested in renewable projects, while $313 million was used for green buildings.