IDB Is Working on Loans to Wean Latin America Off Fossil Fuels

(Bloomberg) -- IDB Invest is in talks to roll out so-called decarbonization loans to projects in Latin America as the multilateral institution looks to help the region meet its climate goals by accelerating the replacement of fossil fuel assets.

“In energy, we are talking to different clients both in Chile and Costa Rica,” Chief Investment Officer Gema Sacristan said in an interview. “Our focus in the transport industry is electric bus systems.”

The IDB Group member that invests in small and mid-size private projects just did its first such deal with a Chilean power producer, providing $125 million to a unit of Engie SA for a wind farm near the city of Calama. The package provides incentives for closing coal-fired plants, and would also allow Engie to share any increase in the minimum carbon price in the event a regulated carbon market is created during the life of the loan.

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IDB Invest hopes to do more decarbonization loans this year. “We're already talking to several clients and this transaction has raised a lot of interest,” Sacristan said.

As IDB Invest works on more loans, its sister institution is working with authorities in the region on policy to help meet carbon targets. The aim is for other lenders to follow suit to support the energy transformation, she said.

Green hydrogen and batteries are other areas that IDB Invest is keen to get involved in, with discussions underway with Chilean authorities. The country estimates it might need $220 billion in green hydrogen investments over the next 20 years, creating 100,000 jobs.

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