UN Chronicle | Corporate Citizenship: Environmental Opportunities, Sustainable Markets

Corporate Citizenship
Environmental Opportunities, Sustainable Markets

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The International Finance Corporation (IFC)—the private sector lending arm of the World Bank Group—has created three environmental funds to enhance the role of the private sector in addressing environmental and social issues in the emerging markets. The funds will be used for emerging market investments that employ or require hybrids of private and public financing, particularly in projects that are innovative or have high developmental impact, and also to promote and articulate the business case for enhanced environmental and social performance at all levels through demonstration of best practices and building local capacity. Project preparation assistance and seed capital will be available for innovative projects. Funding for the facilities is expected to total $55 million over the next five years.

Gavin Murray, Director of the IFC Environment and Social Development Department, said. "If you believe that issues of energy, water, biodiversity and climate change can benefit from market-based solutions, and you need a partner in the emerging markets, IFC is here. Among the development banks, we aim to be the market leader in sustainability."

The three new facilities will fund a range of investments, from traditional sectors and business models to "near to market" technologies and projects that require partial subsidies to be financially viable.

The Environmental Opportunities Facility will handle project development funding and provide flexible investment financing for innovative projects addressing local environmental issues. These projects would produce goods or services that reduce pollution or improve the use of scarce resources, such as water and energy. The Facility aims to overcome the barriers to these investments and move projects towards commercial viability. It will give IFC the ability to "push the market" towards adopting new business models and technologies that address the most immediate environmental problems of those living in developing countries, especially the poor.

The Sustainable Financial Markets Facility will address environmentally and socially responsible lending and investment through IFC financial intermediaries and in the emerging markets' financial sector at large, to increase the positive impact of IFC intermediated financing, enhance the competitiveness of the local financial service industry through better risk management and new products and services, and promote more environmentally and socially responsible inward investment. The programme will include professional training and technical assistance in environmental risk management, environmental finance, and socially responsible investment. The Facility will also enable IFC to address strategic needs by, for example, providing an emerging markets platform for finance-specific codes of best practice and voluntary reporting and certification schemes, and by building local capacity for necessary infrastructure, such as consulting, investment research and eco-rating services. The Corporate Citizenship Facility will allow IFC to work with its project sponsors and other emerging market businesses to demonstrate the business benefits of a progressive approach to corporate citizenship while delivering more public goods, demonstrating that support in the development of good practice in areas such as community development, environmental stewardship and labour practices standards can create value for the private sector. The Facility will also provide knowledge and resources to leverage change at the sector level to enhance benefits for industry and civil society, where this lies outside the authority or capacity of an individual sponsor.

The benefits of a proactive approach to corporate citizenship in developed economies are increasingly recognized. However, still more businesses in emerging markets need to follow suit, both to capitalize on new business opportunities and reduce risks associated with environmental and social performance. The Facility will allow IFC to act more strategically in addressing these issues to the broader benefit of its client countries.

Investment Portfolio by Region

IFC has a $15-billion portfolio of investments in 140 emerging market countries. The multilateral bank makes loans and provides equity in sectors ranging from infrastructure and manufacturing to financial services and information technology. In recent years, IFC has expanded its portfolio to include investments in biodiversity, renewable energy, energy efficiency and biodiversity-related climate change projects.

Source: IFC Annual Report 2002

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