The Infrastructural Development Bank of Zimbabwe is making a fundamental move of expanding its investments towards climate change projects, an official said.
The bank – largely owned by the Government – and recently received equity capital boost of $150 million from its anchor shareholder is working on Climate Finance Facility (CFF) aimed at providing capital to projects considered climate friendly.
Veronica Jakarasi, IDBZ manager (climate finance) told Business Weekly that in addition to other initiatives the bank was involved in on financing climate friendly projects, the CFF would go a long way in bridging the existing funding gap.
“We are bringing another dimension of Climate Finance Facility . . . to established be within IDBZ, which will promote blended finance because we are also targeting different stakeholders such as Government, Development Finance Institutions (DFIs) and the Green Climate Fund to provide seed capital,” said Jakarasi.
The facility, already approved by the board will initially focus on energy, water and agriculture sectors as well as projects that will come under Low Emission Development Strategy.
The LEDS is embedded in a broader framework that will enable the country to issue financial instruments to fund projects with less negative impact to the climate and help the country meet its greenhouse emission target reduction by 2030.
Zimbabwe is a signatory to the Paris climate change accord agreed in 2015, which seeks to hold the increase of the global average temperature to below 2 degrees Celsius.
Zimbabwe submitted a conditional 33 percent energy sector per capita greenhouse gas emission reduction target. The submission was conditional on the means of implementation namely technology development and transfer, relevant training and financial support.
The bank will lobby the Government to allocate part of revenue collected from carbon tax to the facility. IDBZ has also been earmarked as a suitable institution that could manage the National Climate Fund and Green Energy Fund to be developed under National Climate Policy and the New Energy Policy respectively.
“When we did the concept (the Climate Finance Facility), we said a seed capital of about $70 million is needed but the actual feasibility study is the one that will then indicate to use what sort of funding commitments we require,” said Jakarasi.
“The debt will be the beginning and we will then look at other financing facilities to replenish it.”
Analysts say funding was crucial if climate change intervention were to bear fruit.
“More so if this is viewed in light of the endless disputes on climate finance between rich and poor countries during the multi-lateral climate negotiations under The United Nations Framework Convention on Climate Chang, a local bank that can provide funding for local climate change-busting initiatives is exactly what is needed at a time of uncertainty from global funders,” climate change campaigner and journalist Jeffrey Gogo told Business Weekly.
“I think this is a key step to helping Zimbabwe achieves it’s climate goals of cutting emissions by 33 percent by 2030, under the Paris accord on climate change.”
In terms of project development, the CFF will rely on the bank’s existing projects identification and development process.
“But we are looking at projects that are commercial viable, which have a source of repayment because initially it is going to be predominantly debt funding so they will be a need of source of repayment.”