IFC focusing on climate finance amid green transition efforts, Makhtar Diop says

UAE made strong commitment on financing the energy transition, according to IFC's managing director

Makhtar Diop, managing director of the IFC, speaking at the World Governments Summit in Dubai. EPA

The International Finance Corporation, a member of the World Bank Group, is focusing heavily on a “green and climate-change economy” amid global transition efforts globally, a senior executive said on Tuesday.

“The green and climate-change economy is very important, with 50 per cent of what we do related to climate change,” Makhtar Diop, managing director of the IFC, told The National on the sidelines of the World Governments Summit in Dubai.

“It’s quite promising,” he said.

In the fiscal year 2023, IFC delivered $7.6 billion in climate finance and mobilised an additional $6.8 billion from other sources, according to its website.

Climate finance for the year was diversified across various sectors including financial institutions, renewables, green buildings, agribusiness and industrial efficiency, among others.

“When we go and work for a bank, for instance … we sit with the bank and say the reason why we are lending you that money is because we want you to green your portfolio … because we want you to have a much better pro-green policy,” he said.

“A lot of people don't know that 10 years ago, we were among the first ones to issue green bonds … so all this is systematic lending, what is happening in the financial sector and changing little bits of dynamics.”

The IFC is a development finance institution whose mission is to bridge funding gaps in emerging economies by providing finance to projects that might otherwise not be able to secure it, unlocking further private-sector investment.

Countries across the globe are enacting climate-friendly policies aiming to reduce greenhouse gas emissions, boosting demand for sustainable bonds.

Global issuance of sustainable bonds is expected to reach between $900 billion and $1 trillion driven by increased demand and climate supportive policies, according to a report from S&P Global Ratings last year.

On Tuesday, the UAE Cop28 presidency launched a major partnership with the next two hosts of the climate conference, Azerbaijan and Brazil, to help keep the crucial 1.5ºC climate goal within reach.

The “Cop presidencies troika” aims to boost co-operation and ensure continuity between the hosts of the annual climate talks in what is being called "mission 1.5ºC".

"The UAE did a fantastic job of mobilising, making a very strong commitment on financing the energy transition, very strong leadership," Mr Diop said.

IFC also aims to boost investment in the agriculture sector to enhance food security.

"There is a need to have a serious and much stronger focus on agriculture," he said.

"And it requires to look at not only the traditional crops but also the cereals that are produced in some countries, which are very climate resilient.

"If you take in West Africa, you have things like sorghum, you have millet, you have fonio, which are very resilient to climate change."

"So if we invest in it and put the financial resources and credit market condition to increase production, we can address a lot of the food security issues in some countries."