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IDB facilitates investments in shared value by Latin American and Caribbean companies

Oct 25, 2013

IDB facilitates investments in shared value by Latin American and Caribbean companies

Inter-American Development Bank and Nestlé co-host creating Shared Value Global Forum 2013 in Cartagena

The Inter-American Development Bank (IDB) has allocated $750,000 to support clients from its private-sector portfolio in implementing initiatives to create shared value.

A company creates shared value when it addresses economic and social problems in a community, not only making itself more competitive, but creating benefits for the surrounding community.

The IDB is the first multilateral financial institution to operationalize the concept of shared value through its new tool the shared value appraisal, and will select 10 clients to identify investment opportunities aimed at optimizing the allocation of their resources, increasing their competiveness and creating social value in communities. Each client engagement will receive an assessment designed to identify investment opportunities at the intersection of business and social challenges as well as a roadmap to prioritize and execute investments.

Work is already underway with Subsole in Chile, Caribe Hospitality in Jamaica and the Universidad de San Ignacio de Loyola in Peru.

With Subsole, an agricultural products firm, studies have aimed at enabling the company’s workforce to become more sustainable, through investments to improve working conditions of low-income, rural families during the harvest season. In the case of Caribe Hospitality, a tourism development company, the focus has been on identifying job opportunities for at-risk youth during the construction of hotels, and for including small and medium-sized companies in the supply chain. With the Universidad de San Ignacio de Loyola, alternatives are being offered to broaden the socioeconomic spectrum of matriculating students and to lower dropout rates.

The remaining seven beneficiaries are currently being evaluated, with plans for still others to receive blueprints for identifying social issues arising in connection with the products and services they offer, and expanding the reach of their value chains.

While many firms in Latin America and the Caribbean value investments that not only provide financial returns but also bring with them social and environmental benefits, they often lack the capacity, time and resources to identify shared value investments.

The IDB shared value appraisal was among the topics discussed in Cartagena, Colombia, at the Creating Shared Value Global Forum 2013.  The Forum’s focus was to explore various approaches where the private sector has successfully converted business challenges into opportunities for business growth and significant social impact.  The event was organized by Nestlé and the IDB.

GEF

First of its kind instrument helps overcome financial barriers for Brazilian businesses to adopt energy efficiency measures

October 20, 2013

First of its kind instrument helps overcome financial barriers for Brazilian businesses to adopt energy efficiency measures

The Inter-American Development Bank (IDB) and Global Environment Facility (GEF) announce the issuance of $1.6 million in guarantees under the joint Energy Efficiency Guarantee Mechanism (EEGM) to support companies financing energy efficiency projects in Brazil. The first guarantees were recently issued to APS Soluçoes, a Brazilian energy service company, to assist in securing commercial bank financing from Banco Indusval (BI&P) to implement three energy efficiency projects in a call center, logistics warehouse and large retail shopping mall.

“The EEGM is an innovative tool that is supporting Brazil’s energy efficiency industry develop and expand new business models for saving energy,” said Hans Schulz, Vice President for Private Sector & Non-Sovereign Guaranteed Operations, a.i.

The EEGM (www.eegm.org) is a $25 million mechanism formed jointly by the IDB and the GEF that addresses funding needs in the currently underserved sector of energy efficiency in Brazilian commercial buildings. The EEGM is the first guarantee fund in the world that covers both performance risk of energy efficiency projects and credit risk of the borrowers.

“Providing incremental financing for risk reduction in developing countries is a high priority for GEF,” said Naoko Ishii, CEO and Chairperson of the GEF. “With the IDB as our partner, we are demonstrating innovative approaches that will attract Brazilian private sector investors to energy efficiency projects and accelerate reductions in greenhouse gas emissions.”

Energy efficiency is consistently cited as the best means to meet the ever growing energy needs of Latin American countries. Electricity consumption in Brazil has increased by as much as 9 percent annually in recent years. This growth in energy demand can be cut in half, without compromising economic growth, through the widespread adoption of more efficient existing technologies. Yet paradoxically, energy efficiency still faces many financial barriers for businesses.

Gilberto Barshad Faiwichow, Executive Vice President, BI&P in São Paulo, said, “We were able to use the EEGM guarantees to extend our tenor, lower our lending rate and finance projects that we otherwise would not have be able to finance.”

Under the EEGM, guarantees are available in Brazilian reais up to the equivalent of $800,000 and are fast-tracked to minimize transaction costs. The focus is on energy efficiency projects that have the potential to achieve high carbon-emission savings and high financial returns, but where financing is often unavailable due to perceived risks. All technologies are considered including advanced lighting and climate control systems, as well as self-supply solar power and co-generation.