Green Investment Banks as a Tool to Bolster Climate Action in Latin America

The Paris Agreement on climate change represents an historic milestone as the first global agreement to combat climate change. Under this agreement more than 190 countries committed to take action to keep average global temperature rise below 2° C and to promote countries’ resilience to the adverse impacts of climate change.

Achieving this global goal will require a fundamental shift in the global economy towards low-carbon and resilient infrastructure (LCR), including renewable energy, clean transportation, energy efficiency, and water and waste management infrastructure, among others. The International Finance Corporation estimates that in the Latin American and Caribbean region there is an opportunity for climate investments of more than US$ 2.64 trillion by 2030. The magnitude of the investment necessary is considerable and it will be essential to increase and accelerate the flow of private capital toward LCR sectors. However, commercial banks and other private investors often are unfamiliar with "green" technologies and solutions, and lack experience financing them.

Given this scenario, various governments around the world are implementing a new solution known as a Green Investment Bank (GIB). A Green Investment Bank is a specialized public or quasi-public financial institution whose objective is to reduce the barriers and gaps that exist in LCR infrastructure markets. GIBs do not seek to replace private investment; rather they use limited public resources to mobilize private capital in a cost-effective way. This series of documents includes information on the characteristics and functions of GIBs, the financial tools they can use, options for establishing and capitalizing this type of institution, and how GIB initiatives could form part of climate finance strategies for countries in Latin America.