Green Lending in Latin America
Getting onboard for decarbonizing lending at scale
Founded in 2001, CIFI (the Corporación Interamericana para el Financiamiento de Infraestructura) was the first entity dedicated to providing debt financing, structuring and advisory services to small- and medium-sized infrastructure and energy projects across Latin America & the Caribbean. Approximately half of its portfolio was invested in renewable energy across a variety of technologies, including solar PV, hydropower, wind, and biomass.
With the realization that climate change will have considerable impact on all its investments (and not only the ones in energy infrastructure), CIFI was eager to align its investment strategy and portfolio composition to a 1.5°C world (the limit of global warming above preindustrial levels set in the Paris Agreement). CIFI reached out to the Climate Finance Team at responsAbility to analyze the carbon footprint of its entire loan book and the respective climate risk exposure.
With the support of responsAbility’s Technical Assistance (TA) team, external experts were contracted to map CIFI's exposure to carbon intensive activities as well as their climate-related risks and develop a strategy to help align their portfolio with a 1.5°C pathway. The TA mandated consultant’s analysis helped CIFI identify the more carbon intensive sectors in its portfolio so as to reduce exposure to such sectors in the future.
From a credit risk perspective, the analysis confirmed that renewable energy projects in CIFI’s portfolio were less risky than their carbon-intensive counterparts. Yet, certain renewable energy projects are highly exposed to a warming planet and the study also included a risk assessment to assess potential revenue losses due to the increasing frequency and intensity of extreme weather events, underscoring the importance of avoiding runaway climate change.
CIFI has now developed a Roadmap to align their strategy to a 1.5°C scenario and has started the deployment at all levels of the organization with a new Climate Change Policy and procedures to assess Climate Risk in their investment cycle.
Mindful that sharing best practice is a key objective, the results of CIFI’s efforts were shared with a large public audience during a joint webinar organized by responsAbility: Hitting the road to 1 5°C alignment a Financial Institution’s journey
Read more in our Climate Fund Impact Report: Climate Impact Report