The UK Government and the International Finance Corporation announced earlier this week that they were committing to mobilize $2 billion in public and private sector financing for certified green buildings in emerging markets in an effort to transform overseas construction markets.
This will be the first time the United Kingdom has partnered with the International Finance Corporation (IFC), a World Bank Group member, in blended concessional finance for climate-change mitigation. Specifically, the UK-IFC Market Accelerator for Green Construction Program will seek to mobilize as much as $2 billion in public and private sector financing, which will include an initial £105 million contribution from the UK Government, intended for investments (£80 million) and advisory services (£25 million).
The Program will seek to incentivize the development of green buildings through certification with IFC’s EDGE and other leading certification systems.
The value of transitioning emerging markets to relying on green construction would be enormous. Globally, buildings account for 19% of energy-related greenhouse gas emissions, and consume 40% of electricity generated. Further, 5.5 billion square meters of floor space is constructed each year — mainly in emerging markets where green construction is still a nascent industry. By 2050, the global built environment is expected to double, and if green construction techniques and mechanisms can be implemented globally, this could have a marked impact on planetwide emissions.
“Green buildings represent a powerful opportunity to address climate change in emerging markets,” said Hans Peter Lankes, IFC’s Vice President for Economics and Private Sector Development. “Investments in green buildings certified with EDGE and other standards could represent a $3.4 trillion opportunity over the next decade. Blended finance is a valuable tool to help create new markets for green construction by mobilizing private capital through financial intermediaries.”
“To date the UK has supported 47 million people across the globe cope with the effects of climate change and provided 17 million people with improved access to clean energy, helping to raise $100 billion a year by 2020 and sharing expertise to keep us secure too,” added Claire Perry, the UK’s Minister of State for Energy and Clean Growth. “One year on from the launch of our modern Industrial Strategy, we are making the most of the economic opportunities that go hand-in-hand with tackling climate change. This exciting new program will encourage greener construction practices in developing countries to improve energy efficiency and reduce emissions, creating opportunities for UK businesses to invest in new markets,” she concluded.
The United Kingdom also announced this week that it was committing a further £100 million for renewable energy projects in Africa which are expected to provide electricity to 2.4 million people each year. The £100 million will go into the UK’s Renewable Energy Performance Platform (REPP) which will support up to 40 new renewable energy projects in sub-Saharan Africa. The new investment triples funds for the REPP and is hoped to unlock an extra £156 million of private finance into renewable energy markets in Africa by 2023.
“At home, we’re world leaders in cutting emissions while growing our economy and abroad we’re showing our international leadership by giving countries a helping hand to shift to greener, cleaner economies,” said Claire Perry on Tuesday. “This £100 million will help communities harness the power of their natural resources to provide hundreds of thousands of people with electricity for the first time. Building these clean, reliable sources of energy will also create thousands of quality jobs in these growing green economies.”
The REPP already supports 18 renewable energy projects in sub-Saharan Africa, including solar, wind, biomass, hydro, and geothermal technologies, which are expected to provide new or improved electricity access for more than 4.5 million people over the lifetime of the projects.