Just ask the investors: businesses in emerging markets can no longer afford to ignore the risks posed by the changing climate to their bottom lines. Ranging from increasingly frequent and severe weather events to new regulations and changing consumer preferences, climate change is fundamentally transforming the way we do business. Increasingly, companies and their investors are seeking opportunities to transition to and invest in climate-smart portfolios.
By all accounts, engaging the private sector in climate-smart investments will be a cornerstone to growing climate business. In many sectors they already play a large role, supplying nearly a third of global investment in research and development of new renewable energy technologies, or $2.5 billion in 2016 alone. Scaling these technologies up to meet targets set in the Paris climate agreement, however, will require trillions more in innovative climate-smart investments particularly in emerging markets. And this presents us with opportunities. In fact, IFC estimates that 21 developing countries alone hold over $23 trillion in climate-smart investment opportunities through 2030.
The time to capitalize on these opportunities is now. In the words of Michael Bloomberg and Carl Pope, from their recent book, Climate of Hope: “… We believe that by changing the way we think and talk about climate change, we can lower the temperature of the debate – and accomplish a whole lot more.”
And this captures very well what IFC is all about — creating markets, creating and supporting businesses that are financially and environmentally sustainable, and through that, making a difference. Closing off a successful fiscal year in 2017, IFC committed close to $4.8 billion from its own account and mobilized funds from other investors in climate-smart industries, helping scale up climate investments in 41 emerging markets. While these industries are all showing promise, there are five sectors where, based on our experience, innovative approaches are poised to widen the tent, attracting billions in private sector capital.
Unquestionably, meeting future demand for food will be one of the world’s greatest climate-related challenges. The human population is projected to grow from 7.3 billion as of 2015 to 9.7 billion by 2050. Without robust steps to increase productivity and climate resilience of agricultural practices, business-as-usual is expected to reduce global agriculture yields by up to 50 percent by 2030. Fortunately, businesses are beginning to employ climate-smart agriculture measures that can dramatically increase productivity and resilience while reducing greenhouse gas emissions. IFC is focused on helping scale these practices by providing investment and support for specific agribusiness needs, including increasing productivity of animal protein producers, optimizing inputs through precision agriculture, and reducing food waste through investments in logistics and infrastructure.
Another significant impact of global population growth will be the rapid growth of urban environments which will exert pressure on existing building stocks. Buildings are estimated to be responsible for about one third of global greenhouse gas emissions.
This challenge also creates an opportunity for climate-smart investment in green buildings. To help private lenders understand and engage in this opportunity, IFC is helping promote a universal and accessible green performance standard to identify areas for cost savings in buildings. The IFC EDGE program offers developers and investors a free tool to choose options to reduce consumption of energy, water, and extracted materials in new and existing building stock.
As global population and incomes rise, 70 percent of developing country populations are expected to live in cities by 2050. This opens doors for opportunities to build “smart” cities, capable of sustainably meeting demand for infrastructure in urban environments, and private sector interventions are now dramatically changing urban landscapes. In the United States, ride sharing services such as Uber and Lyft are reducing car ownership in cities, which can subsequently reduce congestion and greenhouse gas emissions. IFC is investing in public-private partnerships in Turkey to expand metro rail services and in India to upgrade street lighting networks.