IFC launches a $150m green bond for renewables projects

From the newsletter

The International Finance Corporation (IFC) and impact investment firm Social Investment Managers and Advisors (SIMA) have launched a $150 million green bond initiative to fund over 220 MW of solar and battery storage projects in Africa. These projects are expected to cut carbon emissions by 4 million tonnes over their lifespan.

• The SIMA Commercial & Industrial Solar Green Bond targets small and medium-sized enterprises (SMEs), providing short-term corporate finance and long-term project financing (up to 10 years) for solar initiatives under 5 MW. 

• The IFC is directly contributing $25 million and facilitating a further $20 million for the bond. This additional funding comprises $11 million from the Finland-IFC Blended Finance for Climate Programme and $9 million from GEAPP.

More details

• Launched in 2010, the IFC's Green Bond Program aims to stimulate the market and attract investment for private sector projects in renewable energy, clean transportation, solar, hydro, and energy efficiency. The funds raised through green bonds finance sustainable projects in sectors such as manufacturing, healthcare, education, agri-processing, and services.

• These projects will support Its cumulative green bond issuance volume is approximately $15 billion as of December 31, 2024.

• The SIMA Commercial & Industrial Solar Green Bond, one of the largest impact-driven funds for the commercial and industrial (C&I) solar sector in Africa, marks the first collaboration between the IFC and GEAPP, focusing on decentralized renewable energy systems with a priority on sub-Saharan Africa.

• Despite rapid growth in demand for solar solutions, access to affordable finance remains a significant obstacle for smaller African businesses. This is exacerbated by the higher capital costs of solar projects compared to polluting technologies, which perpetuates reliance on fossil-fuel backup generators.

• Even for utility-scale renewable energy projects, financing is a recurring challenge particularly in achieving a balance between affordability and risk-adjusted returns, as governments' fragile financial positions limit their ability to provide the guarantees sought by investors.

• Green bonds address this issue by attracting investment from institutions and individuals specifically interested in sustainability, bridging the funding gap. They can also offer more favourable terms than traditional loans.

• The IFC has previously engaged other firms in green bond initiatives. In 2019, the IFC and Amundi, Europe’s largest asset manager, launched a $2 billion green bond programme to accelerate renewable energy and climate-friendly investments in emerging markets, including Africa.

• That programme financed large-scale solar farms, such as the Scatec Solar projects in Egypt and South Africa, which added hundreds of megawatts to the grid, and the Lake Turkana Wind Power Project in Kenya, one of Africa's largest wind farms.

• This new bond is unique due to its clear, quantifiable impact on the environment, society, and governance. Moreover, it will support 44,000 productive jobs and dedicate at least 10% of the fund to lower-income countries.

Our take

• Financing Africa’s abundant renewable energy sector remains a risky endeavour. However, this project addresses these risks through the involvement of the IFC, a member of the World Bank Group, which helps attract the necessary capital for solar projects in Africa.

• This bond isn’t just about funding but rather a market signal that Africa’s renewable sector is maturing. For energy companies, the message is clear: innovate with scalable, community-centric models, and leverage blended finance to turn Africa’s energy challenges into investable opportunities.

• It also demonstrates that institutional investors are willing to fund renewable energy projects in Africa’s emerging markets. Energy companies can replicate this model to secure long-term, low-cost financing and scale up their operations.