Press Release: DFC Commits to Net Zero by 2040, Increases Climate-Focused Investments
U.S. International Development Finance Corporation (DFC) today unveiled a series of new climate-focused commitments in support of President Biden’s Leaders Summit on Climate, including a pledge that the agency will reach net zero emissions through its investment portfolio by 2040. Additionally, the agency committed to increasing climate-focused investment to 33 percent of new investments beginning in FY 2023, including investments in climate mitigation, adaptation, and resilience in developing countries. To advance these efforts and further enable the private sector to tackle climate-related challenges, DFC will launch a new $50 million technical assistance facility as well as a risk-sharing platform.
“President Biden has appropriately stated that the climate crisis represents the existential threat of our time and called for coordinated global action,” said DFC Chief Operating Officer David Marchick. “DFC is proud to contribute to U.S. leadership on climate action through our net zero pledge, new climate investment target, and inclusion of climate as a core element in our development strategy for the first time – steps that aim to help developing countries mitigate and respond to climate change while increasing resilience.”
Read President Biden’s full remarks on climate finance at the Leaders Summit on Climate.
Climate change is impacting every country on Earth, but has a disproportionately significant impact on developing countries which already struggle with poverty, food insecurity, lack of access to energy and connectivity, and are more vulnerable to natural disasters. DFC’s development mandate combined with its diverse financing tools make the agency an essential component of the Administration’s strategy to confront the climate crisis in developing countries. By identifying the right opportunities for financing and enabling private sector investment in climate solutions, DFC actions aim to take advantage of a rapidly closing window of opportunity to tackle climate change globally while continuing to support sustainable economic growth in developing countries.
DFC is taking several actions to advance President Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad:
- Executing a Credible Plan to Achieve Net Zero by 2040: DFC plans to achieve net zero emissions by 2040, representing the earliest net zero target for any Development Finance Institution (DFI) from a G7 or G20 country. This target is based on careful accounting and credible assumptions regarding DFC investments, including ramping up support for renewable energy and energy efficiency. DFC will prioritize investment in climate-focused projects and renewable energy while supporting a just transition for developing countries that prioritizes sustainable economic growth.
- Focusing 33 Percent of Investments on Climate: DFC will substantially expand its support for climate-linked projects so they account for at least 33 percent of new investments beginning in FY 2023. DFC’s investments are a core pillar of the broader Biden-Harris Administration U.S. Climate Finance plan.
- Putting Climate-focused Investment at the Core of DFC’s Work: DFC will update its inaugural development strategy, the Roadmap for Impact, to prioritize climate-focused investments, such as projects that reduce emissions, increase renewable energy usage, protect ecosystems, improve adaptation, and enhance resilience.
- Issuing an Inaugural Call for Climate-focused Funds: DFC announced a rolling Call for Applications from private equity, growth capital and venture capital fund managers seeking DFC financing for funds targeting climate mitigation, adaptation, and/or resiliency. The call advances DFC’s commitment to supporting investments that help address the unique challenges faced by developing countries.
- Issuing a Distributed Renewable Energy Call for Applications: DFC announced a Call for Applications from private companies seeking financing for distributed renewable energy (DRE)-related investments. With climate change and a lack of reliable energy access both impacting economic growth and livelihoods in developing countries around the world, investments in DRE offer a sustainable route to advance development, especially in communities that are hardest to connect. DFC will work collaboratively with Power Africa’s Beyond the Grid team and Coordinator’s Office, the Rockefeller Foundation, and the Shell Foundation on investments received under the Call for Applications.
- Creating a Climate Action Facility to Increase Technical Assistance: DFC will commit at least $50 million in funding over the next five years for feasibility studies and technical assistance to support the identification, design, and implementation of DFC’s climate portfolio. The Climate Action Facility is designed to help DFC meet its climate mitigation, adaptation, and resilience investment goals.
- Developing an Insurance Risk-Sharing Platform for Climate Projects: DFC will work to develop a risk-sharing platform with private sector insurance partners to reduce barriers to financing climate projects, expanding the agency’s capacity to finance innovative projects in challenging contexts. The platform will focus on developing markets and will be directly targeted to individual projects that will reduce carbon emissions through clean energy production, more efficient and sustainable agriculture and industry, and the protection of fragile ecosystems through proven approaches.
- Collaborating with Other DFIs and the Interagency: DFC will collaborate closely with other DFIs and interagency partners at the U.S. Agency for International Development, the Millennium Challenge Corporation, the U.S. Trade and Development Agency, and the Special Presidential Envoy for Climate, to drive its climate project pipeline and catalyze private sector investments.
- Hiring DFC’s First-Ever Chief Climate Officer: DFC will hire its first-ever Chief Climate Officer to lead its internal and external coordination on sustainability and climate-related investments.
Source: U.S. International Development Finance Corporation (link opens in a new window)