The green and sustainability-linked loan from IFC will finance renewable energy projects in emerging markets, including those heavily reliant on coal, in support of a just transition to a low carbon economy.
The International Finance Corporation (IFC), the global development institution and private sector investment arm of the World Bank, has issued a €300m green and sustainability-linked loan (SLL) to Iberdrola, the Spanish electric utility company.
The loan will be used to finance renewable energy projects in emerging markets, including those currently relying heavily on coal, such as Morocco, Poland and Vietnam, with a first tranche of €170m already committed to the financing of onshore wind projects in Poland.
The loan is subject to the achievement of two corporate sustainability targets, the first of which is that Iberdrola reduces both its direct and indirect absolute greenhouse gas emissions by more than 60% by 2030 from its 2020 baseline across scopes 1,2 and 3, which incorporates Iberdrola’s operations, customers and supply chains.
The second is to more than double its installed renewable energy capacity by 2030, a significant step up from the more than 41 gigawatts installed by the company by September 2023.
Iberdola said the SLL’s targets were in line with its existing Climate Action Plan, which itself sets out a roadmap with targets verified by the Science Based Targets initiative (SBTi), the corporate climate action NGO launched in 2015 to help companies set emission reduction targets in line with climate science and the Paris Agreement goals.
Commenting on the announcement, José Sainz Armada, director of finance at Iberdrola, said: “This loan will allow Iberdrola to continue contributing to the energy transition, decarbonisation and electrification of developing countries, which are still highly dependent on fossil fuels. It also consolidates IFC as one of our major allies in the financing of renewable projects.”
Energy transition partnership
The SLL is part of a wider partnership to promote energy transition in emerging countries agreed between the two parties in May last year, which also includes commitments to develop early-stage clean energy projects such as offshore wind power generation and green hydrogen.
It also follows two earlier green and sustainability-linked loans to Iberdrola’s Brazilian subsidiaries, which included a R$800m loan to Neoenergia Elektro in May 2023 and a R$550m BRL loan to Neoenergia Coelba in July 2022, in support of network expansion and digitalisation in Brazil.
Iberdola, which is one of the world’s largest utilities by market capitalisation and among the largest renewable energy providers globally, operates across all segments of the energy value chain.
In response to questions from Impact Investor, Ignacio de Calonje, chief investment officer for energy, green hydrogen, mining and sustainable finance at IFC, explained that the decision to work with the company was driven by its position as one of the few energy companies with SBTi validated scope 1, 2 and 3 absolute emission reduction targets, in line with a 1.5°C scenario. The company has also been recognised as a pioneer in new energy technologies, such as offshore wind power, advanced digitalisation of power grids and green hydrogen. Iberdrola, he said, was also one of the major players in some of IFC’s priority markets, such as Brazil and Poland.
“We believe that Iberdrola can therefore be a vital player in helping decarbonise some of IFC’s key markets,” said de Calonje.
As of December 2023, IFC said it had invested over $6.2bn in sustainable finance in infrastructure, including $3bn in sustainability-linked financing for infrastructure companies in emerging markets. In addition to financial support, IFC provides client services such as project preparation support and climate advisory.
But de Calonje said SLLs were just one instrument to incentivise companies to set ambitious decarbonisation targets and implement action plans.
“They are certainly not enough in isolation, hence our broader partnership approach where we also support Iberdrola and other companies on environmental and social matters, providing input on biodiversity and other issues, and co-fund feasibility and other studies for new technologies or projects,” he said.
“However, SLLs are a useful instrument to signal to the market that companies are heading in the right direction, and they provide greater transparency and allow for more scrutiny of a company’s decarbonisation targets and plans,” he added.
