IFC and ClImate Change

Green Business Opportunities in Manufacturing, Agribusiness and Services

Climate change poses a particularly high risk for people in developing countries, many of whom depend on agriculture, forestry, and fisheries for their livelihoods and have a limited or unreliable water supply. IFC has a unique role to play in helping our clients address risks and identify opportunities.

We are the largest global development institution focusing on the private sector, and a part of the World Bank Group. Our $16 billion net worth, our global focus and local presence, our world-class industry expertise, and our leadership in environmental best practice give us powerful advantages to assist our clients.

Through our financing and advisory services, we support private sector investment that applies creative solutions to complex problems. Our investments and advisory services support clean products and the greening of manufacturing, agribusiness and service industries, thereby reducing our clients’ carbon footprint. We also help our clients to better manage increasingly scarce water resources. Many of these activities spur efficiencies along our clients’ value chains, improving their competitiveness and increasing our reach to their business partners.

Rising prices of oil and other commodities also are strengthening the business case for cleaner production and other investments related to climate change. Our clients are becoming increasingly aware of the advantages – to their shareholders and investors – of aligning their company’s name and brand with the “greening” trend worldwide.

IFC and Climate Change:Green Business Opportunitiesin Manufacturing, Agribusiness, and Services

In many countries, manufacturing, agribusiness and service-based industries and their supply chains provide substantial opportunities for job creation and economic growth, particularly for poor regions where there are few alternatives. But some of these manufacturing, agribusiness and services sectors are also among the world’s most greenhouse gas (GHG)-intensive industries.

• 14% of man-made GHG emissions come from transportation

• 15% of man-made GHG emissions come from buildings

• 4% of man-made GHG emissions come from cement production

• 3% of man-made GHG emissions come from iron and steel production

• 17% of man-made GHG emissions come

from agriculture and agribusiness

The climate change challenge facing these industries presents opportunities to reduce GHG emissions and strengthen business competitiveness; companies have opportunities through access to knowledge and new technology, as well as through innovative approaches to operations and products. Responsible management of raw materials and energy resources will continue to be key factors behind the success of businesses.

Many companies are facing rising energy prices or energy access issues. Industries that invest in projects to reduce emissions, enhance energy efficiency, utilize renewable energy sources, and reuse waste are therefore netting tangible business benefits through reduced operating costs. They are also better prepared to address potential future regulations, which might include carbon taxation or limits on energy use, or both.

Water scarcity is already a reality in many parts of the world, a situation exacerbated by climate change. Adaptation initiatives such as better planning and project design as well as demand management solutions to improve efficiency in water-intensive sectors can help make companies more resilient to these impacts.

Climate Change Challenges and Opportunities

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IFC’s regional and sectoral approach reflects our clients’ different needs depending on the part of the world and the specific industry involved. We have in-house, world-class expertise in manufacturing, agribusiness and service sectors, spanning farms to food processing and retail, construction materials, forest products chain, and “green buildings”, especially relevant for retail, property development, hotels, universities, schools and health care facilities.

We look to make climate change mitigation and adaptation investments both in traditional manufacturing and agribusiness sectors – such as cement, glass, metals and food processing – and are also scaling up our investments in relatively newer areas such as wind, solar, and “green” buildings and materials. Our presence in the agribusiness and forestry sectors allows us to contribute to sustainable land use and carbon sequestration as well as avoided deforestation projects.

We help look for upstream and downstream climate change mitigation and adaptation investment opportunities along a company’s value chain and help spotlight outcomes of these investments through case studies (available in printed and electronic formats) and via our web.

Our Approach

We target investment and advisory opportunities in:

• Energy efficiency in manufacturing

• Renewable energy use

• Manufacture of clean technology and renewable energy products

• Waste reduction and recycling

• Efficient water use

• Carbon sequestration and avoided deforestation

Energy Efficiency

IFC has supported energy efficiency investments in a wide range of industries worldwide.

Most of our investments to date have been in process upgrades (upgrading obsolete or inefficient production capacity with modern capacity and technology) in industries such as food processing, steel, pulp and paper, glass, cement and chemicals, where improved energy efficiency is an integral part of a broader investment.

• INDIA: VIcAt SAgAr IFC is supporting construction of Vicat Sagar’s state-of-the-art greenfield cement plant in Karnataka, which is designed to provide 5.5 million tons of cement each year to meet rising demand in India. The project uses best practice technology to minimize consumption of fuel, power and water. At 627 kg of CO2 per ton of cement, including power related emissions, the plant’s carbon footprint will be low by industry benchmarks. In fact, this plant is expected to use less energy and emit fewer CO2 emissions than any other project in IFC’s global cement portfolio. Among the many energy efficiency features of this project there is a 10 MW waste heat recovery system which will use process exhaust gases to generate around 13% of the project’s power requirements.

• gHANA: ASHeSI UNIVerSIty college a liberal arts college in Accra, Ghana, has embarked on a US$6.0 million project to construct its new physical campus on 100 acres of undeveloped land in Berekuso (15 miles north of Accra). The project includes preserving local indigenous forest species (teak farm) on the project land, various measures in the sewage system to reduce water demand e.g. low flow cisterns, design elements of new campus to maximise air circulation and limit the use of air conditioning and installing a biogas plant to treat organic waste and sewage generated. Solid waste will be segregated and students’ awareness will be raised to achieve a high segregation rate. The treated wastewater, which will be tested periodically, will be used for non-critical applications such as irrigation, landscaping and for use as supplemental water for the operation of toilets. Methane generated from the plant will be used for cooking as a fuel substitution for equivalent amount of Liquefied Petroleum Gas (LPG).

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Examples include:

• geNerAl eNergy effIcIeNcy UpgrADeS IN MANUfActUrINg including replacement of utility systems such as air compressors or steam boilers and implementation of variable-speed-drive motors, which can have a major impact in reducing costs to operate pumps and fans.

• eNergy effIcIeNcy IN “greeN BUIlDINgS”for commercial and residential developments, universities, health care facilities, and agro-industrial building applications. Solutions include optimizing building design to reduce energy demand; developing a low energy heating and cooling strategy; utilizing efficient technologies for heating, hot-water, lighting and appliances; and integrating renewable and low carbon energy supply and use of sustainable materials.

• WASte HeAt recoVery to meet process heating and power generation needs in the metals, cement, glass and chemicals industries.

• co-geNerAtIoN projectS such as boiler- and steam-turbine-based systems in fiber and pulp and paper and food manufacturing; and gas-turbine-based applications where waste heat can be used directly. Co-generation can be combined with use of waste wood or agricultural residue derived biomass (see Renewable Energy).

• UKrAINe: INDUStrIAl UNIoN of DoNBASS (ISD) a leading steel manufacturer in Ukraine, reduced its operating costs by 5 percent through blast-furnace upgrades and a modernization program that improved its energy efficiency. The project reduced CO2 emissions by 450,000 tons a year.

• cHINA: SHANSHUI ceMeNt groUp (SSg)China’s second-largest cement producer, is implementing a major energy efficiency program that includes in-house power generation through installation of waste-heat recovery generators in all its kilns. Upon completion of the program, SSG will stand out as an example of environmental best practice in China’s cement sector, which accounts for 45% of world production.

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“ A cleaner production loan was a

quick answer for the financing of our

ongoing investment needs, which are

increasingly shaped by the fast-changing

priorities of our time, especially as

regards energy topics such as energy

efficiency. The loan also proved how IFC

could accelerate things when it puts its

full weight behind a program. We fully

recommend this product for its clients” Adnan Sen, Advisor for Assan Demir

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renewable energy Use

The use of renewable energy in manufacturing, agribusiness and service sector projects has encompassed the following areas:

i) integrating photovoltaic panels, wind turbines and solar collectors for electricity and hot water in buildings. Use wherever possible of district energy supply networks based on renewable energy sources for large developments.

ii) biomass-derived power. Opportunities include the use of waste wood as well as agricultural residues like bagasse as carbon neutral fuel sources for process heating or co-generation. Another solution is the burning of sludge from wastewater treatment plants, which creates energy. These options solve an environmental problem while reducing use of fossil fuels. Several IFC-supported pulp mills are entirely energy self-sufficient and, in fact, some export electricity to the local grid.

iii) anaerobic digestion. This is an effective treatment technology for animal wastes, certain organic process wastes and liquid effluents, and it produces biogas which can replace fossil fuels as an energy source. For example, a brewery can pre-treat liquid effluents through an anaerobic digestion process that produces methane that is used in boilers.

iv) use of wind-power by manufacturing companies; and

v) recovery and use of landfill gas for power generation.

• coloMBIA: proDUctorA De pApeleS (propAl) a Colombian producer of paper from sugar cane bagasse, Propal is upgrading its utility systems and expanding its power generation capacity. The new boiler will burn residues from squeezed sugarcane stalks and pressed sludge from wastewater treatment plants.

• jorDAN: ZArA cplp Zara Investment Holding, one of Jordan’s largest tourism companies, received a cleaner production loan from IFC to help implement energy and water saving projects and pilot its use of renewable energy. Zara will install solar panels to heat water for rooms and swimming pools in two of its hotel properties, investments which are expected to annually save a combined 2.4 million kWh of fuel oil and reduce emissions by 600 tons of CO2 equivalent. In taking advantage of the region’s solar energy potential, Zara is helping to set a best-practice example for the Jordanian hotel industry.

• cHINA: DeQINgyUAN egg IFC recently invested in Chinese poultry firm Deqingyuan Egg. With IFC’s support, the company installed biogas digester engines – a move that allows Deqingyuan Egg to convert methane from chicken waste into electricity.

More than 4 million kilowatt-hours were generated in the first six months of operation – enough power to provide 100 families with electricity for 13 years. The company sells the electricity generated from methane into the state power grid. Taking advantage of government incentives to promote renewable energy production, Deqingyuan purchases that electricity back at a 40 percent discount and decreases its input costs.

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clean technology products and renewables equipment

IFC helps clients adopt cleaner technologies across the full range of manufacturing, agribusiness and service sectors. We have financed many clean technology projects, including new-generation engine controls; low-emissivity glass, which reduces heat loss from buildings; glass for solar cells; and high-efficiency lighting. We have financed clean-technology projects in the transport equipment sector such as low rolling resistance tires. We also have supported manufacturing of mass-transit vehicles. This category also includes turbines for cogeneration and waste heat recovery.

In renewables equipment, we seek investment opportunities in the manufacture of solar photovoltaic (PV) cells and modules and equipment for solar thermal energy; components for wind turbines and hydro-electric power generation; waste and wood-burning boilers; and equipment for methane capture (from landfills or coal beds).

• In 2007, IFC provided a $22.5 million loan to support Moser Baer of India in its first investment in solar photovoltaic (PV) modules, establishing the company as the second major solar PV supplier in India. The solar panels financed by IFC will avoid approximately 6 million tons of CO2 emissions over their expected lifetime.

• pHIlIppINeS: SUNpoWer IFC is providing US$75 million of long-term financing to support US-based SunPower’s solar manufacturing operations in the Philippines. The funding will support SunPower’s 108MW solar cell and module manufacturing plant in Laguna and a 466MW solar cell fabrication facility in Batangas. Such investments in the solar photovoltaic supply chain are a critical part of IFC’s climate change strategy, as solar energy is a reliable source of carbon-free electricity that can be used in grid-connected and off-grid applications.

• cHINA: XINAo IFC’s investment in China’s XinAo Group supported construction of China’s first large-scale, thin-film-based solar module manufacturing facility, helping to drive down production costs and stimulate the development of the local solar photovoltaic market. IFC’s commitment also has helped catalyze additional funding from commercial banks and other lenders. The effort will help make solar power a more affordable alternative to traditional sources of electricity.

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“ IFC seeks to incorporate recycling into its investments where

such investments can help improve our clients’ business.”

Waste reduction and recycling

In many sectors, substantial energy savings result from recycling rather than from manufacturing new materials. IFC seeks to incorporate recycling into its investments where such investments can help improve our clients’ business. We can also help support development of our clients’ upstream waste collection networks where the collected material feeds into their downstream processing operations and also results in better public waste management.

• tHe AgrIBUSINeSS Sector agribusiness produces vast quantities of waste streams which are valuable resources. Composting and organic matter can fertilize soil and improve crop yields. Biogas can be generated from animal waste and agricultural residues (rice husks, fruit wastes, straw). Bio-diesel, a clean burning alternative fuel, can be created from a variety of oils derived from oilseeds, cellulosic materials and animal fats.

• tHe foreSt proDUctS Sectorwe have helped several paper manufacturing clients develop recycling networks. We have helped clients make paper from sugarcane bagasse and wheat straw. We also support the manufacturing of wood-based panels from low-value wood scraps that otherwise would decay.

• tHe MetAlS Sectorwe invest in steel recycling and have supported several foundry companies whose operations are based on melting of recovered steel.

• tHe glASS Sectorwe support investments to recover and sort increased waste glass (cullet) volumes. Cullet use in glass manufacturing reduces costs of both energy and raw materials.

• geNerAl WASte MANAgeMeNtwe support initiatives to develop landfill sites for waste management whereby methane can be captured and used for power generation or disposed of in a way that reduces greenhouse gas emissions.

In some countries, IFC’s investments in waste recycling have introduced the concept of recycling and organized waste-paper collection. In other countries, such as Egypt, our investments have significantly expanded the recycling market.

• coloMBIA’S cArtoNeS AMerIcA is broadening its green influence by recycling an estimated 120,000 tons of waste paper each year for use in manufacturing products including containerboard and corrugated boxes. It promotes the creation of small businesses and strengthens the long-term viability and profitability of the waste-paper collection industry throughout the Andean Region.

• BUlgArIA’S DrUjBA A.D received an IFC fast-track loan for an investment that increased the use of recycled waste glass and significantly improved energy efficiency at Drujba’s Sofia and Plovdiv plants.

• egypt’S WADI IFC is helping leading agribusiness firm Wadi resolve a significant problem: the company generates high volumes of organic waste from its agriculture, food processing and olive oil manufacturing operations. IFC’s technical experts showed the company a way to modify its composting methods for organic matter that is enhancing the productivity of its vineyards and olive orchards, while reducing waste. Guidance also includes direction on treatment of nutrient rich vegetable water from olive oil processing facilities for use in irrigating Wadi’s olive groves.

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Agriculture uses around 70% of the world’s fresh water, while manufacturing (steel, food processing, pulp and paper processing, textiles) and some buildings (like hospitals and hotels) are water intensive sectors.

IFC provides advisory and investment assistance to help clients identify and adapt to water-related risks exacerbated by climate change, making projects more resilient to existing and potential adverse impacts. This includes input on project design or new technologies – such as drought resistant seeds or more efficient water desalination systems – for clients operating or planning to operate in water-stressed areas. Advisory tools like the Water Footprint Assessment help clients to understand the volume of water consumed in their operations and supply chain, while Cleaner Production assessments can identify water-saving opportunities in our client’s operations through processing improvements, waste water treatment and re-use, and better irrigation techniques.

efficient Water Use

• INDIA: jK pAper An IFC supported assessment of two of JK Paper’s paper plants, identified over 15 measures to reduce water usage, notably including: eliminating water leakages, changing once-through water systems to closed loop systems and replacing fresh with recycled water. As part of a package of energy and water-saving projects financed with an IFC cleaner production loan, these measures are expected to save 3.4 million m3 of water p.a., representing 17% average savings for the two plants.

• MAlDIVeS: UNIVerSAl cplp Universal Enterprises Private Limited (Universal) is one of the largest integrated tourism companies in the Maldives, a water-stressed country. With support of an IFC cleaner production loan, this client implemented projects to improve energy and water efficiency, including measures to improve the specific energy consumption of sea water pumps and reverse osmosis systems; install an efficient reverse osmosis system and improve system efficiency through a maintenance program; reduce overall water consumption and replace inefficient bore well pumps. This project is expected to result in annual savings of around 21,000 m3 of water, implying 4.7% reduction in average water consumption per room in four resorts.

• INDIA: jAIN IrrIgAtIoN IFC and its client Jain Irrigation Ltd, a major Indian producer of dried fruits/vegetables and of micro irrigation systems, are conducting a water footprint assessment of onion and mango farms in Western India to identify the best irrigation technologies to deploy throughout Jain’s supply chain. IFC’s US$60 million in investments, which supported increased production of the company’s micro irrigation systems, is expected to result in annual water savings of 700 million m3 in the agriculture sector.

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carbon Sequestration and Avoided Deforestation

Commercial plantations and natural forests in the forest products sector, as well as perennial woody agricultural crops like coffee, cocoa and rubber play a key role in removing carbon dioxide from the atmosphere through photosynthesis. In forestry, studies show that each cubic meter of new forest growth removes nearly 1 ton of CO2 from the atmosphere. IFC invests in sequestration projects, both as stand-alone plantations and in association with downstream pulp, wood, or food processing projects. Both forestry and agriculture provide new sources of income for thousands of poor farmers and forest workers. In the forestry life cycle, CO2 is removed from the atmosphere – not only as trees grow but also after they are transformed into durable wood or paper products.

Deforestation and forest degradation are the second leading cause of global warming, responsible for about 20% of global greenhouse gas emissions, which makes the loss and depletion of forests an important driver of climate change. IFC supports efforts among its clients and member countries to reduce emissions from deforestation and forest degradation (REDD) by supporting sustainable management of natural forests and avoided deforestation projects.

“ Stora Enso has a good reputation in

sustainability among financiers, and

that helps us in receiving funding”Stora Enso’s Senior Vice President, Markus Rauramo.

• tANZANIA greeN reSoUrceS IFC is supporting Green Resources’ ambitious reforestation project, estimated to sequester 10 million tons of CO2 equivalent from a single new plantation in Tanzania over the course of 10 years. The effort will reduce the amount of greenhouse gas in the atmosphere and help offset Africa’s rising level of deforestation. Future plans include certification by the Forest Stewardship Council to ensure that the company’s plantations in Mozambique, Tanzania and Uganda are environmentally and socially sustainable.

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• IFC helped Stora Enso, a market leader in forest products, enhance its plantation practices in China through a training program for forestry workers. The program aims to develop a core group of trusted sub-contracting companies able to undertake forest planting, cultivation, and harvesting operations to a high standard. IFC’s financing and advisory services will contribute to projects sequestering approximately 2 million tons of CO2 each year and will help reduce China’s reliance on unsustainable timber imports and fiber.

• In India, IFC’s forest products clients sequestered 2 million tons of CO2 in 2007, and estimates suggest the number will increase to 3.5 million tons of CO2 by 2010.

Financial Products

financial products and Advisory Services

IFC provides long-term loans, equity and quasi-equity financing. We finance greenfield projects, and we also make investments to expand and upgrade our clients’ existing operations. The scope of projects can extend both upstream – for example, to

“green” a company’s supply chain – and downstream, to green its transportation and delivery network. Typical structures include project finance, corporate loans and revolving facilities.

We have also started making direct investments in energy service companies (ESCOs) as another vehicle to support investments in energy efficiency, use of renewable energy and water savings in manufacturing, agribusiness and service sector companies. However, we can engage with clients on a project-specific basis, as many of our structures are flexible and can be tailored to suit clients’ needs.

We are working with our clients on projects to demonstrate the business case for mitigating climate change. In addition to our standard financing products, “fast track” loans of typically up to US$5 million are currently available to existing portfolio clients to finance cleaner-production projects. Such projects usually result in quantifiable cost savings and environmental benefits.

IFC supports the growth and transfer of clean technology in emerging markets through several financing platforms, and at various stages of development. For early stage companies, IFC can make venture capital investments. IFC can take an equity position of up to 20 percent and invest from US$2 million to US$30 million in select companies that have completed research and development and need capital for commercialization or to increase production capacity.

Senior debt

• on-lending

• liquidity management

• Acquisition financing

• Warehousing facilities

• Syndicated loans

Structured Finance

• partial credit guarantees

• Securitization

• Bond underwriting

mezzanine Finance

• convertible debt

• Subordinated debt

Private equity

• common shares

• preferred shares

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advisory ServicesIFC can also provide a range of advisory services for clients who are willing to investigate climate change mitigation and adaptation opportunities in their businesses but lack the expertise or other resources to identify such opportunities.

In most regions, IFC now has cleaner production advisory programs which locally support assessments to help clients identify potential cost saving opportunities in the areas of energy efficiency, use of renewable energy, recycling, water savings, and/or materials efficiency along their value chain. This allows our clients to learn about new technologies and projects with a business case and environmental and climate change mitigation benefits – and even “green branding” reputational advantages in some cases. Projects identified by such work can be funded either through our standard investment products or by our “fast track” cleaner production loan product.

In the forest products sector, our advisory work has also supported carbon sequestration and waste recycling through improved forest and plantation management, increased productivity across supply chains and better utilization of waste paper. Examples include support to IFC’s pulp and paper clients in India to develop farm forestry operations, work on plantations on degraded land in Indonesia, and third-party sub-contractor development in China. IFC’s Forest Industries Carbon Assessment Tool (FICAT) helps companies measure and report their carbon footprints and identify areas for improvement. Firms can use this tool to calculate impacts for each of their operational sites, or for any stage of the forest life cycle.

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For more information please contact:

nina Zegger 1-202-473-0739 or nZegger@ifc.orgStephanie J. miller 1-202-458-5815 or SJmiller@ifc.org

2010 Ifc

2121 pennsylvania Avenue, N.W.

Washington, D.c. 20433 U.S.A.

telephone: 202 473-1000

facsimile: 202 974-4384

ifc.org

IFC has a dedicated in-house team to help advise clients of potential carbon finance opportunities and realize value from their carbon credits. IFC’s flagship product, the Carbon Delivery Guarantee, allows IFC to use its AAA-rated balance sheet and to serve as an intermediary between forward sellers of Certified Emissions Reductions and buyers, facilitating market access and transparency. Other structures exist to incorporate carbon finance elements into IFC projects for clients that already have registered CDM projects.

Carbon Finance