Scaling up MIGA'S work

Mainstreaming Climate Action
MIGA supported 32 projects1 with climate mitigation or adaptation and resilience benefits in FY23.
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MIGA provided guarantees for climate mitigation or climate adaptation and resilience totaling $1.5 billion— an increase from $1.1 billion in FY22, marking the highest climate finance volume in MIGA’s history.

Climate finance projects spanned 23 countries and the West Bank and Gaza across four regions: Sub-Saharan Africa (SSA), Middle East and North Africa (MNA), Latin America and the Caribbean (LAC), and Europe and Central Asia (ECA).

Among MIGA’s 32 climate finance projects, 72 percent guaranteed equity or equity-like investments while the remainder guaranteed debt instruments.

The 32 projects signed in FY23 will help avoid an estimated 826,464 tons of carbon dioxide equivalent emissions (tCO2e) per year.

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Climate finance accounted for 28 percent of MIGA’s guaranteed investments, which matches the 28 percent achieved in FY22.2

Of the climate finance projects enabled by MIGA guarantees, 19 percent supported projects in fragile and conflict-affected situations, with 28 percent in countries eligible for receiving assistance through the World Bank’s International Development Association (IDA), which serves the world’s poorest countries.

MIGA mobilized a total of $1.8 billion in private sector equity and debt through its climate finance guarantees in FY23; MIGA further crowded in private capital by reinsuring a portion of its climate finance guarantees in the private reinsurance market.

  1. One of the projects is in the West Bank and administered under MIGA’s West Bank and Gaza Trust Fund.
  2. Until FY21, climate finance exposures were reported as a percentage of the total gross issuance volume. From FY22 onwards, MIGA modified the methodology for climate finance reporting to align more closely with the MDB private capital mobilization methodology. MIGA now computes climate finance as a percentage of the underlying loan or equity investment guaranteed, as opposed to the entire guaranteed exposure. Under the previous methodology, in FY23 the dollar value of MIGA’s total climate finance would have been somewhat higher, with the overall percentage somewhat lower.
Greening the financial sector through MIGA’s project work

In FY23, 46 percent of the climate finance delivered through MIGAguaranteed projects supported “greening” financial institutions across the LAC, ECA, SSA, and the MNA regions. Engagement with financial clients for climate activities was executed through two MIGA guarantee products: capital optimization for private sector financial institutions and non-honoring of sovereign financial obligations, available to eligible public sector institutions.

Overall, MIGA guaranteed 20 transactions supporting the financial sector in developing countries, totaling $3.1 billion, including $705 million for climate finance. MIGA also offered technical support to financial institutions to accelerate climate commitments and incorporate climate actions into business practices. Three MIGA-supported climate finance projects in the financial sector are highlighted below.

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Working in partnership with financial institutions across the globe, MIGA can make a tangible difference in improving the lives of people and in preserving a livable planet. Hiroshi Matano Executive Vice President, MIGA

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Botswana

MIGA’s partnership with the Botswana Development Corporation (BDC), the leading development finance institution in Botswana, is expected to enhance the climate resilience of the country's private sector. BDC will use 100 percent of a $52 million long-term loan from Commerzbank Aktiengesellschaft, guaranteed by MIGA’s non-honoring of a financial obligation by a state-owned enterprise (NHFO-SOE) instrument, for climate mitigation and climate adaptation projects in the Botswana private sector. These loans from BDC to the private sector will diversify the economy, reducing its reliance on diamonds, and enhance climate resilience—an example of how MIGA collaborates with partners in the public and private sectors to magnify “win-win” outcomes by connecting development and climate action.

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BDC’s loans to the private sector will help enhance climate resilience and foster economic diversification—an example of how MIGA, partnering with the public and private sectors, can magnify “win-win” outcomes for climate and development. Junaid Ahmad Vice President, MIGA, Operations

MIGA is playing a pivotal role in supporting BDC’s transition towards embedding climate considerations into its lending practices in a country that is particularly vulnerable to the effects of climate change, especially water availability, changing precipitation patterns, and increasing population demands. The program that has been developed between MIGA and BDC is fully consistent with Botswana’s Intended Nationally Determined Contribution (“INDC”) and its National Adaptation Plan Framework, which specifically calls for Botswana’s development banks to finance adaptation projects as part of the larger plan to engage and leverage the private sector for positive climate outcomes. This project is expected to have a “demonstration effect” on other credit institutions in the country, providing an example of how to better integrate climate adaptation finance into the financial system.

MIGA will work to support BDC in building its approach to mainstreaming climate adaptation finance in its lending operations. MIGA’s support is expected to include capacity building activities focused on climate risk methodologie. BDC’s climate adaptation activities will focus on activities that integrate measures to manage physical climate risks in projects to ensure that the intended objectives are realized—an increasingly urgent goal in responding to the accelerating impacts of climate change.

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Argentina

Argentina is highly vulnerable to climate change, mainly due to risks from droughts and floods. Over the last year, Argentina has been experiencing a severe drought which has crippled agricultural output resulting in a projected contraction of GDP of 2.5 percent in 2023, according to the International Monetary Fund (IMF). In FY23, MIGA, working closely with its long-standing client—Banco Santander S.A. and its subsidiary in Argentina— increased an existing capital optimization guarantee, a special application of MIGA’s political risk insurance (PRI) instrument, that enables the expansion of lending by Banco Santander Argentina. The increase of $100 million in the guarantee amount will be directed on a best-efforts basis to support lending for climate finance in the country with an emphasis on renewable energy and sustainable agriculture projects. These activities are aligned with the country’s new 2022 Climate Change Adaptation and Mitigation Plan which focuses on expanding renewable energy, agro-ecology and sustainable transport; controlling deforestation and conserving natural ecosystems; and improving livestock practices.

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Although MIGA has provided guarantees in the past to support Santander Argentina’s climate finance lending, MIGA, in line with its strategy of helping “green financial systems,” is deepening its engagement. As part of MIGA's strong and continuing partnership, Santander Argentina is planning to implement enhanced procedures for screening and reporting climate finance. MIGA is also providing support to build Banco Santander Argentina’s internal capacity to help address climate change.

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Colombia

Also in Latin America, MIGA worked to help support the climate aspirations of Financiera de Desarrollo Territorial S.A (Findeter), a client it has worked with previously. Reflecting Findeter’s public sector role, MIGA deployed its credit enhancement guarantee (NHFO-SOE) to unlock JP Morgan’s commercial loan of almost $135 million to this Colombian development bank. Of the loan proceeds, a large portion will be used by Findeter to finance climate infrastructure projects with an emphasis on renewable energy, energy efficiency, sustainable public transport, and water and sanitation. These projects will help Colombia diversify its energy mix and reduce climate risks while fostering green and inclusive economic growth.

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Findeter is a signatory member to Colombia’s Green Protocol, a voluntary framework with guidelines that aim to promote green finance. Its principles include best practice approaches for climate risk management and the development of new financial activities and products targeted at green-oriented development in the country. In support of these effort, MIGA will work with Findeter to help put in place a process to track and report on climate-related investments.

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MIGA projects supporting economic growth and low carbon development

FY23 saw 54 percent of climate finance from MIGA-guaranteed projects supporting real sector projects across LAC, ECA, SSA, and the MNA regions. MIGA’s guarantees supported projects delivering climate finance in each of MIGA’s three real sector divisions: Energy and Extractive Industries (26 percent of climate finance); Infrastructure (18 percent of climate finance); and Manufacturing, Agriculture, and Services (10 percent of climate finance).

Across the 15 projects with climate finance MIGA supported in the real sector, one was provided through MIGA’s Non-Honoring of Financial Obligations products, with the remaining projects supported by MIGA’s political risk insurance product. By number of climate finance projects, MIGA’s real sector projects were concentrated in SSA, where MIGA delivered nine climate finance projects. In total, in the real sector, MIGA delivered $826 million in climate finance. Three MIGA-supported climate finance projects in the real sector are highlighted below.

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Democratic Republic of Congo

Off-grid solar power is a promising technology to bridge the electricity access gap in rural areas without grid-connected power. MIGA is partnering with Bboxx, an innovative company operating in Africa, to expand access to this technology. In FY23, MIGA expanded this collaboration, supporting Bboxx’s operations in the Democratic Republic of Congo (DRC) through political risk insurance cover to the Facility for Energy Inclusion’s Off-Grid Energy Access Fund (FEI-OGEF LP). Bboxx aims to increase access to affordable and reliable clean energy, boost economic growth, reduce GHG emissions, and create jobs through decentralized solar-powered systems. Individual solar home systems include equipment such as lights, television, and refrigerators. Bboxx is also promoting clean cooking, an urgent development issue with significant benefits for public health, gender equality, the local environment and the global climate, through liquified petroleum gas and small gas burner products. (See The World Bank Group: Innovating Solutions to Bridge the Energy Access Gap).

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Kenya, Namibia

In SSA, MIGA continued its partnership with Kasada Hospitality Fund, supporting its equity investments aimed at refurbishing, or acquiring new hotels, that meet green building standards. In FY23, MIGA signed three additional political risk insurance contracts with Kasada under a master contract signed in FY21, bringing the total number of individual guarantee contracts signed by the end of FY23 to 12, with a total gross issuance of $125.5 million. Kasada aims to establish a portfolio of over 20 hotels (estimated at 4,000 hotel keys), requiring a total investment of $1 billion, comprised of both equity and debt.

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Kasada is committed to achieving “green-building” certification for each of its MIGA-supported facilities. Both hotels are expected to be certified as Green Buildings according to International Finance Corporation (IFC)’s EDGE standard. This certification necessitates achieving a minimum of 20 percent energy, water, and “embodied energy” savings in materials compared to a conventional building in the country. Kasada Hospitality Fund is a private equity fund established by Accor, the 6th largest hotel management company in the world, and Qatar Investment Authority, Qatar’s Sovereign Wealth Fund.

The projects supported by MIGA in FY23 provide MIGA’s political risk insurance for two hotels: one in Nairobi, Kenya ($25 million covering equity and $3 million covering a shareholder loan); and the second in Windhoek, Namibia ($18 million covering equity). All three contracts cover the risks of Expropriation, Transfer Restriction, and War and Civil Disturbance, with coverage periods of up to 15 years for the two contracts covering equity, and five years for the one contract covering the shareholder loan. Both hotels are expected to achieve EDGE certification. These investments mark Kasada Hospitality Fund’s initial ventures with MIGA in these two countries; its existing MIGA-supported investments are in Côte d'Ivoire, Cameroon, and Senegal.

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Mexico

Mexico’s updated 2022 Nationally Determined Contribution—the country’s climate action plan to cut emissions and adapt to climate impacts, under the Paris Agreement—emphasizes the modernization of existing hydro power plants. In FY23, MIGA collaborated with Comisión Federal de Electricidad (CFE), Mexico’s state-owned integrated utility, deploying a MIGA NHFO-SOE to successfully secure long-term financing of 15 years from two private sector commercial banks (JPMorgan Chase Bank, N.A. and Hongkong and Shanghai Banking Corporation Limited) for the project. The proceeds of the underlying project loan of $326 million covered the modernization of seven existing large hydropower plants. The modernization of the seven hydro-power plants will enable an increase in renewable energy generation by 113 MW, producing about 1,426 GWh of additional electricity per year and preventing more than 500,000 tons of CO2e emissions annually. Additionally, the operational lifespan of the HPPs will be extended by decades—potentially up to 40 years.

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Hydropower is sensitive to water availability, including water scarcity and potential flood risk. In Latin America, water resources are vulnerable to climate change, which could reduce dry season hydropower potential. When combined with the challenge of deforestation, climate change can significantly heighten the inter-annual variability of hydropower generation. The locations of the seven HPPs indicate that they are not at risk from droughts and water scarcity, and the modernized turbines will be more resilient to increased water flow. As part of the Environmental and Social Action Plan (ESAP) agreed between MIGA and CFE, CFE will develop and implement Emergency Response Plans for each of the seven HPPs, addressing risks from extreme rainfall, floods, and landslides, and adopting relevant measures to mitigate these risks.

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innovation
The World Bank Group: Innovating Solutions to Bridge the Energy Access Gap

Sustainable Development Goal 7 aims to ensure access to affordable, reliable, sustainable, and modern energy for all by 2030. However, the World Bank estimates that, at the current rate of electrification, over half a billion people in SSA will still lack electricity access in 2030. To meet Sustainable Development Goal 7, the current rate of electrification would need to triple.

The World Bank has put forward that decentralized renewable energy (DRE) represents the swiftest and most cost-effective way to accelerate electricity access in rural areas, particularly in Fragility, Conflict, and Violence settings. DRE systems typically involve solar photovoltaic stations paired with battery storage. They can be easily installed, are dependable, and do not require the large investment needed to build a utility-scale power plant. Nonetheless, national grids, interconnected regionally through financially viable utilities, will continue to play a central role in achieving universal energy access, especially in urban, peri-urban, and relatively nearby rural areas.

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Enabling electricity access through DRE requires a different approach than traditional infrastructure investments in national grids. An innovative approach is also needed to accelerate minigrid and off-grid solar markets. In response to this urgency, the World Bank Group initiative, Distributed Access through Renewable Energy Scale-Up Platform (DARES), has selected nine focus countries.* DARES calls for collaborative efforts between governments, private investors, and development agencies to address Africa’s immediate power requirements and amplify the development of distributed generation solutions.

For MIGA, successful execution of DARES hinges on partnerships with “patient” capital investors and enhanced collaboration with IDA, IBRD, IFC, and other MDBs to overcome barriers to private sector involvement. These strategies must be coupled with blended finance and donor support to unleash MIGA’s innovative risk mitigation tools and expertise, particularly in the most challenging markets.

Concretely, MIGA’s approach underscores:

  • Innovative risk-mitigation solutions tailored to address the distinct risks associated with distributed energy and underserved segments, while spurring private sector engagement;
  • Partnerships with patient capital investors and impact investors to facilitate scale, project aggregation, and transactional efficiency;
  • Technical assistance and capacity building to champion best practices and augment development outcomes;
  • Targeted grants to enhance financial sustainability and amplify development impact;
  • Blended finance-facilitated risk-sharing arrangements to expand MIGA’s influence and reach; and
  • Robust collaboration with IDA, IBRD and IFC to jointly create, scale, and replicate innovative solutions.

DRC is among the countries where DARES is being launched, and the challenge is particularly pressing. Only 19 percent of DRC's 108 million people have access to electricity – roughly 41 percent in urban areas and just 1 percent in rural regions, according to World Bank Group estimates. Working from a unified implementation plan, the World Bank Group aims to:

  • Expand mini-grid construction through market-driven private sector approaches;
  • Accelerate off-grid solar markets by expanding the sale of off-grid solar products;
  • Electrify schools and healthcare facilities with solar PV systems;
  • Empower farmers by advocating for DRE solutions to enhance food security; and
  • Harness commercial and industrial customers to replace diesel with sustainable mini grids.

MIGA is enhancing its guarantees to support off-grid initiatives in DRC (as exemplified by the Bboxx project) by building upon the groundwork laid by IDA and IBRD to enhance the enabling environment for off-grid solutions and leveraging IFC’s Scaling Mini-Grid program in DRC. MIGA is working to establish a robust pipeline of bankable private sector projects to begin to close the energy access gap sustainably in DRC and across SSA.

*The nine countries are Central African Republic, Chad, DRC, Ethiopia, Liberia, Mozambique, Niger, Nigeria, and Uganda.

We need to turn energy access from a roadblock to the driver of green, resilient and inclusive development. MIGA’s support for off-grid and mini-grid projects is helping to power change. Hiroshi Matano Executive Vice President, MIGA

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MAKING CLIMATE ACTION COUNT climate-action