The FINANCIAL — Bank of America announced a Catalytic Finance Initiative, designed to stimulate at least $10 billion of new investment into high-impact clean energy projects. The initiative will focus on developing or advancing innovative financing structures that reduce investment risk, thereby attracting a broader range of institutional investors, according to Bank of America Corporation.
“We want to take a leadership role in helping remove barriers to investment in clean energy projects around the world,” said Brian Moynihan, Bank of America chief executive officer. “The capital we commit and our strong global client and institutional investor relationships can lead to considerable additional investments in a lower carbon future,” he added. Moynihan was the only U.S. CEO who spoke today at the United Nations Climate Summit Finance Session.
As part of the initiative, Bank of America will commit $1 billion in capital to investment structures that employ a range of de-risking tools, developed in conjunction with development finance institutions (DFIs), insurance providers, foundations and institutional investors. The goal of the initiative is to make clean energy investments more financeable, particularly in emerging markets where project impact is often amplified – addressing other large-scale issues like health, education and job creation, according to Bank of America Corporation.
The Catalytic Finance Initiative will broaden the impact of the bank’s work with partner organizations and drive at least $10 billion of incremental capital in investments in renewable energy, energy efficiency and energy access. It will target primarily larger-scale financing opportunities that use de-risking structures such as first loss and mezzanine tranches, risk guarantees and new insurance products to crowd-in capital that would not otherwise be deployed in this sector. The bank will also explore opportunities to work with foundations and impact-focused clients to support smaller, energy access opportunities, using innovative catalytic first-loss capital and other forms of credit support.
“In recent years, there’s been increased focus on de-risking tools that can be used to support clean energy and energy efficiency investment,” said Purna Saggurti, Bank of America Merrill Lynch chairman of Global Corporate and Investment Banking. “We look forward to expanding our work with DFIs, investors and peers to develop approaches to credit enhancement, blended finance and aggregation structures that will open the door for a rapid rise in investment in this area,” Saggurti added.
“The financing gap is significant, and we really welcome Bank of America’s leadership in this area. We look forward to working with them and other global banks to accelerate private sector investment into renewable energy, energy efficiency and energy access,” said Rachel Kyte, group vice president and special envoy for Climate Change, World Bank Group.
“Bank of America’s bold contribution demonstrates the leadership and public-private partnership required to catalyze action towards a low-carbon economy. Transformative change will follow many such initiatives,” said Achim Steiner, UN Under-Secretary-General and executive director of United Nations Environmental Programme.
“It is essential to bring together both private and public funding if we are to secure the investment needed to address the problems created by climate change. The European Investment Bank is committed to supporting clean energy investment around the world. Initiatives such as Bank of America’s for catalytic finance help to increase the opportunities for institutional investors. We particularly welcome its clear aim to increase co-operation between development finance institutions and private capital,” said Jonathan Taylor, European Investment Bank vice president responsible for climate action.
“Accelerating clean energy investments globally isn’t just about needing stronger government policies that will incentivize low-carbon technologies. It’s also about creating a broader array of financing vehicles that investors can utilize to stimulate capital flows. Bank of America’s new initiative is hugely important because it acknowledges this financing gap and aims to help fix it,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk.
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