Innovative Finance Facility for Climate in Asia and The Pacific (IF-CAP)
The Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP) is a flagship initiative of the Asian Development Bank (ADB) designed to significantly scale up financing for climate action in developing member countries.
Overview and Purpose
IF-CAP is a multi-donor financing partnership facility, the first leveraged guarantee mechanism for climate finance ever adopted by a multilateral development bank (MDB). The region of Asia and the Pacific is highly vulnerable to climate change impacts and faces a substantial climate financing gap. IF-CAP helps bridge this gap by using a unique model:
- Leverage Mechanism: Partner countries provide guarantees for parts of the ADB's sovereign loan portfolios.
- Capital Release: By shouldering some of the default risk, these guarantees allow the ADB to reduce the capital it holds for credit risk, thus freeing up more capital for new climate loans.
- Multiplier Effect: For every $1 in guarantees committed by partners, the ADB can generate up to $4.5 to $5 in new climate finance.
Key Details and Partners
IF-CAP aims to raise over $11 billion in new climate finance through initial guarantees of $2.5 billion. The additional funds will support climate change mitigation and adaptation projects, with 80% allocated to sovereign lending and 20% to private sector involvement. The facility will not support new or existing fossil fuel projects. Founding partners providing guarantees include Australia, Denmark, Japan, the Republic of Korea, Norway, Sweden, the United Kingdom, and the United States. A Grant Trust Fund also supports technical assistance and capacity building. This aligns with the ADB's goal of providing $100 billion in climate finance from 2019 to 2030.
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