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Bank of America introduces a Catalytic Finance Initiative, designed to stimulate at least $10 billion of new investment into high-impact clean energy projects to cut carbon emissions. The initiative will focus on developing or advancing innovative financing structures that reduce investment risk, thereby attracting a broader range of institutional investors.
“The capital we commit and our strong global client and institutional investor relationships can lead to considerable additional investments in a lower carbon future,” said Brian Moynihan, Bank of America chief executive officer who also spoke at the United Nations Climate Summit Finance Session.
As part of the initiative, Bank of America will commit US$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.
The Catalytic Finance Initiative will broaden the impact of the bank’s work with partner organizations and ensure that at least $10 billion of incremental capital is deployed 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.”
Bank of America’s $70 billion multi-year environmental business commitment
Since 2007, Bank of America has dedicated $31.7 billion to low-carbon and other environmental business activities. In June 2012 in conjunction with the Rio+20 United Nations Conference on Sustainable Development, Bank of America announced a 10-year, $50 billion environmental business goal to advance lower-carbon economic solutions through lending, equipment finance, capital markets and advisory activities, carbon finance and investment advice and solutions for clients around the world. The $50 billion commitment followed an initial $20 billion multi-year environmental business commitment announced in 2007 that was achieved four years ahead of schedule.
(Photo Credit: Mike Mozart via Flickr, shared by CC 2.0)