Supporting the climate change mitigation and adaptation efforts of our clients

The Paris Agreement in 2015 reaffirmed the urgency of rapidly reducing global greenhouse gas emissions in order to achieve carbon neutrality in the medium term. To actively contribute to this huge challenge, Proparco has made promoting low-carbon development, resilient to the impacts of climate change, central to its strategy for 2020-2022. Despite a difficult economic context, 16 projects with climate co-benefits were financed in 2020, only 3 less than in 2019. The 13 projects with mitigation co-benefits are expected to reduce emissions by 719,000 tCO2 eq per year. In terms of adaptation, Proparco stepped up its commitments in 2020, with 3 projects financed that support the adaptation or resilience of economies and people to the impacts of climate change.

Three of our clients’ projects with adaptation co-benefits financed in 2020

In 2020, Proparco stepped up its financial commitments for private projects that contribute to adaptation to the impacts of climate change by financing three of our clients’ projects in sectors particularly vulnerable to climate change - agriculture, and manufacturing industries: • In Zimbabwe and Zambia, a $25 million loan to

Seedco, the leading African seed manufacturer (see box opposite); • In Kenya, a $18.7 million loan to Kenya Nut

Company, including $4 million to install a drip irrigation system that will save water; • In Egypt, a $20 million loan to T&C Garments, a jeans manufacturing factory (see box opposite).

Loan Contributing to climate change adaptation for agriculture in Sub-Saharan Africa (Zimbabwe)

While agriculture was a pillar of Zimbabwe’s once thriving economy, agricultural yields and production have plummeted over the last 20 years. The $25 million loan to Seedco Group, the leading African seed manufacturer, will finance the development of hybrid field seeds better adapted to climate change and the construction of a corn drying unit to reduce crop losses related to climate hazards and increase yields.

Loan Supporting the growth and green initiatives of T&C Garments in Egypt

Through a $20 million loan to one of the leading jeans manufacturers in Egypt, Proparco is supporting the launch of two green initiatives: to improve wastewater filtration combined with the installation of a recycling system to reduce water consumption by 90%, and install solar panels that will meet 30% of the factory’s electricity needs.

13 projects financed with mitigation co-benefits, with 719,000 tons of CO2 eq avoided per year

In 2020, Proparco supported the energy transition, while improving access to renewable energy for companies and people by financing 13 projects that are expected to avoid 719,000 tCO2 eq per year on average, including 85% in lower middle-income countries and 28% in fragile or conflictaffected countries. These projects account for € 266 million of financing for projects with climate co-benefits and include: • 7 credit lines fully or partly dedicated to the climate with financial institutions in Kenya, Costa Rica, Paraguay,

Brazil, Turkey and Vietnam; • 2 “business” projects in the agriculture sector in Nigeria and in the service sector in Cameroon; • 4 solar infrastructure projects: in Latin America, Africa and India. These projects have a future installed capacity of 600 MW and an expected renewable power generation capacity of 954 GWh.

719,000 tons

of CO2 equivalent avoided per year Equity investment Supporting decentralized energy solutions for Commercial & Industrial (C&I) companies in Nigeria

Proparco is supporting Daystar Power, one of the main providers of hybrid solar energy solutions for companies in West Africa. The facilities should supply about 153 GWh of reliable and clean electricity per year to companies by 2025. They will thereby contribute to reducing their dependence on diesel and improving their energy supply. 127,000 tCO2 eq will be avoided per year.

This project is carried out with the support of the European Union

Volume of emissions of tCO2 eq avoided reached 59% of forecasts for 2020

The volume of emissions of tCO2 eq avoided every year by projects signed in 2020 only corresponds to 59% of the adjusted forecast, which takes into account the actual proportion of climate finance in signatures in 2020. This result is due to the unprecedented sectoral breakdown of climate projects signed in 2020: a single energy infrastructure project in the energy, digital and infrastructure (ENI) sector was signed in the context of the health crisis, whereas these projects have historically contributed the most to the volume of emissions avoided. This project, which only represents 5% of climate finance in 2020, accounts for 58% of the expected total volume of avoided emissions per year. The evolution in the expected results for tCO2 eq emissions avoided per year by projects signed since 2015 is shown below.

Number of tons of CO2 eq avoided per year

Atypical projects

1,650,000 1,600,000 1,529,000 +1,070,000(1)

1,980,000

719,000 1,930,000

Adjusted forecast 1,219,000

PROJECTS SIGNED IN

2015 2017 2018 2019 2020 [Forecast for 2020]

Voices from the Field

CLIMATE & RENEWABLE ENERGY

By Philippe Serres

South America Regional Director

Towards a low-carbon trajectory

With 75% of the population living in cities, Latin America is one of the most urbanized regions in the world. It has already achieved its demographic transition, while the transition towards a low-carbon growth model has only just started. The challenge therefore lies in developing projects on climate change and adaptation, in line with this urban reality. While the energy mix is already very green in many countries, the main development challenge in this region lies in the industry, public transport and water and sanitation sectors.

What is your assessment of the region for 2020?

In 2020, Proparco’s Regional Department for South America is proud to have a great harvest for financing with climate co-benefits. A total of nine projects were approved for €347 million, including six with climate co-benefits for €236 million: three credit lines, two projects for transport infrastructure and one project for water and sanitation. With over two-thirds of our commitments classified “climate”, our results in 2020 clearly reflect the priority given to the climate issue in this region. For example, we have financed the first fleet of electric buses in Bogota, alongside the local development bank Financiera de Desarrollo Nacional (FDN), via a loan for the equivalent in Colombian pesos of €44 million to replace old diesel buses with 250 electric buses. With this flagship project, we are contributing to the achievement of SDGs 11 (Sustainable cities and communities) and 13 (Climate action).

What impacts has Covid-19 had on the operational activities?

Generally speaking, the non-essential activities targeting consumers (tourism, non-food retail sector, passenger transport) have suffered the most. This has led to lower turnovers to differing degrees. The renewable energy and water and sanitation projects have been considered as essential services and their implementation has never been compromised. Some clients in the hospital sector have been temporarily affected.

€236 M of projects with climate co-benefits approved in South America in 2020

What response have you had to develop?

In the very first days of this crisis, Proparco started discussing with all its clients to anticipate any difficulties and look at solutions. Firstly financial solutions, via the possibility of allocating liquidity lines or restructuring existing commitments, but also technical, for example, by sharing best practices for protecting staff. In the end, only two clients experienced a fall in turnover to the extent that they had to negotiate a restructuring of their debt. In both cases, Proparco was responsive to its clients to provide them with appropriate and swift support. This did not prevent us from continuing to finance new counterparties in 2020, which reflects our countercyclical role.

What is the outlook for the region in 2021?

We are particularly optimistic for 2021, even if it will take longer than expected to recover from the crisis. The prospects for the climate are very positive. In Brazil, we are seeing progress with projects that will contribute to strengthening the country’s low-carbon trajectory in the fields of water and sanitation, street lighting and metro concessions. In Ecuador, we are closely following bid invitations for the construction of solar and wind power plants. Finally, building on our first experience with electric mobility in Colombia, we would like to finance new concessions for electric buses in the region. As in 2020, we have also identified growth drivers for our “climate” commitments through the allocation of green credit lines to commercial banks.