Bank of America has announced an initiative designed to stimulate at least $10 billion of new investment into clean energy projects. According to the company, the Catalytic Finance Initiative will focus on developing or advancing innovative financing structures that reduce investment risk, thereby attracting a broader range of institutional investors.
‘We want to take a leadership role in helping remove barriers to investment in clean energy projects around the world,’ says Brian Moynihan, Bank of America's CEO. ‘The capital we commit and our strong global client and institutional investor relationships can lead to considerable additional investments in a lower-carbon future.’
As part of the initiative, Bank of America says it 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.
The company says 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 says it will also explore opportunities to work with foundations and impact-focused clients to support smaller energy access opportunities, using 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," says 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."