The climate challenge becomes more and more urgent. With a revised climate policy, IFU takes another step in supporting the green transition and assisting developing countries to increase their resilience, improve local livelihoods and reduce climate related migration. Going forward, IFU’s aims to:
- Achieve net zero portfolio emissions by 2040 at the latest
- Qualify at least half of new direct investments as climate finance between 2022 and 2024
- Decrease average carbon intensity over a 3-year rolling period at sector level
- Exclude investments in standalone fossil fuel-based power production and supporting infrastructure, like exploration and extraction, for example
“IFU’s new climate policy is aligned with our strategic impact goals of creating green, just and inclusive societies. It provides us with solid guidelines on how to align our investments with the Paris Agreement and to use our leverage to support the green transition in the developing countries. By setting short as well as long term targets we make sure that current efforts are intensified, and that we will arrive at our destination as planned, if not before.”
Torben Huss, CEO of IFU.
Must be aligned with the EU taxonomy
All investments are screened against the principle of “do no significant harm”, and at least half of IFU’s new investments must qualify as climate finance. The latter includes complying with the EU taxonomy, or, if the sector is not covered by the taxonomy, at least providing 20 per cent lower emissions than the most likely alternative. The remaining part of IFU’s investments will be focused on reducing poverty, as well as creating just and inclusive societies.
IFU agrees with the conclusions by the OECD that country transitions to a low carbon economy will vary in speed, as due consideration should be given to fundamental development needs, like decent jobs and access to water, food and energy.
Consequently, IFU has the option to make investments that meet fundamental development needs in the least developed and low-income countries, even if it is in high emitting sectors. But the conditions that qualify these investments are strict and include that the risk of lock-in to emission insensitive production is low, that lower emitting alternatives are unfeasible for technical or economic reasons, and that the investments are in line with the country’s Nationally Determined Contributions (NDC), for example.
“In all investments, our ambition is to reduce GHG emissions as much as possible. But we are fully aware that the poorest developing countries are facing other challenges than European countries, for example. As a consequence, we will continue to focus on poverty alleviation and balance fundamental development needs with the ambition to move towards low carbon emissions as fast as possible.”
Mikkel Kallesøe, VP, Sustainability and Impact at IFU.
Continue to account for and disclose emissions
IFU will continue to account for and publicly report on IFU’s portfolio GHG footprint. In addition, IFU is committed to making climate related financial disclosures from 2024 and onwards. The latter includes considering climate related risk for the individual investments.
“To keep track and give us the opportunity to evaluate our efforts to reduce emissions, we have calculated and disclosed the GHG emissions from IFU’s portfolio since 2021. Going forward, we will also work on including climate related risks in our financial reporting, which will further strengthen our ability to avoid stranded assets and implement adaptation measures in the individual investments, for example,” said Mikkel Kallesøe.
IFU’s climate policy 2022 is available here.