Caribbean countries are likely to benefit from a new US$50 million Energy Efficiency Finance Facility being funded by the Inter-American Development Bank (IDB).
The IDB said that the funds would finance companies making investments in energy efficiency and self-supply renewable energy projects in Latin America and the Caribbean.
It will be supported by seven million Euros (One Euro =US$1.30 cents) from the Nordic Development Fund (NDF) to mitigate risk of the facility through the provision of partial guarantees to the IDB-financed subloans, which will range in size from US$500,000 to five million.
The IDB said an additional one million Euro from the NDF will provide technical assistance grants related to project identification and feasibility and engineering studies.
The facility will address funding needs in the currently underserved sector of energy efficiency and small-scale renewable energy generation, where borrowers often encounter high risk premiums, high collateral requirements and inadequate tenors.
It will focus on projects with potential for high financial returns, including increasingly economical technologies such as smart-grid, advanced lighting and solar or biomass power.
"This is a new market in which small loans can produce significant returns," said Kelle Bevine, head of the Strategy Management Unit in the Bank's Structured and Corporate Finance Department.
"Amid increasing demand for energy in the region, we can help reduce consumption by making investments in low carbon technologies more financially viable."
The new facility aims to realize up to US$100 million in climate friendly investment and continues the Bank's collaboration with NDF, which over the past year has provided technical assistance funding for a variety of energy audits and small-scale energy projects for companies in Central America.
The NDF resources may be complemented by funding from other IDB-administered funds also aimed at incentivizing climate friendly investment, including the Sustainable Energy and Climate Change Initiative (SECCI) fund and the Canadian Climate Fund for the Private Sector in the Americas.