The Ikea and Rockefeller foundations are making their largest investments ever to start a fund they hope will be able to fund more than $ 10 billion in small-scale renewable energy projects to try to lift more than 1 billion people out of energy poverty .
Each foundation provides $ 500 million in venture capital and hopes to attract $ 10 billion in additional funds this year from international development agencies, before opening up to institutional investors in an attempt to expand investment in renewables in countries like and India, Nigeria and Ethiopia.
“This can be commercially feasible. There’s $ 1 billion that takes risks in advance, and that can unlock tens of billions of dollars. We’re not playing here. We’ve seen it work in India. We know what it takes to succeed.” , Rajiv Shah, the president of the Rockefeller Foundation told the Financial Times.
For Heggenes, chief executive of the Ikea Foundation, he said it offers a “very significant” opportunity to address the two biggest threats in developing countries: poverty and climate change.
Investing in renewable energy has become big business in Europe and the United States, but the Ikea-Rockefeller platform aims to do something similar with smaller-scale projects in emerging markets. Its goal is to develop “distributed” renewable energy projects – instead of centralized power plants – mostly in the form of mini-solar projects but also some microenergy.
The foundations said they had already signed agreements with the International Finance Corporation, an organization affiliated with the World Bank, and the U.S. International Development Finance Corporation and hoped that Ikea’s participation would block agency support. similar in Europe.
Its goal by the end of this year is to have $ 10 billion in funding from development agencies to go next to its initial $ 1 billion, and then to invite commercial investors to support individual projects.
Shah said he thought the platform could eventually grow to $ 100bn or even $ 1tn using its “philanthropic capital as leverage to raise business capital.”
He said that since his time as an official in the Obama administration dealing with the Copenhagen and Paris conferences on climate change, he had seen “a lot of commitments made and a lot of good intentions but not a lot of execution.” .
“This has the opportunity to be the most significant, largest-funded investment, aimed at the dual goals of lifting people out of poverty but in a climate-friendly way.”
Heggenes said the Ikea Foundation – created by the flat-pack furniture retailer at protect it from recovery and invest in projects to address inequality – considered energy poverty as the biggest obstacle to growth in the poorest countries.
The two foundations have set a goal of cutting 1 billion tons of CO2 emissions and removing 1 billion people from energy poverty by the end of the decade.
Shah said the pandemic has resumed development in the poorest countries for up to two decades, and that there was a great need to encourage economic growth in an environmentally friendly manner in these nations. “Now is the time to act,” he said.