By Renan Lodi, Correspondent Brazil

​IFC, a member of the World Bank Group, approved the first operation with a Brazilian financial institution to promote clean mobility. Banco Alfa de Investimento S.A, the leading company of Conglomerado Financeiro Alfa, will receive a US$265 million financing package to compose its loan portfolio for the acquisition of vehicles with a higher level of sustainable consumption, such as flexible-fuel, electric, or hybrid vehicles. The investment will help strengthen the climate finance market, mitigating climate impact and supporting economic recovery in Brazil.

The first tranche of funding includes a US$100 million loan from IFC’s own account and the mobilization of other financial institutions in the amount of US$65 million. The banks involved in this phase of the financing are Itaú BBA, Banco Santander SA, and Banco de Occidente. The second tranche, another US$100 million, is expected to be released in 2021.

The project is a synergy between IFC’s strategic goal to increase climate-related investments and Alfa Conglomerate, which intends to evolve its sustainability strategy and participate in a relevant way in the financing of vehicles with low or no emissions of contaminants. IFC’s support to Alfa will ensure the extension of loan terms to retail clients through long-term funds, preserving jobs and stimulating economic growth.

“The partnership with IFC materializes at a strategic moment for Alfa. We are reviewing, developing, and strengthening our sustainability strategy and we recognize that climate stability is one of the major challenges in the 21st century. We are pleased to contribute to the reduction of emissions from vehicles in Brazil by financing sustainable cars equipped with flexible-fuel, hybrid, or electric engines,” says Banco Alfa’s Executive Director, Fábio Raposo.

Brazil, the largest car market in Latin America, saw an initial downturn in sales triggered by the COVID-19 pandemic. As the economy gradually reopens, the country is expected to see an increase in car sales with more Brazilians likely to opt for personal vehicles due to transmission risks in public transport. This will stimulate the economy with the sector’s impact on the supply chain and other segments. The push to purchase flexible-fuel, electric, or hybrid vehicles will also create a greater demand for more sustainable products.

“One of IFC’s strategic priority in Brazil is to support investments in climate-smart and modern technologies to mitigate climate impact. This funding aims to contribute to market sustainability and translates into support for the implementation of investments in renewable energy and energy efficiency,” says IFC’s Country Manager in Brazil, Carlos Leiria Pinto.

In September 2016, Brazil ratified its commitment to the Paris Agreement to reduce greenhouse gas emissions and increase the participation of bioenergy in its overall energy matrix (including biofuels and bioelectricity). The country is already the second largest producer of biofuels worldwide, behind the United States, and has the largest market for flexible-fuel vehicles. These cars have proven to be an effective tool for climate change mitigation. The fleet of flex vehicles reached 2.328 million units in 2019. In the case of electric vehicles, the fleet is still small: the total of electric cars being used in the country is around 20,000, according to data from the Brazilian Association of Electric Vehicles (ABVE).

“This investment is the beginning of a long-term partnership with Banco Alfa, which will allow the Bank to continue supporting clean mobility, including flexible-fuel, electric, or hybrid cars,” says IFC’s head of Financial Institutions for Brazil and the Southern Cone, Rogerio Santos.

IFC will share its global expertise in climate finance with Banco Alfa to build the bank’s capacity and contribute to increased sustainability in the climate finance market. IFC will also support Banco Alfa in the development of technical capacity for climate definitions, eligibility criteria, and environmental impact reports to reduce greenhouse gas emissions through the implementation of the Climate Assessment tool for Financial Institutions (CAFI).