IDB Group Targets $500 Billion in Private Capital for Latin America Through Loan Repackaging
The Inter-American Development Bank (IDB) is launching an initiative to attract private capital to Latin America by transforming up to $500 billion in regional local loans into globally investable assets. This initiative, announced on Tuesday, aims to bridge the climate financing gap in developing nations.
ReInvest+ Initiative Details
The project, called ReInvest+, is a collaboration between the IDB Group and Brazil's COP30 presidency. It aims to convert performing loans held by local banks into investment-grade, hard-currency securities. This will be achieved by incorporating political and foreign exchange risk insurance, making them more appealing to institutional investors.
The IDB hopes this move will attract institutional investors who typically avoid early-stage, unrated, and local-currency projects. Currently, perceived risks and currency fluctuations deter major investment.
"Up until now, we’ve asked investors to change their risk appetite," IDB President Ilan Goldfajn said. "We’re flipping the script. The projects must go where the money is."
Addressing the Climate Financing Gap
ReInvest+ is part of a larger effort to address the significant $1.3 trillion annual climate financing gap in developing countries outside of China. Public funds alone are insufficient, and private investment has been limited due to the perceived high risks. A study commissioned by the IDB estimates that the total global pool of eligible loans could exceed $3 trillion.
Call for Proposals and COP30 Announcement
The IDB is actively seeking proposals from commercial and international banks to participate in ReInvest+. Submissions are due by October 24. Selected partners will be revealed at COP30 in Brazil, where they are expected to commit to purchasing assets over the following year. No preliminary funding amount goal has been set.
IDB's Role as Intermediary
The IDB will serve as a trusted intermediary, establishing criteria and offering financial technologies to facilitate the loan transition process. This is designed to ensure the integrity and transparency of the process, increasing investor confidence. This initiative will facilitate a more efficient allocation of capital to critical sectors in Latin America.
