The International Finance Corporation (IFC) has partnered with Brazilian financial institution Banco Alfa de Investimento S.A to promote clean mobility.
Banco Alfa de Investimento S.A will leverage a $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 financing package will include a $100 million loan from the IFC and $65 million in financing from various institutions including Itaú BBA, Banco Santander SA, and Banco de Occidente.
Another $100 million will be released by the IFC and partners in 2021.
The deal will ensure the extension of loan terms to retail clients through long-term funds, preserving jobs and stimulating economic growth.
The investment will help strengthen the climate finance market, mitigating climate impact and supporting economic recovery in Brazil.
In addition, 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).
The agreement comes after Brazil, the largest car market in Latin America, saw an initial downturn in sales triggered by the COVID-19 pandemic.
However, 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.
Brazil, the second largest producer of biofuels worldwide behind the United States, has increased its fleet of flex vehicles to 2.328 million units in 2019 and has only sold 20,000 electric vehicles, according to data from the Brazilian Association of Electric Vehicles (ABVE).
Fábio Raposo, Banco Alfa’s executive director, said: “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.”
Carlos Leiria Pinto, IFC’s country manager in Brazil, adds: “One of IFC’s strategic priorities 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.”