Santander and IFC, a member of the World Bank Group, have signed a $300 million unfunded risk-sharing facility to support the increase of access to climate finance and the growth of small and medium enterprises (SMEs) in Chile. The facility will contribute to the sustainable economic growth of the Chilean economy by helping develop a climate financing market and create employment.
This facility will enable Santander to promote the origination of mainly climate-related loans, helping Chile meet its nationally determined contributions (NDCs) under the Paris climate agreement. In addition, this risk-sharing arrangement will allow the expansion of Santander’s financing for SMEs, which contribute to over 66% of total employment in Chile but face a finance gap of US$ 8.4 billion, or circa 4% of Chile’s GDP.
This is the first risk-sharing facility in the Chilean market, and it allows IFC and Santander to share the risk of a given portfolio of trade assets on a 50-50% basis. The underlying trade assets are primarily export-driven and expected to total approximately $1 billion of Chilean export flows in three years.
“We are very proud to be part of this alliance with IFC, which will help more companies in the country decide to invest in climate initiatives. All this is very much in line with the policy that the Santander Group has assumed worldwide in terms of sustainability and that reinforces the commitment acquired in 2019, when we became one of the signatories of the Principles of Responsible Banking of the United Nations”, explains Miguel Mata, CEO of Santander Chile.
“We are excited to partner with Santander in this innovative financial instrument, which will help open the path for more private sector investments in climate projects in Chile. The support of the private sector is critical for Chile to promote sustainable finance and develop a low-carbon, climate-resilient economy,” said David Tinel, IFC Country Manager for Argentina, Chile, Paraguay and Uruguay. “Fostering the economic growth in emerging markets aligned with the sustainable management of their natural resources is one of IFC’s key strategic objectives as a development institution,” he added.
In the last five fiscal years, IFC invested over $10 billion in the financial sector in the Latin America and the Caribbean region, in long-term investments, including mobilization. The risk-sharing facility with Santander is part of IFC’s strategic focus on supporting local financial markets to achieve development impact. IFC aims to achieve this goal using innovative financial products and mobilization, fostering micro, small and medium enterprises, encouraging corporate social responsibility, protecting natural resources through environmentally-sustainable business practices, and promoting business expansion into other emerging markets.
In the fiscal year 2019, IFC’s long-term investments in the Latin America and the Caribbean region across all sectors totaled $6.2 billion, including $3.7 billion mobilized from other investors, representing almost 33% of IFC’s long-term investments and mobilization that fiscal year. For more information about IFC in Latin America and the Caribbean, visit www.ifc.org/lac.