The launch of the Green Equity Approach (GEA), an initiative of the International Finance Corporation (IFC), the World Bank’s private investment arm, faced a stumbling block after it emerged that the first IFC equity client to take part had invested in a major new coal plant expansion in Indonesia.
The GEA, which was first announced at the 2018 World Bank Annual Meetings (see Observer Winter 2018), requires new IFC equity clients to commit to divest from coal by 2030. The IFC also provides support to help clients grow the proportion of green finance in their portfolios under the GEA.
The IFC, which has been implementing the GEA since 2019, published the final version of the approach in September. In October, it emerged that Hana Indonesia, the client IFC had chosen to pilot the scheme in 2019, had since approved finance to support a 2,000 MW expansion of a coal power station in Banten, Indonesia – known as Java 9 and 10 – according to a report on the online news site Climate Home. The article highlights that, “IFC officials claimed not to be aware of Hana Indonesia’s involvement in the coal megaproject,” when asked about the investment.
“The IFC has made huge progress in eliminating coal from its indirect investments, and with its Green Equity Approach has sent a strong signal to its private investor clients that the era of coal is over,” said Kate Geary from Netherlands-based civil society organisation Recourse. “So it’s a massive disappointment that IFC’s first GEA client…provided project finance to two new highly-polluting coal projects, Java 9 and 10. IFC must close the coal loophole in its GEA and ban clients from funding new coal plants if they get the IFC’s stamp of approval through the GEA.”