IFC, a member of the World Bank Group, and SEB Bank today launched an innovative transaction that will support lending of around €50 million to help small and medium enterprises in Lithuania switch to renewable sources of energy.

IFC, a member of the World Bank Group, and SEB Bank today launched an innovative transaction that will support lending of around €50 million to help small and medium enterprises in Lithuania switch to renewable sources of energy.

Through the transaction, a €10 million facility will be established that will allow SEB Bank to provide equity-like support in the form of subordinated loans to local renewable energy projects, while IFC assumes the underlying risk of the loans. The transaction is a global pilot for an approach that involves offering subordinated loans to finance small-scale renewable energy transactions through commercial banks. This approach could also be used to support other sustainability investments.

“We believe this agreement between IFC and SEB Bank could provide a significant stimulus for the development of renewable energy projects in Lithuania,” said Raimondas Kvedaras, Senior Executive, Vice President and Head of Corporate Banking of SEB Bank. “This is particularly meaningful because our country has an obligation to the E.U. to increase the amount of energy produced from renewable sources by seven percent by 2010. This model of energy project financing could also attract much-needed investment to Lithuania during the economic slowdown.”

Georgina Baker, IFC Director for Global Financial Markets, said, “IFC is committed to supporting renewable energy, particularly during difficult economic times. We are excited about this pilot transaction and look forward to working with SEB Bank to successfully implement it. This innovative financing mechanism could become an important tool for financing sustainable energy investments and mitigating climate change.”

Tackling climate change through sustainable energy, renewable energy, and energy efficiency is a global priority for IFC. Through its client base of more than 400 financial intermediaries, IFC has created innovative new structures in renewable energy finance and developed customized credit lines that help small and medium enterprises make energy efficiency upgrades, invest in cleaner production technology, incorporate sustainability standards into supply chains, and strengthen corporate governance.