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Development cooperation is turning green

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Vestas turbines and Masai warriors at the Ngong Hills near Nairobi. After several years of intense efforts on the project, “Lake Turkana Wind Power", Africa’s largest wind farm, is to be built in Kenya.
Photo: Thomas Gadsbølle / RB / POLFOTO

The presentation of a new Danish initiative, the Danish Climate Investment Fund (KIF), in January at the Industrialisation Fund for Developing Countries (IFU) in Copenhagen signals a unique form of cooperation – in both a Danish and international context. For a relatively modest injection of DKK 275 million from Danida, KIF is expected to generate climate-friendly investments in developing countries and emerging economies of up to DKK 10 billion.

The recipe is to combine traditional development assistance with the expertise and experience that IFU has built up in difficult markets over several decades and thereby attract capital from interested private investors who are new to investing in developing countries and emerging economies.

KIF was launched with a start capital of DKK 1.2 billion. In addition to Danida’s and IFU’s contributions of DKK 275 million and 250 million respectively, the Danish institutional investors, such as PensionDanmark, PKA and PBU, are covering the rest. KIF is to be administered by IFU, which has proven ability to attract further investments from other investors corresponding to a ten-fold increase of its start capital. Consequently, the expectation is that KIF will be able to generate total investments of up to DKK 10 billion.

The initiative has already shown results: during 2014, KIF entered into agreements on five projects. The biggest project falls into place shortly before the end of the year. On December 12th, it is announced that the agreement on Africa’s largest wind farm to-date, in Turkana in northern Kenya, has finally fallen into place after eight difficult years of preparation. Vestas is to deliver the 365 wind turbines, and the total investment amounts to over DKK 5 billion. Added to this is the DKK 87 million provided by KIF.

The creation of the Climate Investment Fund reflects two trends that became evident in Danish and international development cooperation in 2014. Firstly, development cooperation is increasingly turning green through the inclusion of a climate change dimension. Secondly, traditional development assistance needs to adapt to the new development landscape by using new and innovative methods when working with the private sector and by integrating different policies for sustainable development. The work on preventing climate change has contributed to the new paradigm, as everyone knows that the goal set at the Climate Summit in Copenhagen to raise USD 100 billion in climate finance per year cannot – and should not – in any way be achieved by means of development assistance alone.