The IKEA Foundation, the charitable arm of the Scandinavian homeware store, has teamed up with the Rockefeller Foundation to set up a $1bn (£700m) fund to fight climate change and energy poverty.
The renewable energy will be generated from sources such as mini-grid and off-grid solutions, located near the point of use, rather than centralised sources like power plants.
According to the Financial Times, each foundation will provide $500m of risk capital for the venture, but they also hope to attract additional funds of $10bn this year from international development agencies, before opening up to institutional investors.
While funding to support energy transition has increased at a global level, many organisations struggle to identify viable, investment-ready projects, the IKEA Foundation said.
As a result, many emerging economies still depend on unreliable and polluting energy sources. They believe the creation of a new platform will help governments to more easily achieve renewable electrification and development targets. Some of the most deprived countries in the world, such as India, Nigeria and Ethiopia, will be targeted.
“Our collective ambition is to create a platform that supports renewable energy programmes which can deliver greenhouse gas reductions fast and efficiently and accelerate the energy transition.
“We need to replace polluting sources of energy with renewable ones, provide access to energy to communities and unlock further funding for sustainable models. Ultimately, we aim to unite countries and communities in urgent action to tackle the climate crisis, reduce one billion tons of greenhouse gas emissions and, by doing so, we hope to positively impact the lives of one billion people.”
Dr. Rajiv Shah, president of the Rockefeller Foundation, said: “Millions of lives and trillions of dollars have been lost to Covid 19, forcing people back into poverty after decades of progress. The effects of the climate crisis will make this even worse, which is why we must invest now to reverse this downward spiral”.
Last week, the G7 agreed to boost climate finance for developing countries in order to match a decade-long commitment to provide $100bn by 2020.
The commitment followed new figures from the OECD in November 2020 that showed that while climate finance from wealthier countries was increasing, it had not yet reached the minimum level as defined by the UN.