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IDB aims to unlock more than $11 billion for sustainability goals

The Inter-American Development Bank wants to unlock at least 11 billion dollars in sustainable financing to help countries deal with events such as natural disasters, which put pressure on their currencies and hinder private-sector investments.

Multilateral lenders are being pressed to find innovative ways to address climate change, biodiversity loss and other challenges as the United States and richer nations reduce official development aid.

Ilan Goldfajn, IDB president, said that the IDB's actions would inspire the private sector to contribute more - a priority of the conference.

He said: "We are not just announcing new ideas, we're launching the things that private sector has been asking for - credible tools, scalable platform, and real investment opportunities with impact and confidence."

Support will include a platform that helps countries manage the risks of large domestic currency swings, which can discourage international investors because it is harder to predict return.

The plan is to extend the program to other regions in the next three-year period and double the amount of money raised.

FX EDGE is a credit line that will kick in if the value of a currency drops sharply. This usually happens during political crises, debt crises, or natural disasters. It ensures debtors are able to continue making payments for their loans, whether they're made in dollars or another currency.

The platform will also allow for greater use of currency hedge instruments, such as derivatives, through local financial institutions and banks. These instruments are backed up by the IDB credit rating.

'AMAZONIA BONDS'

The IDB, in collaboration with the World Bank will also issue "Amazonia Bonds" worth up to $1 billion. These bonds were tested last year and helped to curb deforestation in the world's largest rainforest.

Brazil, Colombia, and Peru all try to protect a rainforest area covering more than 6,000,000 square kilometres (2,3,000,000 square miles), which is home to 10% of the known species of animals and plants.

Goldfajn added that the IDB will also increase the number countries who can access a newly enlarged emergency relief fund of $5 billion called the Contingent Credit Facility for Natural Disasters.

It will offer, along with other multilateral development institutions, more "Climate-Resilient Debt clauses", which allow countries to suspend their loan payments for a maximum of two years in case a major hurricane or drought occurs, or if any other natural disaster occurs, scientists believe that climate change has made it more likely.

IDB estimates that the clauses will cover $4.2 billion by 2026. A separate Business Resilience Program run by IDB Invest will include similar clauses in contracts with private companies.

The Regional Disaster Risk Transfer Program was also established to enable countries to transfer risks associated with extreme weather events onto the capital and insurance markets.

IDB Invest's Business Resilience program would include debt clauses in contracts with private companies as a way to cushion them against climate risks.

Goldfajn stated that "each of these are important in their own right, but when taken together they demonstrate how development banks can move the needle through tailoring risk to investors." (Reporting from Simon Jessop in London, Marc Jones in Seville and Barbara Lewis in Matthew Lewis's and Matthew Lewis's offices)

(source: Reuters)