Development Finance Institutions in Climate Finance

This policy brief by the Institute for Economic Justice examines the role of Development Finance Institutions (DFIs) in climate finance, focusing specifically on the Industrial Development Corporation (IDC) in South Africa. It argues that the IDC's current operations are misaligned with climate goals due to a portfolio skewed toward carbon-intensive sectors and conservative lending practices, and proposes specific financial and governance reforms to support a just transition.

• There is a significant gap between South Africa's annual climate finance requirements and the actual funds mobilised. The country needs between R334 billion and R535 billion per year, but only R131 billion was mobilised on average from 2019 to 2021, with DFIs contributing only 7.6% of that amount.
• The Industrial Development Corporation (IDC) struggles to align with climate goals because its portfolio is heavily weighted toward energy and mining, which are carbon-intensive. This is attributed to governance that favours private sector interests, conservative lending, and a reliance on commercial financing.
• The IDC faces three primary challenges in mobilising climate finance: capital constraints caused by a self-financing model, conservative lending characterized by short repayment periods and high interest rates, and governance gaps due to a lack of worker and civil society representation on its board.
• The brief recommends specific financial reforms for the IDC, including a fiscal support injection of up to R100 billion and leveraging monetary policy for another R180 billion. It also suggests providing loan guarantees for terms exceeding 10-15 years and offering concessional loans at 2% below prime with grace periods of at least five years.
• To improve governance and transparency, the brief proposes diversifying the IDC board to include green industries, workers, and civil society, while aligning reporting with the Green Finance Taxonomy.

APA

iej_admin (2025). Development Finance Institutions in Climate Finance. Institute for Economic Justice. https://iej.org.za/resource/policy-brief/development-finance-institutions-in-climate-finance/

Chicago

iej_admin. Development Finance Institutions in Climate Finance. Institute for Economic Justice, 2025. https://iej.org.za/resource/policy-brief/development-finance-institutions-in-climate-finance/.

Wikipedia

{{cite report |last1=iej_admin |title=Development Finance Institutions in Climate Finance |publisher=Institute for Economic Justice |date=28 February 2025 |url=https://iej.org.za/resource/policy-brief/development-finance-institutions-in-climate-finance/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{iejadmin2025development, author = {iej\_admin}, title = {{Development Finance Institutions in Climate Finance}}, institution = {Institute for Economic Justice}, year = {2025}, month = feb, url = {https://iej.org.za/resource/policy-brief/development-finance-institutions-in-climate-finance/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }