THE SCALING UP OF DEVELOPMENT FINANCE INSTITUTIONS IN CLIMATE FINANCE PROVISION TO SUPPORT LOCALISATION AND WORKER TRANSITIONS

The document examines the role of DFIs in climate finance, specifically focusing on the Industrial Development Corporation (IDC) in South Africa. It argues that the IDC is currently unable to meet its mandate of supporting a just transition because it operates like a commercial bank, relying on capital markets and maintaining a risk-averse, private-sector-biased governance structure. The authors recommend a significant recapitalisation of the IDC through fiscal and monetary policy, a shift toward concessional lending with longer grace periods, and a reform of its board to include broader representation from civil society and workers.

• The Industrial Development Corporation (IDC) is unable to fulfill its mandate of supporting green industrialisation and a just transition because its investment portfolio remains heavily concentrated in carbon-intensive sectors. In fiscal year 2024, 37.2% of its R94 billion portfolio was in mining and metals, 29.4% in manufacturing, and 12.8% in energy.
• The IDC's classification as a 'self-financing' Schedule 2 entity under the Public Finance Management Act (1999) makes it vulnerable to capital market shocks and limits its ability to provide patient capital. It relies on internally generated funds and borrowings, with a recent marked increase in short-term loan advances between 2023 and 2024.
• The IDC operates with a conservative, commercial-bank-like risk profile, offering non-concessional or slightly concessional lending rates that are not more competitive than commercial banks. It lacks a standard policy for grace periods, typically granting interest moratoriums for only the first 12 months on a case-by-case basis, which hinders the 20-to-30-year investment horizons required for a just transition.
• The governance of the IDC exhibits a strong private sector bias, with six out of ten board members coming from large mining, energy, and finance firms, many of whom have served for 9-13 years. Furthermore, the IDC scored 0.8 out of 10 in a Centre for Environmental Rights (CER) assessment of international standards for transparency and accountability, ranking last among six studied DFIs.
• South Africa's annual climate financing needs are estimated between R334 billion and R535 billion to reach net-zero by 2050, but annual average finance between 2019 and 2021 was only R131 billion. In 2023, DFIs contributed only 7.6% of total climate finance in South Africa, with domestic DFIs like the IDC contributing R1.9 billion.

APA

Stott, J., & Chikowore, A. (2025). THE SCALING UP OF DEVELOPMENT FINANCE INSTITUTIONS IN CLIMATE FINANCE PROVISION TO SUPPORT LOCALISATION AND WORKER TRANSITIONS. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2025/02/IEJ-policybrief-DFI.pdf

Chicago

Stott, Joan, and Adrian Chikowore. THE SCALING UP OF DEVELOPMENT FINANCE INSTITUTIONS IN CLIMATE FINANCE PROVISION TO SUPPORT LOCALISATION AND WORKER TRANSITIONS. Institute for Economic Justice, 2025. https://iej.org.za/wp-content/uploads/2025/02/IEJ-policybrief-DFI.pdf.

Wikipedia

{{cite report |last1=Stott |first1=Joan |last2=Chikowore |first2=Adrian |title=THE SCALING UP OF DEVELOPMENT FINANCE INSTITUTIONS IN CLIMATE FINANCE PROVISION TO SUPPORT LOCALISATION AND WORKER TRANSITIONS |publisher=Institute for Economic Justice |date=February 2025 |url=https://iej.org.za/wp-content/uploads/2025/02/IEJ-policybrief-DFI.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stott2025scaling, author = {Stott, Joan and Chikowore, Adrian}, title = {{THE SCALING UP OF DEVELOPMENT FINANCE INSTITUTIONS IN CLIMATE FINANCE PROVISION TO SUPPORT LOCALISATION AND WORKER TRANSITIONS}}, institution = {Institute for Economic Justice}, year = {2025}, month = feb, url = {https://iej.org.za/wp-content/uploads/2025/02/IEJ-policybrief-DFI.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }