Exclusive-IDB seeks to unlock $11 billion-plus for sustainability goals

By Simon Jessop, Marc Jones and David Latona

SEVILLE (Reuters) -The Inter-American Development Bank aims to unlock at least $11 billion in sustainable finance to help countries cope with events, including natural disasters that put a strain on their currencies and hamper private-sector investment.

As the United States and other richer nations cut official development aid, multilateral lenders are under pressure to find new ways to respond to challenges including climate change and biodiversity loss.

From the sidelines of the fourth International Conference on Financing for Development, IDB President Ilan Goldfajn said the steps taken by the IDB would hopefully inspire more contributions from the private sector - one of the conference's priorities.

"We're not just announcing ideas - we're launching things that the private sector is asking for: credible tools, scalable platforms, and real opportunities to invest with impact and confidence," he said.

The support will include a new platform to help countries manage the risk of big domestic currency swings that can deter international investors as it makes it harder to predict returns.

Building on a programme in Brazil that has already drawn in $8 billion from the private sector since last year's launch, the plan is to expand the idea to other regional economies over the next three years and at least double the money mobilised.

Dubbed FX EDGE, it will offer a line of credit that kicks in if a currency falls sharply - usually a problem during a political or debt crisis, or after a natural disaster - thereby ensuring debtors can continue to make dollar-denominated or other overseas currency payments on their loans.

The platform is also intended to allow greater use of long-term currency hedging instruments such as derivatives through local banks and financial institutions, backed by the IDB's credit rating.

'AMAZONIA BONDS'

In collaboration with the World Bank, the IDB also plans to issue up to $1 billion in "Amazonia Bonds," which were trialled last year to help curb deforestation of the world's biggest rainforest and support its communities.

Countries such as Brazil, Colombia and Peru are trying to protect an area that covers more than 6 million square kilometres (2.3 million square miles) of rainforest that is home to more than 10% of all known animals and plants on Earth.  

In addition, the IDB would increase the number of countries able to access a newly enlarged $5 billion emergency relief pot called the Contingent Credit Facility for Natural Disasters, Goldfajn said.

Alongside other top multilateral development banks, it will also offer more "Climate Resilient Debt Clauses" that allow countries to suspend loan payments for up to two years in the event of a major hurricane, drought or other natural disaster that scientists say have been made more likely by climate change.

The clauses will provide $4.2 billion in total coverage by 2026, the IDB estimates, while a separate Business Resilience Program, run by its IDB Invest arm will introduce similar clauses into contracts with private companies.

It has also created the Regional Disaster Risk Transfer Program to allow countries to transfer the risks of extreme weather events to the insurance and capital markets,

A separate Business Resilience Program run by IDB Invest would introduce debt clauses into contracts with private companies to help cushion them from climate risks.

"Each of these is important on its own - but together, they show how development banks can really move the needle by tailoring risk for investors," Goldfajn said.

(Reporting by Simon Jessop and Marc Jones in London and David Latona in Seville, Spain; Editing by Matthew Lewis and Barbara Lewis)