renewable resources

As the U.S. Government’s development finance institution, OPIC mobilizes private capital to help solve critical development challenges and in doing so, advances U.S. foreign policy. Consistent with this mission, OPIC seeks to promote sustainable investment that contributes to long term business success, economic and social development, a healthy environment, and stable societies.

What does sustainable investment mean to OPIC?

The good news is that private sector growth has helped expand emerging market economies by 50% in the past several years. But this growth is placing a strain on global natural resources, which in turn can lead to a host of health and social conflicts and consequences. Investing in projects that help the health of the planet and its people is OPIC’s end goal.  Sustainable investment means supporting the broad economic aspirations of developing markets without compromising future generations.

OPIC’s due diligence process integrates environmental and social considerations alongside financial, commercial, regulatory and reputational risks, among others.  Transparency and accountability are key parts of OPIC’s philosophy of sustainable investment.  When stakeholders have access to information about an investment, affected communities are consulted, and mechanisms for resolving local conflicts are available, then private investment does better at promoting stable and democratic societies.

OPIC’s portfolio contains such a broad diversity of clients, sectors, and transactions that a customized approach to sustainability makes more sense than “one size fits all.”

Why does OPIC support sustainable investment?

Sustainable investment can boost development and financial returns, while reducing risk exposure:

Boost development returns. When an OPIC-supported investment includes otherwise undervalued environmental and social capital and service flows, it accrues high development returns (for example, expanding access to finance for women and other disadvantaged entrepreneurs, creating livelihood opportunities for poor people, and supporting markets for renewable resources and environmental services).  OPIC-financed projects with high development returns can serve as a multiplier effect when local programs replicate and scale up.

Reduce risk exposure. OPIC is often first to forge into difficult, unproven markets where other investors may not yet be ready to go, such as frontier markets and in post-conflict countries.  In some cases, pre-existing social or environmental factors expose OPIC to reputational or credit risk (such as weak, nontransparent, or inconsistent enforcement of environmental, natural resource, labor laws and regulations; subsidies to natural resource commodities; or weak property rights regimes). OPIC’s proactive approach to environmental and social due diligence helps to manage these risks and reduces the likelihood of social conflicts that may undermine the commercial viability of OPIC-supported transactions.  This in turn reduces the level of internal OPIC resources needed over the project’s lifecycle, and increases the project’s likelihood of achieving financial success.

Enhance financial returns. OPIC’s financing requires viable business plans designed to generate acceptable, risk-adjusted returns.  Beyond this threshold, a growing body of evidence shows that incorporating sustainability into business plans and project designs can be captured in the bottom line.  In addition to reducing exposure to risk, a focus on sustainability can reduce operating costs associated with energy, water, and material inputs; reduce regulatory compliance costs; open up new markets, boost brand loyalty, uncover otherwise hidden value; and increase competitiveness in sectors with supply chains that are subject to international environmental, labor, or human rights standards.

What tools does OPIC apply to sustainable investment?

OPIC tailors its investment tools to the needs of individual projects, and helps clients meet or go beyond minimum performance standards by offering products that incentivize greater environmental and social outcomes.   Some products are designed for private investment in sectors that enhance the environmental dimension of sustainability, for example:

  • Regulatory risk insurance products for renewable energy and carbon credit markets
  • Support for investment funds that are dedicated to renewable energy
  • Energy efficiency financing and clean tech equipment leasing

Other OPIC products are targeted to the social dimension of sustainability, for example:

  • Financing for projects that provide essential services (for example: energy, water, housing, health care facilities) for vulnerable groups, or in post-conflict environments where private investment contributes to public health improvements, social development and stability
  • Support for investment funds dedicated to impact investing

OPIC also partners with other US Government agencies, development finance institutions, and organizations that offer complementary resources to overcome project design and implementation challenges.

Once OPIC receives a request for support, it applies its full suite of policies to encourage continuous improvement in the client’s sustainability performance throughout the duration of OPIC’s involvement. From early client engagement to approval through post-disbursement monitoring, then continuing until there is no longer a financial relationship with the client, OPIC uses a set of tools to promote economic, social, and environmental sustainability.  OPIC applies the following policies to all transactions regardless of the type of financing provided or the sector:

  • 2010 Environmental and Social Policy Statement (ESPS). Besides local environmental issues, the ESPS also addresses the global climate change through OPIC’s Greenhouse Gas policy.
  • IFC’s eight social and environmental Performance Standards, which cover: 1) environmental and social impact assessment and management, 2) labor and working conditions, 3) resource efficiency and pollution prevention, 4) community health, safety, and security, 5) land acquisition and involuntary resettlement, 6) biodiversity conservation and sustainable management of living natural resources, 7) indigenous peoples,  and 8) cultural heritage.
  • World Bank’s General and Industry Sector Environmental, Health and Safety Guidelines.

In addition, OPIC undertakes site monitoring of those projects it determines to pose significant environmental or social risks, as well as a randomized sample of all financed projects. When requested, OPIC’s Office of Accountability offers problem-solving services for addressing environmental and social concerns related to OPIC-financed projects. These services are independent of OPIC financing and may be accessed at any stage in the project cycle.

OPIC considers the nature, scale, and stage of the business activity to be financed, as well as its level of expected environmental and social risks and impacts. Project screens and early stage due diligence filter out transactions that, even with OPIC’s engagement and assistance, are unlikely to comply with minimum standards. For example, if an early appraisal determines that a project is unlikely to achieve compliance with relevant IFC performance standards, OPIC will not proceed with the transaction.

OPIC is committed to transparency and accountability

A set of policies and procedures support this commitment:

  • Public disclosure of project information (with special requirements for extractive industries)
  • Requirements for clients to consult with affected stakeholders and to comply with local laws and regulations
  • Strict prohibitions against corruption
  • The ability to independently review OPIC’s implementation of applicable environmental and social policies at the project level
  • Explicit expectations of high standards of business integrity and corporate governance
  • Tracking / reporting corporate performance against GHG emissions and other sustainability indicators

OPIC’s tailored financial products, combined with its policies and procedures constitute a comprehensive approach to sustainable investment. OPIC also continually monitors the evolution of international best practices to remain at the leading edge of sustainable investment.