When it comes to Latin America’s renewable energy market, Chile stands out as the region’s undisputed pioneer and powerhouse. More than that even, some experts have commented that the country could justifiably be called the world’s leading renewables market, and, while its size may pale in comparison to say China or the US, its immediate prospects are far brighter. Endowed with rock solid fundamentals and an accommodating government, the nation promises much in the way of opportunities for the non-conventional renewable energy (NCRE) sector, and a great many investors are eyeing the market with keen interest.
Without any significant fossil fuel reserves to call its own, Chile, historically speaking at least, has drawn on oil and gas imports in keeping its industry well stocked. With expense proving something of a problem, the scope for cost reductions coupled with the promise of reduced emissions have done much to spark the NCRE sector into life and bring a greater measure of sustainability to the already-fruitful economy.
Host to the sunniest desert on the planet and 4,000 miles of windy coastline, investors from across the globe have been quick to pick up on the country’s low carbon opportunities and make good on its promise of self-sufficiency and sustainability.
600MW
Renewable energy capacity added to Chile in the first six months of 2014
In only the first six months of last year, Chile added an impressive 600MW of renewable energy capacity, twice that of the previous 12 months, and the government granted hundreds of concessions for a series of expansive projects. Impressive sure, these figures are merely a consequence of a much-changed energy landscape and underline the importance of a more sustainable energy plan in realising environmental and social gains.
Of the country’s contributors, few have made a greater contribution than CorpBanca, which has time-and-again made clear its commitment to sustainability and contributed its fair share to the development of a robust renewables market. While not necessarily a part of the energy sector, the bank has nonetheless played an important part in the country’s low-carbon transition, and done much to drive some of the latest developments. The role of financial services in facilitating this transition, as in the case of CorpBanca, is often forgotten and its place in fostering sustainability, not just in the energy market but also in the community at large, is little understood. World Finance spoke to CorpBanca’s Director of Wholesale Banking, Jose Francisco Sanchez, and Environmental Officer, Rodrigo Varela, about the major ways in which the country’s energy landscape has shifted, and the bank’s importance in facilitating the latest developments in the NCRE sector.
How does the Chilean Government encourage and support renewable energy?
Chile’s Government has been supporting the use of renewable energies, especially unconventionals, through measures that benefit final consumers – both individuals and enterprises – and involve energy generation using new technologies. In particular, initiatives require that no less than 20 percent of electricity generation stems from unconventional sources by 2025, and measures to promote self-generation, such as giving the option to individuals to offset their utilities bills with their own electricity generation.
What role does CorpBanca play in helping to protect the environment?
As a bank we don’t generate relevant direct environmental and social impacts. On the contrary, our clients might generate significant impacts on the environment due to their business or projects. That is the reason why CorpBanca has a social and environmental risk policy, which aims to ensure that we don’t generate any relevant indirect impacts through our clients. Thus, CorpBanca plays a preventive role, by requiring that our customers comply with international standards, such as the Equator Principles (we are the first Chilean bank to adhere to these principles) and the Performance Standards of the International Finance Corporation (IFC, the financial arm of the World Bank and also shareholder of CorpBanca).
CorpBanca’s environmental officer is responsible for verifying compliance with the above rules, both initially at the moment of the assessment of a financial project and during the life period of the project by monitoring the business activities of the client. The Social and Environmental Committee, put together by the senior management, is responsible for reviewing the aforementioned policy and its enforcement, especially for cases that can generate relevant environmental and social impacts or a reputational risk for CorpBanca.
CorpBanca recently joined the Business Leaders Centre against Climate Change (CLG), which has as a mission: to promote the development of policies and measures to overcome the climate change, and at the same time enable Chilean companies leverage the business opportunities that arise from moving to a less carbon-intensive economy.
Even though the direct environmental impacts of CorpBanca can be insignificant compared to our industrial clients, especially those involved in the mining, generation and distribution energy, and forestry sectors, it is a priority to us to reduce any potential environmental impacts. That is why we became the first bank with neutral carbon emissions in Chile in 2010. Furthermore we measured our carbon footprint in 2011 and 2012, to be able to neutralise our emissions during 2015 through the Santiago Climate Exchange. We will again face the challenge of measuring our carbon footprint for 2013 and 2014.
What projects for promoting sustainability is CorpBanca currently involved in?
CorpBanca has a policy and a focus to finance projects of NCRE, such as photovoltaic and wind projects. By funding such projects we are supporting sustainability both at a country and a global level, as well as achieving a reduction in Greenhouse Gas (GHG) generating energy through more sustainable and cleaner mechanisms. CorpBanca is also evaluating the opportunity to finance energy efficiency projects, which have the same objective as the previous regarding the reduction of GHG.
How important is the Javiera solar plant project for both Chile and the whole of Latin America?
The Javiera project, developed by SunEdison, was the first photovoltaic project to obtain funding from commercial banks (CorpBanca and BBVA) in a sector that, until this milestone, was dominated by the participation of multilateral agencies and development banks. Since the Javiera project, which was structured under Chilean law and according to its sound institutional system, other banks and sponsors have started to evaluate this type of financing.
How does Chile rank in the region in terms of renewable energy?
Chile has fast become a leader in developing renewable energy projects, principally photovoltaics, and has benefited from outstanding sun irradiation conditions in Northern Chile, which facilitate a low production and project costs. The country’s energy generation was historically concentrated in high-cost fossil fuels and had a high external dependence (Chile does not produce oil, natural gas and coal), meaning that there are many more growth opportunities in efficient and sustainable NCRE.
How is Chile’s energy sector evolving?
Several projects of NCRE generation, related to solar and wind energies, or intended to facilitate the construction of small passing hydroelectric plants, were expected by the market, but were put on standby until 2013. Fast-forward to today and the number of projects has increased significantly.
What else can be done to support sustainable practices in Chile?
CorpBanca, through its credit evaluation facilities, identifies opportunities to improve environmental and social aspects of its clients’ everyday lives, which are then communicated to them in order to encourage sustainable development. If all financial institutions replicated this practice, this industry would occupy a leading position in terms of promoting sustainable practices. Alongside the private sector’s contributions to promote better environmental practices, the government, through subsidies directed at companies that implement and support sustainable practices can do a great deal also.
What makes CorpBanca different to other institutions?
CorpBanca decided to take the leadership in financing NCRE projects two years ago, through a concrete plan of actions that involves training our commercial, risk, legal and support teams regarding the characteristics of the sector, its risks and opportunities. This strategy requires a strong dedication from both the board of directors and senior management in order to achieve a good understanding and knowledge of this particular sector. In 2014 we implemented a financing policy regarding NCRE that established guidelines for our commercial team as well as the risks that CorpBanca is willing to take in order that our clients are made more aware of the general conditions under which the bank will finance projects. This transparency has enabled us to achieve a strong and positive position as a leader in the local banking industry and as a major contributor to matters of social and environmental wellbeing.
