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IFC introduces synthetic SRT transaction to elevate climate finance in Poland

9 April 2024 14:17 (UTC+04:00)
IFC introduces synthetic SRT transaction to elevate climate finance in Poland

The International Finance Corporation (IFC) and BNP Paribas Bank Polska (BNPP Poland), a subsidiary of BNP Paribas S.A. Group (BNPP Group), have announced today the launch of a Synthetic Significant Risk Transfer (Synthetic SRT) transaction aimed at bolstering sustainable finance for renewable energy, water efficiency, and clean transportation projects in Poland, Azernews reports, citing IFC.

Synthetic SRTs are innovative financial instruments increasingly gaining traction in emerging markets. They play a vital role in bolstering the resilience of financial markets by unlocking bank capital and easing access-to-finance constraints.

In this transaction, IFC will assume mezzanine exposure to a $548 million-equivalent credit portfolio from BNPP Poland's balance sheet. This marks BNPP Poland's inaugural SRT transaction and the second collaboration between IFC and BNPP Group, following the first involving BNPP Group's global emerging markets trade finance operations. IFC's investment will facilitate BNPP Poland in originating new PLN-denominated sustainable finance loans within Poland. This initiative marks IFC's debut SRT with the "Simple, Transparent, and Standardized" designation, aiming to enhance scalability for issuers, investors, and regulators.

Despite advancements in renewable energy, Poland remains one of Europe's most carbon-intensive nations, with fossil fuels constituting nearly 80 percent of its energy supply in 2023. Polish banks encounter constraints in financing the energy transition, estimated to require $350 billion between 2021 and 2040. In this context, SRT transactions enable banks to mitigate risk weights on their asset exposures, thereby liberating essential capital to broaden the reach of climate finance.

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