Ikea and Rockefeller Foundations Unveil $1 Billion Renewable Energy Fund

The Ikea Foundation and the Rockefeller Foundation have launched a $1 billion fund to finance the construction of small renewable energy projects in developing countries.

The goal of the fund is to provide green power to over 1 billion people and help the world slash greenhouse gas emissions by 1 gigatonne over the next decade.

To put that into context, greenhouse gas emissions reached 34.1 gigatonnes last year and scientists estimate that in order to prevent temperatures from rising more than 2.7 degrees Fahrenheit (1.5 degrees Celsius) over pre-industrial levels, the world will need to cut emissions by between 1 gigatonne and 2 gigatonnes a year over the next 10 years.

"If global energy consumption doesn't change from fossil fuels to renewable energy, we will not meet the Paris Agreement ambitions and millions of families will be left behind in poverty. We need to be honest and recognize that the current approach is not delivering the impact the world needs in the time that we have," said Per Heggenes, CEO of the IKEA Foundation.

The organizations said the money will help provide clean power to 800 million people who lack electricity and 2.8 billion who have unreliable access. 

Their role will be two-fold. In addition to investing $1 billion, they want to work with development agencies, including the International Finance Corporation and the U.S. International Development Finance Corporation, as well as private banks and impact investors, to coordinate a global effort that would lead to at least $10 billion in renewable energy investments.

The foundations want to leverage their green energy expertise to create an investment platform that will “deploy catalytic capital more efficiently, and at a scale that supports the expansion of local renewable energy projects.”

That collaboration will shape up later this year, during the COP26 UN climate change conference that is slated to take place in Glasgow in November.

Climate Justice

The foundations have framed this investment platform as a climate justice initiative, saying that the renewable energy projects they plan to finance will help lift people out of poverty. Their focus will be on building off-grid and mini-grid projects for rural communities—the United Nations estimates that 180,000 mini-grids are needed to supply electricity to 440 million people who lack access to national power grids.

“It will make a tremendous difference in terms of serving as an alternative to either coal-based power or diesel-based power for those who are otherwise not able to have jobs or have income or read at night in their homes because of a lack of electricity,” Dr. Rajiv Shah, the President of The Rockefeller Foundation, told CNBC.

This is important because as well as being a leading source of greenhouse gas emissions, the burning of diesel and coal emits harmful air pollutants that are responsible for millions of premature deaths every year.

The urgency of tackling climate change means that renewable energy is set to attract huge amounts of capital over the next few years but, so far, most of those investments are earmarked for China, Europe, and the U.S. As is often the case, low-income countries are being left behind and that’s exactly what this platform aims to address.

The foundations did not provide details regarding which specific countries will benefit from the fund but said that they will focus on Southeast Asia, Subsaharan Africa, and Latin America.

Shah said that in recent years, clean electricity projects by the Rockefeller Foundation have allowed some 500,000 people in the Indian state of Bihar to “to plug in” for the first time. “We have seen how this has changed their lives and we now hope to bring this effort to the world,” he added.