Latin America’s biggest development institution is prepared to defy growing environmental concern about biofuels by lending money to a $1bn-plus Brazilian ethanol project.

The board of the Inter-American Development Bank is set on Wednesday to approve proposals to provide a 15-year loan of $260m (€164m, £130m) to three new ethanol plants being built by Santa Elisa Vale do Rosario, a Brazilian company, and US private equity groups.