climate finance: overview and strategic considerations climate finance ws_2017-12-05...dec 05, 2017...
TRANSCRIPT
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Climate Finance:
Overview and Strategic Considerations
2nd National Workshop on Innovative Climate Finance Mechanisms for
Financial Institutions in Pakistan,
Islamabad, 5 December 2017
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Climate Change is real: Climatic conditons change, with e.g. strong
impacts on the economy, e.g. agriculture, water systems and coastal
properties (impacting investment portfolios)
Policy response: New climate policies increasingly likely (impacting
investment portfolios such as energy sector, transport infrastructure,
building codes,...)
Threat to investments, but: new business opportunities arise from e.g.
providing finance and insurances for adaptation to climate change
Financing the transformation of energy system, transport sector,
energy efficiency, etc.
Climate Change: risks + opportunities for FI´s
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• Paris Agreement: Key climate policy milestone, to reduce globale temperature rise to
well below 2°C by the end of the century
• Joint efforts by developed and developing countries
• Nationally Determind Contributuons (NDCs) are backbone of Paris Agreement
• NDCs are domestic action plans of UNFCCC Parties to derive climate goals
• NDCs come with targets to reduce GHG and adaptation measures
• NDCs have unconditional and conditional features
• Pakistan intends to reduce up to 20% of its 2030 projected GHG emissions
• subject to availability of international grants (approx USD 40 billion at current prices)
• Pakistan’s adaptation needs range USD 7 to USD 14 billion/a until 2030.
• Conditional NDC elements sum up to more than of USD 4.4 trillion until approx 2035
Financial needs!
Intl. policy driving for climate finance
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International climate finance provisions: the 100 bn
5
UN target for int. climate finance: USD 100 bn
per year by 2020
To be updated by 2025
So far, some USD 67 billion may be achieved
from public finance
Financing gap of USD 33 billion indicates huge
need of mobilizing private sector finance
Given the numbers from NDCs on conditional
needs, the relevance of the private sector will
increase drastically
Mobilizing private finance implies engaging
with the banking sectorSource: OECD, 2016.
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FI´s: Financing the climate agenda – and beyond
6
FI´s play an important role for financing sustainable development as a
whole, not only climate
So: Climate Change (and Sustainable Development) poses a huge
opportunity for FI´s…
But: An integrated strategy on policy level and banking sector is required
Financing the
climate agenda
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Advancing Climate Finance: Domestic Policy level
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• Consider international trends (SDGs,
NDCs), also learn from others
• Develop holistic domestic framework
(policies & regulation, institutions,
stakeholders & FI champions,...)
• Provide domestic incentives /
funding
• Harness international support (Access
to funding, capacity building such as
IFC roadmaps, donor CB activities, ...)
• Coordination & leadership, towards
an … integrated Climate Finance Strategy
Capacity Needs
Institutions
Regulation (e.g.
guidelines)
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Advancing Climate Finance: Banking Sector / FI´s
9
• Incoprorate „climate“ into existing ES scrutiny :
• Is the investment / loan repayment at risk due to CC?
• Which sector specific / climate related risks do the customers face?
• e.g. Agriculture – risks due to harvest loss, smallholder solutions?
• Energy Efficiency – SMEs/ESCOs with a higher credit risk?
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Example: Green Investment Facility Viet Nam
So
urc
e: G
IF 2
01
7
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Advancing Climate Finance: Banking Sector / FI´s
11
• Incoprorate „climate“ into existing ES scrutiny :
• Is the investment / loan repayment at risk due to CC?
• Which sector specific / climate related risks do the customers face?
• e.g. Agriculture – risks due to harvest loss, smallholder solutions?
• Energy Efficiency – SMEs/ESCOs with a higher credit risk?
• RE – grid connectivity, offtake agreements (PPAs, FiT)?
• Mitigation /Adaptation: expected returns or need for co-finance?
• Political framework: Which regulation requires action (GBG), which
incentives (e.g. tax reliefs) exist?
• Note: The Green Banking Guidelines do offer a good basis for this!
• Understand (and voice) capacity building needs
• Implications on funding: Find suitable mix of instruments
• Conditional loans? Guarantees? Project equity? Mobile banking? etc
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Co-finance required? Sources of Climate Finance
12
Domestic Funding
International Funding
Pu
blic
Fu
nd
ing
Pri
va
te F
un
din
g
Multilateral (MDBs) & Bilateral
National Budget
Funds: GCF, GEF, AF, etc
Grants, Guarantees & Loans
Loans, Bonds
Insurances
etc
FI´s
Credit lines, Guarantees,
Insurances,
etc
Central Bank, National Fund,
Guarantees, Insurances, Tax
incentives, Taxes, fines, etc
FI´s
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Opportunities of international Climate Finance
13
So
urc
e: C
lima
te F
un
ds
Up
da
te, W
IR, 2
01
7
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Key messages as input for discussion
15
• Policy level:
• Coordinating the process, using synergies (integrated climate finance
strategy)
• Facilitate National Climate Finance Dialogue: Get/Keep the core stakeholders
on board, enable capacity development opportunities
• Assess co-funding opportunities – potential (and need) is there, including
capacity development / technical support programmes (e.g. GCF)
• FI´s:
• Seriously consider the risks and opportunities of climate change
• Carefully reflect CC in portfolio / activities (Green Banking Guidelines)
• Understand potential of co-financing to reduce risks (e.g. guarantees) and
unlock finance for less attractive investments (e.g. adaptation)
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Thank you very much!
Björn Dransfeld
Founding Partner
the greenwerk. Climate Advisory Network
www.thegreenwerk.net
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Group Work:Innovative Climate Finance approaches for FI´s in Pakistan
Format:
3-4 Small break out groups,
you have 30-40 minutes
Task:
“Scoping study, climate finance overview, green banking guidelines"
Experiences and challenges in designing and
applying instruments for climate finance
Document it on paper!