Post on 30-Apr-2018
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Climate Finance: Overview and Strategic Considerations
2nd National Workshop on Innovative Climate Finance Mechanisms for Financial Institutions in the Philippines,
Manila, 8 December 2017
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Climate Finance – driven by policy, an opportunity for FI´s
Sources of Climate Finance
Design considerations for green bankers
Capacity development for FI´s
Concluding remarks for discussion
Agenda
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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
Intl. policy driving for climate finance
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• The Philippines NDC: intend to reduce up to 70% of its 2000-2030
projected GHG emissions,
• Also considerable adaptation measures
• Conditional on international support: Not quantified in $,
• Based on ASEAN regional RE target of 23 percent, annual investments of
up to USD 1.3 billion per year (0.35 percent of annual GDP) will be needed
until 2025.
• Conditional elements of all NDCs sum up to more than of USD 4.4 trillion
until approx 2035
Financial needs!
Intl. policy driving for climate finance (ctd)
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International climate finance provisions: the 100 bn
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UN target for int. climate finance: USD 100 bnper 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
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FI´s play an important role for financing sustainable development as a whole, not only climate Main Message: Climate Change (and Sustainable Development) can
mean a huge opportunity for FI´s… But: An integrated strategy on policy level and banking sector is required
Financing the climate agenda Financing the climate agenda
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Co-finance required? Sources of Climate Finance
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Domestic Funding
International Funding
Publ
ic F
undi
ng
Priv
ate
Fund
ing
Multilateral (MDBs) & Bilateral
National Budget
Funds: GCF, GEF, AF, etcGrants, Guarantees & Loans
Loans, BondsInsurances
etc
FI´s
Credit lines, Guarantees, Insurances,
etc
Central Bank, National Fund, Guarantees, Insurances, Taxincentives, Taxes, fines, etc
FI´s
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Opportunities of international Climate Finance
11
Sour
ce: C
limat
e Fu
nds U
pd
ate,
WIR
, 201
7
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The Potential of Climate Finance Co-Funding for Green Banking
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• Addressing domestic financing gaps (NDC), support in
attracting private sector finance (aligning NDC with domestic
financial sector)
• May reduce risks and barriers (e.g. through guarantees)
• Unlocking finance also for financially less attractive activities
(e.g. adaptation)
• (If international) Learning from other countries experiences
• (+) Greater independence from domestic structures
• (-) Dependence from interational partners
• Which role can the PSF play?
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Example: Green Investment Facility Viet Nam
Sour
ce: G
IF 2
017
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Advancing Climate Finance: Banking Sector / FI´s
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• 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 incentives (e.g. tax reliefs) exist?• Implications on funding: Find suitable mix of instruments
• Fund? Conditional loans? Guarantees? Project equity? Mobile banking? etc
• Understand (and voice) capacity building needs
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Capacity Development for Green Banking
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• Banking sector in developing countries has capacity building needs for
green banking
• (International) climate finance can support capacity building through
e.g. institution building, workshops & trainings, project development
• Focus: Domestic Leadership (Champions, Central Bank, provincial Gvts)
• Complement with intl. support: Examples include the GCF with its
readiness programme, NDC partnership, IFC (sustainable banking
initiative), DENR is NDA, 1st readiness support accessed
• Also consider e-learning opportunities through ESCAP, or such as IKI
with the RENAC Green Banking programme
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Train-the-Trainer Seminars atRENAC‘s Training Centre in Berlin
Trainings in India, Indonesia, Philippines, Thailand and Vietnam
Delegation tours & B2B meetingsin Germany
“Green Finance Specialist” program
Online trainings
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The Potential of Climate Finance Co-Funding for Green Banking
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• Seriously consider the risks and opportunities of climate change!
• Also focus on regulatory & fiscal incentives => important, learn from others
(Pakistan, Sri Lanka, China) (mandatory/voluntary??)
• 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 (BSP /
IFC workig group approach??)
• Assess co-funding opportunities – domestic and intl; potential (and need) is
there, including capacity development / technical support programmes
(e.g. GCF)
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Pasalamatan!
Björn DransfeldFounding Partner
the greenwerk. Climate Advisory Network
bd@thegreenwerk.netwww.thegreenwerk.net