Financing Instruments for Cooperation on Climate Change (2014-2020)

Financing instruments for cooperation

on Climate Change

2014-2020

ALIDE SEMINAR – November 2014

Laurence Rouget-Le Clech – Latin America and the Caribbean Dept

AFD / Stratégie Climat-Développement 2012-2016 2

Present in 70 countries, on 3 continents

AFD a development bank

A variety of flexible tools: grants, concessional loans, technical assistance, equity

financing, guarantees, credit lines to intermediairies, budget support…

4 structural pillars :

Economic growth

Poverty reduction

Green and inclusive growth

Support to French Overseas

2 commitments :

Finance development

Leverage countries’

development strategies

€7.8 billion committed in 2013

Activity in climate and energy in increase:

x10 between 2002 and 2008, 30% Group’s activity in 2012 (> €2 billion)


AFD Group is one of the global leading

player on climate action

More than 12 billion

euros since 2005 in

financing climate related

projects (mitigation and/or

adaptation)

AFD Group represent

around 10% of international

public funding on climate

change action


2012-2016 Climate Action Plan

1. A sustained and ambitious climate-

related funding objective

50% of AFD’s foreign-aid funding

30% of Proparco’s foreign-aid funding

And support environmental policies (« Grenelle de l’Environnement ») in the French Overseas Territories


2012-2016 Climate action plan

2. Measuring and monitoring impacts

Systematic carbon footprint measurement of all projects directly financed by AFD

« Climate » projects (emissions reductions)

Emissive projects (> 10 ktCO2/year)

Strongly emissive projects (> 1 MtCO2/year)

A robust methodology for quantifying GHG emissions, in line with international standards

A carbon footprint tool for 27 pre-defined types of projects

AFD is leading the effort to harmonize carbon-footprint measurement approaches with several other international donors (IFC, EBRD, IDB…)

AFD is developping a tool to estimate its funded projects’ vulnerability to climate change effects.


2012-2016 Climat strategy

3. Project selectivity

Objective: to promote cimate related consideration during project appraisal

Consolidate and manage the group's image in accordance with its mandates and its

primary role in support of economic and social development of poorest countries

Selectivity that focuses on highly emissive projects

Selectivity adapted to AFD Group’s mandates and to the countries capacity

Selectivity that provides more flexibility for countries already engaged in considering climate issue in

their public policies

Category 1

(SSA, LDCs, priority and poor

countries in crisis)

Category 2

(Middle Income Countries)

Category 3

(Countries with Green and

Inclusive Growth mandate)

MITIGATION projets &

projets with NEGLIGIBLE

climate impact

(between -10kteqCO2/year

and 10kteqCO2/year)

YES YES YES

EMISSIVE

project

(between 10teqCO2/year

and 1MteqCO2/year)

YES YES

YES

if the loan is not concessional.

In case of concessional loan, OUI

only if the country has an

acceptable climat policy

HIGHLY EMISSIVE

projects

(more than 1MteqCO2/year)

YES

with conditions on lending

concessionality unless the country

has an acceptable climate policy

NO

unless the country has an

acceptable climate policy

NO

AFD operations in Latin America


Mexico (2009)

Brasil (2007)

Haïti (1981)

Dominican Republic(1997)

Suriname (2010)

Jamaica (2009)

Dominica (1985)

0

200

400

600

800

1000

1200

2009 2010 2011 2012

Colombia Rep. Dom Brazil Mexico Haiti

Mandates in LAC

Green and inclusive growth (lower carbon emissions)

In the Caribbean region : support to the countries’ resilience

/ regional cooperation


A wide range of financial instruments

mobilized by AFD Group on climate action

A wide range of tools for project funding :

Grants, concessional loans, loans at market conditions, investment funds own or mezzanine funds,

securities and other structured instruments

Innovative financial instruments with high impact on national / regional climate related

public policy and the implementation of CC action plans (NAMA, NAPs) :

Budget support at national level, multi-sectoral, sectoral or territorial investment and capacity

building programs

Innovative financial instruments :

“Green" credit lines and support to local banks and SMEs

Direct financing to local authorities

Mobilization of EU blending instruments or of the French Global Environment Fund (FFEM)

Subsidiary dedicated to financing the private sector: Proparco

Debt or equity financing of projects or companies particularly in the areas of renewable energy,

energy efficiency and environmental services


1. Financing of projects

Example : Géothermal project in Dominica

Large reservoir next to Roseau,

Green and cost-competitive energy

Export potential to neighboring French islands.

Highly conducive to PPP

Financing Package

Exploration phase : EU/AFD Grants (€ 8M)

Production : initial phase soft financing (€6,5M)

Next phase : PPP

CIF Grant : for TA and studies (€2M)


06/02/2013Project carbon footprinting at AFD Group 10


2. Climate Change Policy Loans

(CCPLs)

Features

Non earmarked « thematic » budgetary loans

– Announced for several years

Relies on a « policy matrix »

– Established between the government and donors, high level dialogue targeted

– Annual result indicators

With a technical assistance program

Objectives

Help authorities transform political will into an operational climate change

action plans

Facilitate cross-sector and inter-ministerial dialogue to enhance CC

considerations in political, budgetary, technical decision making

11

The Mexican Climate Change Action Plan

(PECC 2008-2012)

Climate Change Loan : 2 commitments (USD 485M) – BID, coherence with WB

Main features

Long Run: Cut emissions by 50% in 2050 with respect to 2000

Short Run: -51 Mt CO2 by 2012 with respect to baseline

Cross-cutting, mitigation, adaptation: 106 objectives, 303 actions w/ lead entities

Institutional set-up: MoE, CC Interm. Commission, lNE

MoE responsible for monitoring, evaluation and dissemination

12

Forest/REDD+ Land use planning Low-carbon growthEconomics

CC Budgetary Loan

Technical Cooperation Program

Ministry of Finance

CC Action Plan (PECC)

Min. of Environment (MoU)

Framework CC loan in Mexico : In line with the PECC !

Credit Agreement

with Policy Matrix

SIAT PECC Assessment

Extract for own AFD

accountability, linked

with other CC operations

Dissemination of Results

Inputs for next PECC:

new goals, linking micro

and macro analysis

06/02/2013Project carbon footprinting at AFD Group 13

CC credit lines:

Offer both appropriate funding

and dedicated technical

support;

Build capacity and overcome

the financial and technical

barriers to scaled-up

investment:

provide banks with special

partnership conditions allowing

them to seize the opportunities

of climate change finance.

34 partnerships with banks

1,4 billion commitments since

2005

BFI


3. CC Credit lines


Credit lines to FI Brasil, Mexico, Colombia


Brasil - Non sovereign Credit Lilne to Development Bank of Minas Gerais (BDMG)

Need for urban investment and sustainable develpment strategy at the local level

€ 50 M credit line to finance public infrastructure investments

with positive climate impacts: specific adaptation or mitigation purposes

support to the Bank and to the local municipalities (identify, evaluate, monitor)

Non sovereign Credit Line + LAIF to FIRA (Mexico)

“Agriculture” + “land use changes and forestry” contributes 18% of GHG emissions

80% of economic losses due to weather-related disasters in the past 2 decades

€100 M credit line and support to local banks (21 Banks – 57 NBFI) and 1,8 M final beneficiaries

For new products/process to promote identification/development of sustainable productive projects:

Promotion of “sustainability component” in all projects to develop or promote the institution;

€ 5 M LAIF to FIRA for Technical assistance and pilot investments (co financing with IDB)

Non sovereign Credit Line + LAIF to Findeter (Colombia)

€ 150 M Credit line to support sustainable development of cities

Eligible projects : renewable energy, energy efficiency, transport and water

€ 5 M LAIF for Technical assistance (co financing with IDB)

14

Una ilustración: financiamiento del componente « transporte »

de un proyecto urbano integral en la ciudad de Medellín

• Objetivo: apoyar la puesta en marcha del programa urbano

de 400 MUSD en la zona centro-oriental de la ciudad, para

desenclavar barrios populares

• Intervención de la AFD: un préstamo directo de 240 MUSD

al municipio sin bonificación, para financiar un tranvía y dos

líneas de « metrocable »

• Como acompañamiento, la ciudad emprende un programa

de desarrollo urbano integral en el conjunto del tramo urbano

que va del centro a la periferia

•• Impactos socioImpactos socio--econeconóómicos y ambientales: micos y ambientales:

• Revalorización de la zona centro-oriental de la ciudad con

construcción de espacios públicos, de viviendas, etc.

• Reducción de la emisión de gases de efecto invernadero

• 300.000 personas beneficiadas

Medellín : 2da Ciudad de Colombia (3 millones de habitantes), 2da

ciudad colombiana emisora de GEI, 1er centro económico. Desde hace

10 años la ciudad implementa una política urbana innovadora centrada

en la inclusión urbana y el respeto del medio ambiente


4.Non sovereign financing to local authorities

Financing the transport component of an integrated urban

project – City of Medellin

2cd City (2M people), 2cd rank in GHG emissions,1st eco center

10 years of innovative urban policy: socially inclusive combining

economic development and social and cultural initiatives

Objective : to support a USD 400 M in desadvantaged areas

in the East and Center of the city

Direct loan to the municipality of Medellin

USD 240 M at market conditions

1 tramway line + 2 metro cable lines

Development of an integrated development plan : rehabilitation

and construction of public infrastructure, social services

Impact

Better perception of the central and eastern part of the City

Decrease in GHG emissions

300 000 direct beneficiaries


Thank you for your attention


Financing Instruments for Cooperation on Climate Change (2014-2020)

Economy & Finance

Transcript of Financing Instruments for Cooperation on Climate Change (2014-2020)