Forming and Capitalizing Green Banks To Scale up Climate ... · institutional design, formation,...

Forming and Capitalizing Green BanksTo Scale up Climate Investment

A p r i l 2 0 1 9

CGC implements the Green Bank model to lower C02 emissions through institutional design, formation, capitalization, and administration.

Forming and Capitalizing Green Banks To Scale up Climate Investment - April 2019

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Who we are

• CGC works to advance the Green Bank model, partnering with govts., national development banks, and local NGOs to form and support GBs.

• CGC has helped design and create six Green Banks that have catalyzed >$1.5B in climate investment:

• South Africa • Connecticut (U.S.) • Montgomery County (U.S.) • New York (U.S.) • Rhode Island (U.S.) • Washington DC (U.S.) • Climate Access Fund (U.S.) • Currently working with Rwanda, Colombia, Indonesia and others

Consulting and

Technical Assitance

Thought Leadership

Advocacy

CGC implements the Green Bank model to lower C02 emissions through institutional design, formation, capitalization, and administration.


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Our supporters who we are and collaborators

FUNDERS PARTNERS (indicative selection)

COALITION FOR GREEN CAPITAL founded and leads (or co-leads)

Approximately one trillion dollars per year of additional investmentin clean energy is needed to keep warming below two degrees.


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Annual investment in clean energy under IEA scenarios with DFI commitments

Source: Coalition for Green Banks in Developing Countries: Scaling up Private Finance to Archieve Paris Climate Goals, July 2017

USD

, Bill

ions

$ 0

$500

$1,000

$1,500

$2,000

$2,500

$2Trillion

$1.1Trillion

$517Billion

$395Billion

$49Billion

Amount needed to hit two degree

target:

Investment today:

Additional projected under current policies:

Potential for increased commitments and leverage via DFls:

Additional investment needed:

Public funding is insufficient to fund the shift from brown to green:Countries must drive more private investment into climate projects.


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In non-OECD countries climate projects are largely publicly financed

Sources: 1OECD, Risk and Return Characteristics of Infrastructure Investment in Low Income Countries, September 2015. 2Asian Development Bank, Catalyzing Green Finance:A Concept for Leveraging Blended Finance for Green Development, August 2017. 3Colombia Department of National Planning (DNP), November 2017.

$398M

$179M$80M

$763M

$630MBillion

NDCinvestment

gap:

The National Planning Dept. projects that to meet Colombia’s NDCs under the Paris accord, private sector investment must grow 7X.

Private investmentPublic investment

Private fundin

g must b

ecome PRIMARY sou

rce and increa

se 7X

Green Banks are country-driven catalytic finance facilities designed to mobilize private investment into climate projects


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Green Banks can be placed within existing institutions or exist independently

Capital Markets Climate Proyects

A finance facility, which can exist independently or within an existing institution, that has a:

• Dedicated mission: “crowd-in” private investment to address climate change.

• Geographic focus: is nationally -or locally- owned, and focuses on addressing gaps and catalyzing greater investment in local markets.

• Capital base in-line with its mission: sources and deploys a mix of public and private sources (excluding customer deposits, typically).

Note: Green Banks perform many functions to enhance private investment in climate projects:

• Capital mobilizer • Capital provider • Lead arranger • Innovator • Capacity-builder • Feedback to government on enabling environment

Green Bank

Green Banks raise capital from a variety of sources and deploy catalytic investments or financial products based on local market needs


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Existing Green Banks have delivered strong results


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Green Banks lower CO2 emissions and act as innovators to mitigate risk in local markets through financial solutions that can be replicated by other market actors.

Sources: Annual and quarterly reports

Green Banks have growing interest as a Strategy to Scale-Up Climate Investment in Emerging Markets

Highly-engaged Countries (23)

AngolaBahrainBarbadosBrazilCambodiaChileChinaColombiaIndiaJordanKyrgyzstanLebanonMalaysiaMexicoMongoliaPeruRwandaSenegalSouth AfricaTurkeyUgandaUkraineUnited Arab Emirates

Interested Countries (8)

ArgentinaArmenia

EgyptEl Salvador

KenyaNigeria

The PhilippinesVietnam


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Most Green Bank activities are happening in isolation. A systematic approach could help take this opportunity to scale

EUROPE: 1

AFRICA: 8

ASIA: 14

LATIN AMERICA & CARIBBEAN: 8

Hosted by:

Sponsored by:

Organized by:

Green Banks offer a systemic model which could be scaled globally tohelp close the trillion dollar annual climate finance gap


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System of 25 Green BanksOne individual Green Bank

DEPLOYS ~USD 500Mof public-purpose capital

LEVERAGES ~USD 1-5Bof private capital

Demonstrates viability of multiple clean technologies and markets

DEPLOYS ~USD 12.5Bof public-purpose capital

LEVERAGES ~USD 25-125Bof private capital

Catalyzes full private sector adoption ofclean technologies and markets

x25

Green Facilities can support large projects… and small projects


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Distributed Solar, Biogas & Energy EfficiencyOffshore Wind

UK: Green Investment Bank (now Green Investment Group):

• Lead debt syndicates and organized long-term private sector refinancing.

• Brought new investors (pension funds) in the OSW space.

South Africa: Climate Finance Facility:

• Will finance distributed renewable, efficiency and water projects.

• Will focus on technologies with limited track record in South Africa,and that struggle to find affordable finance.

Green Banks fill gaps & serve as “first movers”:Can take early stage risk


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ExampleGREEN BANKInterventions

CommunitySolar Project

Commercial Investors

Time/Project stage: EARLY MIDDLE LATE

Bridge loan beforeinterconnection

Commercial bank provides project finance after interconnection achieved

For example, newinterconnection rules

are uncertain andperceived as slow

Green Banks can address risk associated with “first application” oftechnologies, and difficulties underwriting multiple revenue streams


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Biogas projectwith PPA



Subordinated debt and/or tenor extension

Commercial bank provides coinvestment in senior position,and/or with shorter tenor

For example, technology and/or developer has limited track

record in country. Project relies on multiple revenue streams, which are hard to underwrite beyond 5 years.

Green Banks can help with regulatory risk, for example financingunder a new regulatory scheme, with intention of refinancing


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Portfolio ofon-site EE/RE



Green Bank finances entirety of first portfolio of projects

Commercial bank or asset manager refinances portfolio of loans when it

reaches sufficient size

For example, a new regulatory scheme (e.g. Commercial PACE) where no

commercial investors have experience

www.greenwardpartners.com

[email protected]+34 91 737 40 08

Forming and Capitalizing Green Banks To Scale up Climate ... · institutional design, formation,...

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