MONGOLIA GREEN CREDIT FUND:

The Public Private Partnership Model for Green Development

B. Naidalaa

Sustainable Finance Initiative (ToC) Steering Committee member,

Consultant to the MGCF Project, GGGI

Contents

1. The UN Initiatives on Climate Change and Mongolia: The Paris Agreement and NDCs

2. The Private Initiative for Sustainable Development

3. The Rationale for Establishing the Mongolia Green Credit Fund (MGCF)

4. The Basic Concept of the MGCF

5. The Expected Outcomes/Impacts of the MGCF

1. The UN Initiatives on Climate Change and Mongolia:

The Paris Agreement and NDCs

The NDCs of Mongolia (2016)

14% reduction in total

national GHG emissions (from BAU)

Reduce electricity

transmission losses from

13.7% in 2014 to 7.8%

by 2030.

Increase renewable electricity

capacity from 7.62% in

2014 to 30% by 2030

Reduce building heat

loss by by 40% by 2030, compared to 2014 levels

Implement advanced

technology in energy

production by 2030

Improvement in public

transport in terms of

energy usage

Increase the share of hybrid

vehicles from 6.5% to

approximately 13% by

2030

Upgrade cement

production from wet- to

dry- processing

Maintain livestock

population at appropriate

levels

Improve waste and recycling

management

2. The Private Initiative for Sustainable

Development

ТоС Banking Requirements

Project Profitability

Project Profitability

Impact on Environment

Impact on People and

Society Compliance

Conventional Banking Requirements

Mongolia Sustainable Finance Initiative (ТоС)

2. The Rationale for Establishing the Mongolia Green Credit Fund (MGCF)

Why do nations create national green financing vehicles?

To coordinate policies under one national Vision

To effectively coordinate grants and technical assistance of partners

To attract funding and investments

from public and private entities

To accelerate the development of green projects

To create an inclusive platform

for all people, banks, and businesses

International Cases of Funds for Sustainable Development

Social Fund for Development (SFD):

• Established in 1991 by a Presidential decree and with support of the UNDP

• То finance sustainable development projects

• Investors: WB, EU, Germany, JICA, Kuwait Development Fund

Green Fund (GF):

• The Government of South Africa, through the Department of Environmental Affairs (DEA) has set aside R800 million to establish the Green Fund.

• То finance sustainable development and green projects

• The Development Bank of SA (DBSA) acts as the implementing agent of the Green Fund.

Tropical Landscapes Finance Facility (TLFF):

• A loan and a grant Fund established in Oct, 2016

• To use public funding to unlock private finance in green projects

• BNP Paribas and ADM Capital will act as fund manager for the loan fund

• UN Environment will manage the secretariat

The Rationale for establishing the Mongolia Green Credit Fund

• Mongolia’s NDCs submitted in 2015 and endorsed in 2016

• Ratification of the Paris Agreement Global commitments – Paris Agreement

• Advanced economies have agreed to jointly mobilize USD100bln per year by 2020 (GCF)

• Increasing commitments from global private financial institutions for green projects Increasing Global funding sources and commitments for climate change

• National policy mandate; Strong targets in Energy, Construction, Transport.

• Govt pledged support for Green Credit Fund

• Need for financial products in line with national priorities National priorities – Air quality, Green growth

• At least USD2.5bln investment in Renewable energy to achieve the NDCs

• Annual potential market for industrial process energy saving in Mongolia is USD100mln (ADB study, 2016)

Increase of green projects, initiatives and demand for green funding

• Need of new lending products, risk sharing facilities

• Need of involvement of local financial institutions The financing gap – Lack of low cost, longer tenor funding for green projects

• Sustainable Finance (ToC) Initiative by local Banks for Sustainable Finance and Green Credit Fund

• Market-based approach to drive scale and sustainability Private sector initiative with a public purpose

• Strong involvement of development partners

• Liaising closely with businesses, banks, donors, and govt. in building the green financing platform Platform for international cooperation and Mongolian leadership

The Financial “Irrigation System” for Green Projects

3. The Basic Concept of the Mongolia Green Credit Fund (MGCF)

Goal:

• To create the apex national green financing platform to support Mongolia’s national green development agenda and global action to address climate change

Legal Status:

• Private Investment Fund (PIF)

Initiators/Shareholders:

• Government of Mongolia, International Organizations, Mongolian Bankers Association

Board:

• Fund investors, public and private

• Governance function separated from Fund management to ensure transparency and professionalism

Executive Management:

• Qualified fund management LLC, licensed and engaged competitively

• Independent professional management team

Main products:

• Lower cost, longer tenor lending to financial institutions

• Risk sharing facilities to financial institutions

• Grant funds/capacity building/TA program

• Green bonds for national / international markets

The Basic Structure – Not your typical government fund

The Potential Products of the MGCF

Lower rate, longer term loans

Green housing

Energy efficiency

Renewable energy

Waste management

Sustainable transport, electric car

…more products in line with the national agenda

Credit guarantee, risk sharing facilities

Technical assistance, trainings

The Stakeholders in the MGCF Project

MGCF Ministry of

Finance (MoF)

Ministry of Energy (ME), Energy Regulatory Commission (ERC)

Ministry of Construction and

Urban Development

(MCUD)

UB city

Ministry of Environment and Tourism (MET)

Bank of Mongolia

(BoM) Financial

Regulatory Commission

(FRC)

MBA and Banks

Mongolian Chamber of Commerce

and Industry

International Organizations

…open for participation

Sustainable Development Vision 2030 of Mongolia

The National Vision, Green Development

Policy

Private Sector

Initiative, Independent Professional Management

The Public Private Partnership

4. The Expected Outcomes/Impacts

GLOBAL COMMITMENTs TO LOCAL PROJECTs. An efficient and self-sustainable national platform to convert global funding and commitments on climate change into local sustainable projects.

INCLUSIVE PLATFORM. A Public Private Partnership to establish a single and inclusive platform for green financing (Public Policy/Private Management model).

NEW FINANCIAL PRODUCTS. Pioneering new green financial products in Mongolia – such as green bonds, green housing loan, energy efficiency loan products and other green financial products in line with National Agenda.

REAL INCENTIVE. Creating a real financial incentive to boost the sustainable finance (ToC) initiative of local banks, and further compel the introduction of the sustainability principles to other industries.

KEY SUCCESS FACTOR. Building up the key framework to implement the National Agenda for Green Development successfully.

Thank You

www.gggi.org

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