Climate Finance: Overview and Strategic Considerations · · 2018-01-30Climate Finance: Overview and Strategic Considerations 2nd National Workshop on Innovative Climate Finance

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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

Climate Finance – driven by international policy, a huge opportunity for FI´s


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


• 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


• 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.


FI´s: Financing the climate agenda – and beyond

8

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

Sources of Climate Finance


Co-finance required? Sources of Climate Finance

10

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


Opportunities of international Climate Finance

11

Sour

ce: C

limat

e Fu

nds U

pd

ate,

WIR

, 201

7


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?

Some design considerations for green bankers


Example: Green Investment Facility Viet Nam

Sour

ce: G

IF 2

017


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

Capacity Development for FI´s


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


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


Module “Climate finance options in South-East Asia”

Food for Discussion…


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

[email protected]


Group Work:

Innovative Climate Finance approaches for FI´s in the Philippines

Format: 3-4 Small break out groups,

you have 30-40 minutes

Task:

Experiences and challenges in designing and applying instruments for climate finance

Document it on paper!

Documents

Climate Finance: Overview and Strategic Considerations · · 2018-01-30Climate Finance: Overview and Strategic Considerations 2nd National Workshop on Innovative Climate Finance