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  • INTERNATIONAL CLIMATE FINANCE

    TAKING STOCK OF BILATERAL, PRIVATE, & HYBRID

    FINANCING INITIATIVES FINANCING INITIATIVES

    Acropolis BeFind – Financing for Development

    KLIMOS WORKSHOP Brussels, April 28, 2013

    Emilie Bécault

    Axel Marx

  • Context

  • Overall Purpose

    A MAPPING EXERCISE/ OR INVENTORY

    “non-multilateral” financing initiatives involved in providing and/or

    promoting climate finance to developing countries

    BILATERAL FINANCING

    INITIATIVES

    PRIVATE FINANCING

    INITIATIVES

    HYBRID FINANCING

    INITIATIVES

  • Structure of the report

    1. INTRODUCTION

    2. INTERNATIONAL CLIMATE FINANCE: A CONCEPTUAL TOOL BOX

    3. BILATERAL FINANCING INITIATIVES

    3.1 Introduction

    3.2 Bilateral financing institutions (BFIs): definition and typology

    3.2.1 Bilateral development cooperation agencies

    3.2.2 Bilateral development banks (BDBs)

    3.2.3 Bilateral environmental/climate funds

    3.3. Climate financing from BFIs: estimates, distribution, and instruments 3.3. Climate financing from BFIs: estimates, distribution, and instruments

    3.3.1 Bilateral climate-related development assistance

    3.3.2 Bilateral development banks

    4. PRIVATE FINANCING INITIATIVES

    4.1 Introduction

    4.2 Institutional investors

    4.3 Private sector carbon funds

    4.4 Philanthropic initiatives

    5. HYBRID (PUBLIC-PRIVATE) FINANCING INITIATIVES

    5.1 Introduction

    5.2 Mobilising private finance: key instruments

    5.3 Multi-stakeholder (financing) partnerships

    5.4 Hybrid Carbon funds

    6. CONCLUDING REMARKS

  • Conceptual Tool Box

    KEY CONCEPTS OF CLIMATE FINANCE

    SOURCES FLOWS INITIATIVES INSTRUMENTS PRINCIPLES

    Primary origins of

    the funds (e.g.

    private, public,

    hybrid, int’al

    domestic, regional)

    The volume of

    funds that are

    committed and/or

    disbursed by a

    financing

    institutions/

    Organizational

    entity or institution

    (formal or

    informal) set up to

    channel or mobilise

    funds for specific

    Instruments,

    mechanisms used

    by financing

    initiatives or actors

    to disburse funds

    The norms

    /principles that

    guide the choice

    and design of

    financing

    instruments and institutions/

    initiatives or actors.

    funds for specific

    international

    cooperation

    purposes.

    instruments and

    initiatives. They

    help justify the

    burden-sharing

    among actors.

    CF: Public money,

    private money,

    donations from

    individuals and

    philanthropies

    CF: global total climate

    financial flows;

    public/private flows

    from developed to

    developing countries;

    flows from ODA/OOF;

    flows from multilateral

    funds; flows from

    UNFCCC funds.

    CF: Bilateral financing

    institutions (BFIs);

    multilateral financing

    institutions; Climate

    specific funds (e.g.

    global donor funds set

    up by UN agencies or

    the EU; Regional and

    national recipient

    funds;) private

    funds/initiatives, PPPs.

    CF: e.g. grants,

    concessional loans,

    guarantees, equity,

    debt swap, bonds etc..

    They can be combined

    depending on the

    institution; they have

    their own advantages

    and disadvantages.

    CF: e.g. polluter pays

    principle; ability to pay

    principle; additionallity

    principle; user pays

    principle; equality

    principle;

    precautionary

    principle; common but

    differentiated

    responsibilities

    principle etc…

  • Bilateral Financing Initiatives

    BILATERAL FINANCING INITIATIVES

    Bilateral cooperation

    agencies (i.e. bilateral

    donors)

    Bilateral development

    banks (BDBs)

    Bilateral climate-specific

    funds

    � Primary channel of public

    climate finance to developing

    countries (esp. in terms of

    � Ex: Agence Française de

    Développement (AFD); the

    Japan International

    � Key funds:

    • UK Int’al Climate Fund (ICF); • Germany Int’al Climate countries (esp. in terms of

    adaptation)

    � Recent estimates: ODA: USD

    21.9 bn (17% of total ODA)

    (43% primary objective)

    OOF : USD 682 m for 2013

    � Regional distribution: mainly

    to Asia

    � Challenges:

    • Limitations of the OECD DAC monitoring system and the Rio

    markers.

    • Challenges of reconciling development and climate

    objectives

    Japan International

    Cooperation Agency (JICA); The

    German Development Bank

    (KfW)

    � Similar activities than BCAs but

    different mandates and use of

    private sources of fund.

    � Recent estimates: 2012

    climate related finance to

    developing countries: USD 14

    bn

    � Principally concessional loans

    and for mitigation activities in

    Asia.

    � Challenges: difficult to track;

    only a few studies exist.

    • Germany Int’al Climate Initiative (ICI);

    • Norwegian Int’al Climate and Forest Initiative (NICFI);

    • Japan: Fast Start Finance � Main purpose: demonstrate

    willingness and ability to

    finance global actions on

    climate change

    � Support programmes by dev.

    agencies and IOs

    � Flows are included in the

    OECD DAC reporting system to

    avoid double counting

  • Private Financing Initiatives

    � Private finance: main source of global climate finance

    � Estimates for 2013: USD 193bn (58% of total global climate financial flows)

    � Substantial challenges of tracking private climate finance

    • Lack of common definition

    • Complexity and diversity of flows• Complexity and diversity of flows

    • Confidentiality concerns of corporate actors/lack of transparency

    • No established systems for monitoring, reporting and verifying (MRV)

    � What is generally included? : FDI ; Portfolio investments; Mobilized private investments; Carbon market payments; Voluntary climate funds; Private donations ; Corporate initiatives ; Payments for low-carbon products.

  • Corporate Initiatives of Institutional Investors

    � A potentially important source of climate finance

    INSTITUTIONAL

    INVESTORS

    TYPES OF INVESTMENT

    ASSETS

    INVESTMENT CHANNELS

    Pension funds

    - Defined benefit

    - Defined contribution

    Corporate equity

    Corporate debt (Bonds)

    Project equity

    Direct investment

    - In corporate securities

    - In projects - Defined contribution

    Other pension assets

    - Pension reserve funds

    - IRAs, insurance contracts, etc.

    Insurance companies

    - Life, reinsurance

    - Property and casualty

    Sovereign wealth funds

    Foundations & endowments

    Investment managers

    Project equity

    - Levered

    - Unlevered (whole asset)

    Project Debt

    - In projects

    Through intermediaries

    - Investment managers

    - Private equity funds

    - Infrastructure funds

    - Other pooled investments

    vehicles

  • Institutional Investors Initiatives on Climate Change

    � Regional / Global groups of institutional investors with specific focus on climate- related investments.

    • Objectives/activities: – catalyse /mobilise greater investments in low-carbon/climate resilient projects – knowledge building/sharing with other actors (esp. governments) – seek to promote greater leadership on climate finance– seek to promote greater leadership on climate finance

    • Main groups: � (EU) Institutional Investors Group on Climate Change (IIGCG)

    � (North America) Investor Network on Climate Risk (INCR)

    � (Australia) Investor Group on Climate Change (IGCC)

    � (Global) P80 Group (pension funds)

    � (Asia) The Asian Investor Group on Climate Change (AIGCG)

    � (Global) Climate Wise (group of insurance companies)

  • Hybrid Financing Initiatives

    � Global public-private partnerships: voluntary cooperative arrangements

    between various actors from both the public sector (states, IOs, cities,

    regions) and private sector (for profit and non-profit).

    � Three types of partnerships :

    1) Knowledge partnerships 1) Knowledge partnerships

    2) Standard-setting partnerships

    3) Implementation/Capacity building/Service delivery partnerships

    � Key question: are some global PPPs involved in climate finance and how?

  • Public-private (financing) partnerships (?)

    � Only a few global PPPs focus on financing (esp. renewable energy)

    • The Renewable Energy and Energy Efficiency Partnership (REEP)

    • The Renewable Ener