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 Energy Policy Network for the 21st century (REN21)

• The Capital Market Climate Initiative (UK Government)

• BNDES Amazon Fund

• The Climate Group

• The Global Energy Transfer Feed-in Tariffs Programme

• The Forest Carbon Partnership Facility (FCPF)

• Finance for Resilience Initiative

• The Global Climate Partnership Fund

Concluding Remarks and Next Step

� This study provided an inventory of different types of initiatives involved

in global climate finance to developing countries.

� Four main issues:

1) Methodological, definitional, and data challenges.

2) Need to scale up private finance for adaptation2) Need to scale up private finance for adaptation

3) Issues of impact and effectiveness

4) Barriers to private investments: new role for the public sector ;

public-private partnerships; and global knowledge networks.

� Next step

– Case studies of specific initiatives: especially PPPs (REEP and REIN 21)

• Impact and role in partner countries of Belgium