Climate Finance: Overview and Strategic Considerations

Size: px

Start display at page:

Download "Climate Finance: Overview and Strategic Considerations"

Winifred Lloyd
5 years ago
Views:

Financial Institutions in Pakistan, Islamabad, 5 December 2017

1 Climate Finance: Overview and Strategic Considerations 2nd National Workshop on Innovative Climate Finance Mechanisms for Financial Institutions in Pakistan, Islamabad, 5 December 2017 Große Theaterstraße Hamburg Germany 2017 the greenwerk.

2 Climate Change An Opportunity for the Financial Sector (?)

3 Climate Change: risks + opportunities 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. 3

Intl. policy driving for climate finance 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

4 Intl. policy driving for climate finance 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 Pakistan intends to reduce up to 20% of its 2030 projected GHG emissions subject to availability of international grants (approx USD 40 billion at current prices) Pakistan s adaptation needs range USD 7 to USD 14 billion/a until Conditional NDC elements sum up to more than of USD 4.4 trillion until approx 2035 Financial needs! 4

5 International climate finance provisions: the 100 bn UN target for int. climate finance: USD 100 bn per 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 sector Source: OECD,

6 FI s: Financing the climate agenda and beyond Financing the climate agenda FI s play an important role for financing sustainable development as a whole, not only climate So: Climate Change (and Sustainable Development) poses a huge opportunity for FI s But: An integrated strategy on policy level and banking sector is required 6

7 Implementing an Integrated Climate Finance Strategy

..) Provide domestic incentives / funding Harness international support (Access to funding, capacity building such as IFC

8 Advancing Climate Finance: Domestic Policy level Consider international trends (SDGs, NDCs), also learn from others Develop holistic domestic framework (policies & regulation, institutions, stakeholders & FI champions,...) Provide domestic incentives / funding Harness international support (Access to funding, capacity building such as IFC roadmaps, donor CB activities,...) Institutions Regulation (e.g. guidelines) Capacity Needs Coordination & leadership, towards an integrated Climate Finance Strategy 8

9 Advancing Climate Finance: Banking Sector / FI s 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? 9

10 Source: GIF 2017 Example: Green Investment Facility Viet Nam 10

11 Advancing Climate Finance: Banking Sector / FI s 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 regulation requires action (GBG), which incentives (e.g. tax reliefs) exist? Note: The Green Banking Guidelines do offer a good basis for this! Understand (and voice) capacity building needs Implications on funding: Find suitable mix of instruments Conditional loans? Guarantees? Project equity? Mobile banking? etc 11

Guarantees, Insurances, Tax incentives, Taxes, fines, etc FI s Credit lines, Guarantees,

12 Public Funding Private Funding Co-finance required? Sources of Climate Finance Domestic Funding National Budget Central Bank, National Fund, Guarantees, Insurances, Tax incentives, Taxes, fines, etc FI s Credit lines, Guarantees, Insurances, etc Multilateral (MDBs) & Bilateral Funds: GCF, GEF, AF, etc Grants, Guarantees & Loans FI s Loans, Bonds Insurances etc International Funding 12

13 Source: Climate Funds Update, WIR, 2017 Opportunities of international Climate Finance 13

14 Key messages

15 Key messages as input for discussion Policy level: 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 Assess co-funding opportunities potential (and need) is there, including capacity development / technical support programmes (e.g. GCF) FI s: Seriously consider the risks and opportunities of climate change Carefully reflect CC in portfolio / activities (Green Banking Guidelines) Understand potential of co-financing to reduce risks (e.g. guarantees) and unlock finance for less attractive investments (e.g. adaptation) 15

16 Thank you very much! Björn Dransfeld Founding Partner the greenwerk. Climate Advisory Network the greenwerk.

Group Work: Innovative Climate Finance approaches for FI s in Pakistan Format: 3-4 Small break out groups, you have 30-40 minutes Task: Scoping study,

17 Group Work: Innovative Climate Finance approaches for FI s in Pakistan Format: 3-4 Small break out groups, you have minutes Task: Scoping study, climate finance overview, green banking guidelines" Experiences and challenges in designing and applying instruments for climate finance Document it on paper! 17

Advancing the implementation of Nationally Determined Contributions in Africa the role of climate finance

Advancing the implementation of Nationally Determined Contributions in Africa the role of climate finance 7th Climate Change and Development in Africa Conference 11 October 2018, Safari Park Hotel, Nairobi,