DESIGNING INVESTMENT GRADE POLICIES: LESSONS FROM EXPERIENCE WITH LOW-CARBON, CLIMATE-RESILIENT INVESTMENT

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1 DESIGNING INVESTMENT GRADE POLICIES: LESSONS FROM EXPERIENCE WITH LOW-CARBON, CLIMATE-RESILIENT INVESTMENT Robert Youngman Team Leader, Green Finance and Investment ENV/CBW OECD-WWC-Netherlands Roundtable on Financing Water 12 April 2017, OECD Headquarters, Paris

2 Mobilising finance and investment for Paris: low-carbon infrastructure 2

3 Components of an Investment Grade Policy Framework for Clean Energy Investment Environment Investment policy Investment promotion and facilitation Competition policy Financial market policy Trade policy Public governance Etc. Core Climate Policies Innovation Environment

4 Trends in investment and patenting Trends in investment flows and patent counts in renewable power sources in OECD and G20 countries Source: Authors calculations, based on BNEF (2015a); and Haščič and Migotto (2015).

5 Research questions 1. Which investment conditions and climate policies are effective in mobilising investment? 2. How do investment conditions impact the efficiency of climate policies in mobilising investment?

6 Enabling Investment and Innovation in Renewable Energy Scope Dependent variables Explanatory variables Renewable power G20 & OECD countries (investment) (innovation) INVESTMENT (investment flows) INNOVATION (patent counts) Effects Climate mitigation policies Investment environment Innovation environment Control variables

7 Findings: Policy drivers for, barriers to RE investment Feed-in tariffs, RE certificates, public tenders Explicit carbon prices (in EU, and emerging markets & solar) Mitigation policies more effective when combined Investment depends on investment environment Overall ease of doing business Trading across borders Sovereign credit rating Implementation of Basel III leverage ratio Investment conditions can hamper effectiveness of mitigation policies And for water investment?

8 Mobilising finance and investment for Paris: low-carbon infrastructure 8

9 Potential for low-carbon bond issuance to 2035 in a 2 degree scenario: In China, Japan, EU and US (in the renewable energy, low-emission vehicle and energy efficiency in buildings sectors) bonds outstanding in four regions ($bn) 5,500 4,500 3,500 2,500 1, ,900 1,700 1,500 1,300 1, Annual bond issuance in four regions ($bn) Amount outstanding Issuance Source: OECD (2016) A Quantitative Framework for Analysing Potential Bond Contributions in a Low-Carbon Transition 8

10 THANK YOU! For more information, visit:

11 OECD Centre on Green Finance and Investment Mission: Through effective policies, markets, and institutions, mobilise and scale up finance and investment to support the transition to a green, lowemissions and climate-resilient global economy 11

12 What the Centre will do 1 Provide a global platform for knowledge exchange and effective engagement 2 Produce high-quality, policy-oriented research and analysis 3 Initiate and foster collaboration to address knowledge gaps and market challenges 12

13 Main workstreams 1 Strategies, policies, and actions for the low-carbon transition 2 Resilience and conservation 3 Finance 4 Tracking progress 5 Maximising impact for development 13

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15 Policy communities / OECD bodies Investment framework policymakers (including cross-border) Energy and Transport Ministries Environment Ministries National development banks Export credit agencies Long-term investment financing / infrastructure experts Mayors and urban planners OECD CGFI Development cooperation agencies, MDBs Bilateral development institutions Responsible business conduct regulators, ESG specialists Corporate governance policymakers Market conduct regulators, financial education experts Finance Ministries, central banks, public debt managers Insurance and pension fund regulators Disaster risk financing experts, adaptation / resilience specialists 15