Opportunities for climate andenvironmental finance     Maria Netto     Climate Change and Capital Markets Lead Specialist ...
Climate Finance MechanismsClimate finance can leverage otherinvestments. When blended together…  US$ 250          Internat...
Valuing Benefits - Market Mechanisms•   Environmental assets:    – Capital market indexes (ranking of companies on basis o...
Policies and Standard Settings•   Shifts in investments need long term regulatory signals (predictability)    with clear s...
International Climate FundsMechanisms    Key features                                               Capitalization   Fundi...
International Climate FundsMechanisms      Key features                                               Capitalization      ...
National Funds and Budgets•   Integration of climate change in budget and fiscal planning – examples of    Costa Rica and ...
Lessons learned for operationalization•   Operationalization of climate finance need to consider how best to:     – Ensure...
Focus on operationalization
Support to national public and development                       banks•   Institutional Support•   Environmental and socia...
Approach
SectorsSectors                 NDBsEnergy Efficiency       Bancoldex, Findeter, FIRA, Sociedad                        Hipo...
Example of NAFIN  Clean           IDB                               USD                                                  1...
Lessons learned from NDBs Supported•   Need to focus on specific market segments and ensure market    readiness•   Support...
Knowledge Exchange   MOU with ALIDE – support for: (i) training; (ii) preparation    of technical notes ; (iii) organizat...
Taller Alide-Bid-Brou (Sesión4.a): Opportunities for climate and environmental finance, Maria Netto, Bid
Taller Alide-Bid-Brou (Sesión4.a): Opportunities for climate and environmental finance, Maria Netto, Bid
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Taller Alide-Bid-Brou (Sesión4.a): Opportunities for climate and environmental finance, Maria Netto, Bid

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Taller “Oportunidades para la banca de desarrollo de América Latina y el Caribe en los mercados sostenibles”.
Opportunities for climate and environmental finance
Maria Netto
Especialista Principal de Cambio Climático, BID

Published in: Economy & Finance, Technology
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  • Climate finance can cover additional cost to… Facilitate enabling policies, regulatory frameworks, institutions and markets in support of adaptation and mitigation Catalyze transformational private and public investments and development programs in a range of areas including: low-carbon technologies (renewable energies, energy efficiency in industry, water use, transport, buildings...) terrestrial carbon (agriculture and forestry) climate resilience (change practices and factor-in climate vulnerability in infrastructure planning, in agriculture...) Support research, development and deployment of new technologies Skip this slide if the animated slide is used.
  • Focus on operational issues, where NDBs have a lot of bottom-up experience
  • Taller Alide-Bid-Brou (Sesión4.a): Opportunities for climate and environmental finance, Maria Netto, Bid

    1. 1. Opportunities for climate andenvironmental finance Maria Netto Climate Change and Capital Markets Lead Specialist Capital Markets and Financial Institutions Division Inter-American Development Bank Montevideo – 25 July, 2012
    2. 2. Climate Finance MechanismsClimate finance can leverage otherinvestments. When blended together… US$ 250 International Climate bln p.a. Funds Private Sector Investments National climate funds and budgets … Can catalyze Market Mechanisms transformatinal National investments for Development International and low-carbon, Budgets national policies climate-reslient development “BASELINE” International Private & Public Development Investments Assistance
    3. 3. Valuing Benefits - Market Mechanisms• Environmental assets: – Capital market indexes (ranking of companies on basis of environmental performance) – Payment for environmental services (e.g. Mexico, Costa Rica) – Other environmental asset markets – e.g. renewable energy, biodiversity – for which there is potential for accounting carbon value as well.• Carbon markets: – CDM: revenues of $27 billion in 2002-10 (leveraging another $125 billion in low-emission investment). Worked well in countries with capital liquidity and large GHG emission reduction potential projects. – Voluntary carbon market: are a small share of global markets (0.3 %) but is increasing (28 % increase a year) – particularly in the LAC region and for REDD (500% market share increase!) – New carbon market mechanisms are underway: national and sub-regional, city-wide levels.
    4. 4. Policies and Standard Settings• Shifts in investments need long term regulatory signals (predictability) with clear sets of incentives and pricing to carbon.• Lack of international agreement on the detail framework for commitments under the climate change convention is one of the most important uncertainties for shifting investments.• Governments play a key role in supporting finance though regulations, standards and commitments (enabling environment).• National policies may play an important role in ensuring that the use of resources, both public and private, is optimized. In particular there is a need for: – Planning regulations and design standards for infrastructure; – Promoting standardization and cost effective measures such as energy efficiency; – Defining technologies to be adopted, e.g. types of new generation capacity – Providing incentives for private investors to adapt new physical assets to the potential impacts of climate change; – Integrating climate change adaptation considerations in key sectors; – Attracting and coordinating foreign investment.
    5. 5. International Climate FundsMechanisms Key features Capitalization Funding mechanismsGlobal - For about 15 years operates as Financial Mainly public Mainly grants.Environment Mechanism of the CC Convention. Manages donor Provides forFacility different funds for mitigation and adaptation (GEF contributions. concessional trust Fund Climate Change window, SCCF, lending in some LDCF). Moved from project by project cases too. programing to country programming systems. - Benefits all developing countries of the CC Convention. - Mainly executed through MDBs and UN.Adaptation - Operational since 2008 with the aim to finance Levy (%) of Grants.Fund adaptation activities. carbon credits - Benefits all developing countries – with priority to (from CDM). most vulnerable ones. - Executed through “accredited” entities which can Public donor be national or international. contributions.Climate - A mechanism to pilot transformational low carbon Public donor Grants andInvestment development. Has 2 main funds, the CTF and contributions. concessionalFunds SCF (FIP, SREP, PPCR). Has a sunset clause. lending. - Pilot programs in 46 countries with 35 projects underway - Executed through MDBs.
    6. 6. International Climate FundsMechanisms Key features Capitalization Funding mechanismsMDBs - Most MDBs have dedicated climate funds / trust Mainly members Grants; funds. In addition, many are earmarking their contributions. Lending and resources to promote activities to address climate concessional change. For example IDB has an objective that lending; 25 % of its portfolio should be to be allocated to Guarantees; environmentally friendly activities. Bond issuance; - Benefit their own constituencies Carbon Funds.Bilateral - A significant number of climate funds have been Budget Grants;Institutions pledged by donor countries as part of their contributions. Lending and commitments to the Climate Change Convention concessional (so called “Fast Track Finance”). Auctioning of lending; - Eligibility by countries to participate in funds and emissions rights. Carbon Funds. specific conditions/criteria differ.Green Climate - Established at COP 16 held on December 2010 in Donor country TBD!Fund! Cancun, Mexico, the Green Climate Fund (GCF) contributions. was established. The Fund is expected to become Other sources the largest multilateral source of finance for TBD! climate change activities. - Expected to finance activities in developing country Parties using thematic funding windows.
    7. 7. National Funds and Budgets• Integration of climate change in budget and fiscal planning – examples of Costa Rica and Chile.• National Funds: e.g. Bangladesh, Brazil, China, Colombia, Ecuador, Indonesia. – Scopes: from broad range (“mitigation and adaptation” to very specific “disaster management and adaptation”, “REDD”). – Capitalization: national budgets, levies on carbon credits (e.g. CDM Fund in China), royalties or taxes in specific sectors (e.g. Climate Fund Brazil), international funds. – Finance mechanisms: grants and concessional lending. – Fiduciary responsibility: vary from national banks, new institutions created to manage funds, MDBs and UN.
    8. 8. Lessons learned for operationalization• Operationalization of climate finance need to consider how best to: – Ensure large, transformational and long term impacts in the economies – Move from “project by project” to “programmatic” – Mobilize / Leverage private sector investments – Become host driven - ensure close link of international finance to national development goals – Promote the enforcement of prices for environmental assets – Ensure transparent and efficient use of resources – Capacity to navigate the complex landscape of financial incentives and resources available – Have “real” environmental results that are monitored, verified and reported
    9. 9. Focus on operationalization
    10. 10. Support to national public and development banks• Institutional Support• Environmental and social risk management systems• Market studies / identification of opportunities• Development of financing strategies to integrate carbon finance , energy savings and /or other potential co- benefits from mitigation / adaptation• Training of staff and clients• Co-financing with IDB and other donors• Support to structure finance lines with international climate funds
    11. 11. Approach
    12. 12. SectorsSectors NDBsEnergy Efficiency Bancoldex, Findeter, FIRA, Sociedad Hipotecaria, BNB, BandesalRenewable energy NAFINSustainable Transport Bancoldex, Cofide, FindeterWaste Management BNBAFOLU Financiera Rural, FIRA, Banco Agrario, AFD, BNB
    13. 13. Example of NAFIN Clean IDB USD 1,190 mTechnology lending to NAFIN - Fund NAFIN USD 70 m USD USD 70 m USD 70m 1,540 m Debt and Private Equity CTF IDB Resourcesconcessional co- NAFIN mobilized loans financing
    14. 14. Lessons learned from NDBs Supported• Need to focus on specific market segments and ensure market readiness• Support market development and up front capital needs• Innovation and piloting of green products• High potential of leveraging public and private finance to address climate change• Learning by doing process – tailored solutions for specific needs• Large potential of supporting programmatic / sectorial approaches (versus project by project)• Issue with blending USD lending (grants X concessional lending)• Key to involve NDBs from the beginning in government discussions over climate finance and policies for promoting carbon price• Potential throughout LAC region - growing demand for scale up this kind of support from NDBs:
    15. 15. Knowledge Exchange MOU with ALIDE – support for: (i) training; (ii) preparation of technical notes ; (iii) organization of regional dialogues on specific climate finance related topics Web platform on carbon finance with a dedicated “Community of practice” for financial institutions – which includes technical notes and webinars On site training to NDBs, financial intermediares and clients on how to integrate climate and carbon finance in their business Collaboration with other agencies (UNEP-FI), governments and bank associations in the development of standards / green protocols (example Colombia and Peru) Development of studies for national and sub-national governments relating to regulations and standards for promoting carbon markets Support for studies and dialogue among stock exchanges (e.g. Brazil, Peru, Colombia, Chile) regarding development of environmental indexes , carbon markets and standards.
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