First Workshop onLong-Term Finance Bonn, Germany, 9 – 11 July 2012
• The Role of National Development Banks in Mobilizing International Climate Finance
National Development Banks: Potential Heroes of Climate Finance Diana Smallridge Washington, DC April 18th, 2012 “The Role of National Development Banks in Mobilizing International Climate Finance” World Exchange Plaza. P.O. Box 81119. Ottawa. Ontario. K1P 1B1. Canadatel.: 1.613.742.7829 fax: 1.613.742.7099 www.i-financialconsulting.com email@example.com
.The Latin American Association of Development Financing Institutions (ALIDE) is the internationalorganization that represents Latin American and Caribbean development banking.ALIDE targets its programs, projects, activities and services at fostering the unity andstrengthening the joint action and coordinated participation of the development banks andfinancial institutions in the region’s to promote socioeconomic progress.PROGRAMS, PROJECTS, OPERATIONS AND SERVICES• 23 DB with sustainability programs• 16 specialized areas• Venture capital, loans & guarantees
Some conclusions drawn over the experience within ALIDE about the role of national development banks in enhancing climate finance• NDBs are well positioned to channel climate finance funds given their characteristics: – Pivotal players- link with public policies – Experience in Intermediating resources (national & multilateral). Long term – Risk taker – Project structurer – Soft power – Demand creator for new technologies• Questions that the National Development Banks (NDB) should answer: – How to increase climate finance funds? – How to accelerate the climate finance funds deployment? – How to complement low carbon private investments?• Designing appropriate financial instruments. This should take into account risk mitigation factors, technology cost, implementation costs, and determine how to build capacity, among other issues. Is there appropriate knowledge and capacity to promote green projects?• Key question: How can the NDBs complement the private financial sector to finance carbon projects?
FIRA´s carbon finance strategyTechnological assistance.• Support a % of the costs associated to training, capacity building and technology transfer of sustainable projects.• Support a % of the costs associated to the registration of projects eligible to receive carbon credits (either CDM or voluntary markets). If the project is successfully implemented, the beneficiaries reimburse the financial aid received.CDM Program of Activities.• Animal waste management system (PoA AW).• Liquid waste management systems of relevant agricultural and alcoholic beverages industries (PoA LW).Publicly backed guarantees and low carbon projects funding.• Second tier credit scheme through financial intermediaries to provide loans to low carbon projects.• FEGA, partial guarantee scheme to cover financial intermediaries.• FONAGA Verde, guarantee scheme to cover first credit defaults in energy & water efficiency and renewable energy projects (Biodigesters included).
FIRA´s low carbon strategic partnerships to create the necessary internal capacity and specialized products. Partnerships to implement Partnerships to develop Tools and Information and capacity building programs to promote low carbon activities projects + Information and capacity building Tools and programs + Green development Non-refundable banking information technical cooperation and best practices for CC related studies and Environmental and PoA Liquid Waste social risk management early stages financing system implementation and design Environmental and social risk Finance for CC management related subject paper information and study training Sustainability impact indicators of CC and carbon investment projectsSpecialized market workshopsknowledge in and development of asustainable energy portfolio of mitigationfinance projects
FIRA´s experience in receiving international climatefinance aid.Advantages of receiving climate finance aid:• Access to high level and specialized information and advise• Knowledge transfer and capacity building• Access to non refundable funds• Assistance to identify priority areas and areas of opportunity• Valuable contacts with the climate finance international sphere Obstacles to receive climate finance aid:• The agreements and contracts that need to be signed to formalize the cooperation might include some clauses that are not acceptable under the governing laws of the country. E.g. penalization clauses.• It is not always clear how to formalize the cooperation and there is no realistic chronogram to finalize it.• Red tape. There is usually a great number of administrative procedures to solve before the cooperation can be started. Uncertainty & delays.• The aid is sometimes subject to a future agreement that might involve, for example, the future selling of CERs in a specific amount at a specific time and at an already settled price that passes the risk to the local credit institution.
FIRA´s experience in the CDM process and areas ofopportunity – Difficulty. In the CDM process it is very difficult to get to register a project since it is necessary to comply with many requirements and create capacities before obtaining the registry. It could be advisable to simplify the registry process and promote the capacity building along the project implementation. Learn by doing instead of detailed planning and strict control that leads to corrections and errors. – Cost. The cost associated to the registry of a CDM project is considerable, thus many projects are left out of the CDM and have no incentive to reduce GHGs (even within PoAs). – Communication. There is no possibility to obtain guidance from the UNFCC. It would improve the information flow if there could be an institutional communication channel. – Continuity. What is going to happen to the CDM until 2015 and beyond? – Market. Depressed prices, volatility, substitute carbon credits and markets. What is going to happen to projects registered after December 2012? Is there going to be demand for carbon credits?