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Climate finance - K. Enting (kfw) CCXG GF March 2014
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Climate finance - K. Enting (kfw) CCXG GF March 2014

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  • 1. Bank aus Verantwortung Lessons From Replication and Scaling-up of Climate Finance Katrin Enting Competence Centre Environment and Climate KfW Development Bank OECD, CCXG Global Forum Paris, 18 March 2014
  • 2. 2 Outline I Generating Lessons Learnt II Experiences With Green Credit Lines III Case Studies IV Challenges and Opportunities 5
  • 3. 3 I. Generating Lessons Learnt • Monitoring • By operating departments • Annual reporting and on-site progress assessments • Final inspection mission • Evaluation • By independent evaluation unit, external director, report directly to Board of Managing Directors • Post-project evaluation 3-5 yrs after technical completion • Comparison of actual outcomes against envisaged outcomes and state of the art benchmarks • Focus on development impacts using DAC key criteria: relevance, effectiveness, efficiency, impact and sustainability (score 1-6 i.e. 4) • Systematic and thematic reviews of evaluations Sample average 2010-2012 80,3 80,9 0 10 20 30 40 50 60 70 80 90 100 Number of projects Aggregate volume Sucessquotain%(rating1-3)
  • 4. 4 II. Green Credit Lines – Domestic Experiences as a Role Model • KfW Group: New commitments in climate & environment in 2013: EUR 27.8 bn, thereof EUR 3.4 bn in developing countries • Dominate domestic working modality: on-lending through regular banks that do appraisal and build on local and long-standing customers relations Lessons Learnt:  Efficient use of budget funds and large potential to mobilize private climate finance RE/EE finance works best as part of a promotional system incl. information and consulting, legislation, rules and regulations and technical standards
  • 5. 5 II. Green Credit Lines – Experiences in Development Finance Credit Lines to support local financial intermediation (simplified): Basic characteristics: › Provision of long-term liquidity for climate-related investments of SMEs & private households › Building up and consolidation of climate-related portfolios of local banks through appropriate re-financing (indirect financing mechanism) › Focus on institutional development of partner bank: TA for product development, project scouting, development of positive list and measurement tools, dedicated marketing, training of employees › Use of local structures (distribution channels and contacts to customers and producers/importers) for broad coverage Financial Intermediary KfW concessional loan Debt SMEs / Priv. Househld. BudgetFunds Investment Equity Mobilization of additional funds Mobilization of additional funds
  • 6. 6 II. Green Credit Lines – Experiences in Development Finance › Incentive for investments into green technology (EE + RE) and promotion of their implementation and broad distribution › Introduction of specialized credit products in local banks for investments into green technology › Support of economic and private sector growth in the host country Direct private finance mobilization effects › Support of local markets for green technology incl. the development of local firms in related sectors (e.g. consulting firms, technology firms, production capacities) › Long-term anchoring of climate protection in the product portfolio/ strategy of local banks › Raising of public awareness and consciousness about the climate change (bank employees function as multipliers for knowledge transfer) › Successful implementation of green technology with single clients can have a signaling effect and create further interest among the broader public Indirect transformational effects
  • 7. 7 II. Green Credit Lines – Experiences in Development Finance • Scaling-up and replication over time: started with 2 climate credit lines in 2007 to 71 active climate credit lines in 2/2014 (replication) of which 16 are follow-up lines (up-scaling) • Green lines overall volume (closed, ongoing, preparation): EUR 3.4 bn • Key sectors: Energy efficiency in SME, renewable energy production, emissions reduction (only 2 credit lines with adaptation purpose)
  • 8. 8 II. Green Credit Lines – Experiences in Development Finance Lessons Learnt (1/2) • Limitations: i) still many pilot projects, ii) no systematic ex-post evaluation yet since projects started very recently, but mid-term evaluations & final termination mission, iii) private finance mobilized not as objective/indicator • General: • Most effective as part of a promotional system incl. regulation and information/consulting; Fossil fuel/electricity price subsidies lower attractiveness of scheme • Amount of finance mobilized depends on project design & context • Negative abatement cost favor financial sustainability (sustainable demand and supply) • Balance political ambition (no BAU), market acceptance (the less proven, the more concessionality required) and sustainability  Establish credit lines as workhorse for climate finance in small-scale investments
  • 9. 9 II. Green Credit Lines – Experiences in Development Finance Lessons Learnt (2/2): • Achieving, measuring and monitoring climate impact: • Targeted CO2/energry savings on average reached • Standardization and harmonization btw. donors to avoid duplication of work and dilution of standards • Simple eligibility criteria • User-friendly tools avoid errors in data collection, processing & entering • Effort to measure and monitor must not be prohibitive for bank & client • Financial institutions: • Even in case of negative abatement costs, grant element needed for initial institutional development of partner bank • Require, incentivize and monitor for process innovations and innovative financing products • Management commitment and staff incentives are critical factors
  • 10. 10 III. Case Study (1/2) - Credit Line EE housing, India 1) Pilot programme –First credit line for EE housing in India • EUR 50mn concessional loan to National Housing Bank (NHB) which refinances to commercial banks that provide loans for EE homes • Capacity building and research to adopted a European calculation model for energy assessment to Indian conditions (active+passive) • More than 1900 home loans 2) Second phase (in preparation) • EUR 100mn concessional loan to NHB • Support NHB to define and introduce a EE label using the German EE housing label as a role model Lessons Learnt/Success Factors • Adapt a simple but robust tool to Indian conditions • Identify residential projects with potential, advise developers • Strong support by Indian government and NHB fully engaged
  • 11. 11 III. Case study (2/2) – Project finance / PPP Wind power, Morocco • National Wind Plan 2010 • Objective 2000MW by 2020, total investment cost USD3.5bn • 3 components: I) 280 MW already in operation (KfW support of 2 wind parks, 200MW), II) 720 MW privately financed, III) “Integrated wind programme”: 1000 MW financed as PPP, 1st phase: Taza (KfW concessional loan for public equity and debt), 2nd phase: 5 locations (KfW support for 3 wind parks jointly with EIB (NIF), AfDB/CTF) Lessons Learnt/Success Factors • Strong national political engagement & legislation (credible policy signals): National Energy Strategy 2009 (increase of RE), Renewable Energy Law 2009 (feed in of privately produced RE electricity) • Explicit PPP approach in integrated wind programme • Long-standing cooperation: 20yrs of Moroccan-German cooperation in the energy sector incl. German-Moroccan Energy Partnership, various TA activities, KfW’s energy portfolio in Morocco € 1.1bn
  • 12. 12 IV. Challenges and Opportunities Challenges Opportunities No common definition of mobilized private finance Limited systematic ex-post evaluations yet Increase mid-term evaluations Very case-specific, few generic lessons Share lessons across institutions Most lessons are not climate-specific Make use of lessons leant in other areas of development cooperation Not all projects, sectors and countries where private finance can be mobilized are suitable for large scale private sector investments and entire private sector takeover of interventions Target areas with highest private sector attractiveness for big numbers; Scaling up and replication of national public support as alternative objective Move from projects to programmes, careful assessment of impacts of (enhanced) direct access, ensure stable frameworks (incl. regulations and support schemes)
  • 13. Bank aus Verantwortung Thank you ! Katrin Enting Competence Centre Environment and Climate KfW Development Bank Palmengartenstrasse 5–9 60325 Frankfurt am Main Katrin.Enting@kfw.de