Overview of how development partners engage the private sector on green growth and climate change

1. Overview of how development partners
engage the private sector on green
growth and climate change
Naeeda Crishna Morgado, Development Co-operation
Directorate
OECD DAC-DCED Workshop on ‘Development Co-operation
and the Environment - Engaging the private sector’
1 March 2016, Paris

2. Contents
• Context
• How development partners engage the
private sector
– Key terms and definitions
– Approaches
– Who does what
– What the development finance flows tell us
• Challenges and opportunities
• Areas for future work

3. Investment for a low carbon and climate
resilient future
Significant finance is needed for SDGs,
despite additional investment for
‘greening’ being low
Source: New Climate Economy 2015: trillion $

4. ‘private sector engagement’, ‘private
sector collaboration’, ‘private sector
partnerships’, ‘private sector co-
operation’, ‘private sector development’,
‘business collaboration’, ‘enterprise
development’ ‘public-private dialogue’,
‘public-private partnerships’, ‘Public-
Private Partnerships (PPPs)’ ‘mobilising’
‘leveraging’ ‘catalysing’
• .
Working definitions
Private sector
Organizations that
engage in profit-seeking
activities, and have a
majority private
ownership (i.e. not
owned or operated by
the government).
Private sector
engagement
Active participation of
the private sector in the
activity (both directly
and through
intermediaries) in order
to deliver development
outcomes

5. Why do donors engage the private
sector
Promoting green
private sector
development in
partner countries
Partnering to
mobilise
investment for
green growth
and climate
change
Partnering to
harness and
exchange skills
and knowledge
for green
growth
Loans, guarantees,
blended finance
Technical support
(feasibility studies,
policy advice,
capacity building)
E.g. Public-
private
dialogues on
SDGs, public-
private
platforms on
sustainable
trade
E.g. Green credit lines, green
value chain development
programs, capacity building
for SMEs on climate change

6. Who does what?
Bilateral donor
governments and aid
agencies
Largely grant financing
(and loans to a smaller
extent) to public sector
and civil society
Objective: Private
sector development,
harnessing skills and
knowledge
Activities: Dialogues,
matching grants
schemes, enabling
conditions, capacity
building (through NGOs
and public sector)
Bilateral and multilateral
development banks
(public sector operations)
Loans, grants and
guarantees to public
sector
Objective: Private
sector development
Activities: enabling
conditions, capacity
building (through NGOs
and public sector),
financial support via
public agencies
Bilateral DFIs, bilateral &
multilateral development
banks (private sector
operations)
Equity, loans,
guarantees, risk
insurance to the private
sector
Objective: leveraging
private finance
Activities: Directly
financing companies,
mitigating risk to attract
private investment,
demonstrating viability
in high risk areas
Source: Adapted from Dalberg, 2010; IFC, 2011
Role in
PSE
General
role
Roles of different development finance providers in PSE

7. What development finance flows tells us
• Support for PSE makes up a fifth of climate-related
development finance
15%
32%
25%
22%
0% 20% 40% 60% 80% 100%
Bilateral
MDBs
Climate Funds
Total
Climate-related development finance supporting private sector
engagement in 2013, by provider
Direct support to private
sector
Support 'likely to engage'
private sector
No private sector
engagement
Source: OECD DAC statistical system

8. What development finance flows tells us
• Focus: Mitigation activities; clean energy, financial
services; middle income countries
Source: OECD DAC statistical system
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Energy
Banking
Multi sector
Transport
Agriculture & Forestry
Industry
General environment
Other
Unallocated
USD, Billion
Climate-related development finance supporting private sector engagement
in 2013, by sector
Direct support to private
sector
Support 'likely to engage'
private sector
No private sector
engagement

9. Challenges and opportunities
• Lack of evidence on development (and
environmental) outcomes, difficulty in monitoring
environmental impacts
• Managing multiple drivers for private sector
engagement (environment, development, trade,
investment)
• Managing trade-offs between environmental
outcomes and business returns
• Defining a ‘successful’ PSE approach for
climate change and green growth

10. Next steps
• Build on scoping paper with interviews, results
from this workshop, focussed sections on
– mobilising private investment for low carbon and
climate resilient infrastructure
– engaging SMEs to improve environmental
performance and encourage eco-innovation
– partnering with private sector to enhance natural
capital and ecosystem services
• Further case study on development partner
approaches in one area e.g. credit lines

11. Thank you!
DAC ENVIRONET Secretariat
Naeeda Crishna Morgado, Naeeda.CrishnaMorgado@oecd.org
Jan Corfee-Morlot, Jan.CorfeeMorlot@oecd.org