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Development banks and development finance institutions: scaling up green investment in developing countries
- 1. Development banks and development finance institutions: Scaling up green investment in developing countries Naeeda Crishna Morgado and Bérénice Lasfargues Development Co-operation Directorate 20th ENVIRONET meeting 15 May 2018
- 2. Structure • Context – insights from OECD report ‘Investing in climate, investing in growth’ • OECD work programme on development banks and DFIs • Looking forward – where to go from here?
- 3. Work in 2017: Insights from “Investing in Climate, Investing in Growth”
- 4. Types of actors targeted Public Private Scopeofoperations InternationalDomestic Development banks and DFIs will be critical players Bilateral DFIs Multilateral development banks Bilateral Development Banks National development banks Regional & subregional development banks
- 5. MDBs: significant support for sustainable infrastructure, but varies by bank and sector 6.7% 20.7% 22.3% 29.4% 31.1% 31.9% 50.3% 51.8% IsDB AsDB AfDB Average IADB WBG EBRD EIB 2% 16% 21% 49% Communications Water Supply and Sanitation Transport and Storage Energy Climate Non-climate Source: OECD analysis, DAC Statistical System Share of MDB commitments for infrastructure which is climate- related, 2013-15 average
- 6. Bilateral DFIs need to move beyond renewable energy Source: OECD analysis, data collected by EDFI Climate-related annual commitments by EDFI members, as share of commitments and by sub-sector, 2011-15 11% 13% 19% 21% 17% 36% 18% 22% 2009 2010 2011 2012 2013 2014 2015 Average 2011-15 Climate Non-climate Solar 11% Wind 17% Hydro 23% Biofuel/bi omass 4% Other RE (non- specified) 25% Through financial intermedi aries 20%
- 7. Increasing emphasis on NDBs and local actors, but lack of information • More emphasis on national and domestic DBs and DFIs • Lack of harmonised, easily available, disaggregated data on NDBs • IDFC Green finance mapping is a first step Share of green finance to total new commitments in 2014, IDFC members Source: IDFC green finance mapping report 2015
- 8. OECD work programme on development banks and DFIs
- 9. Proposed scope of OECD work • Aim: To improve the understanding of the changing role of development banks and DFIs in sustainable infrastructure • Focus on: – Shifting current financing and portfolios to better align with climate- friendly pathways – Scaling up and mobilising private finance • Looking at, in particular, the role of DBs and DFIs in emerging economies • How: deep dives into different issues, mapping climate / green finance activity • Knowledge partners
- 10. Priorities in 2018 • Promoting environmental safeguards in development banks and development finance institutions – what role for donor shareholders? – Discussion paper by Q2 – Expert workshop with governments and development banks, 16 May 2018 • Mobilising commercial capital for sustainable infrastructure: Key actions for emerging economy national development banks – Discussion paper by Q4
- 11. Potential priorities in 2019-20 • Global survey on development banks and DFIs • Regional deep dives • Case studies: – Transformative actions to mobilise private finance e.g. through blended finance – Issues and challenges around scaling up adaptation finance – Demonstrating and scaling up green business models for infrastructure
- 13. Questions for discussion • How can this work add value to and better support the DAC members in their role as shareholders of DBs and DFIs? • What should the work programme focus on in 2019-20?
- 14. Thank you
Editor's Notes
- How can this work add value to and better support the work of DBs and DFIs? Have we covered the major issues? Where are the gaps? What can OECD do to stimulate dialogue between banks and policy makers? What synergies can our work benefit from?
- MDBs are aligning their infrastructure portfolios with low-carbon development pathways, but some issues remain. MDBs have made ambitious commitments to increase climate finance in the run-up to COP 21 in 2015, ranging from an increase to a third of the portfolio (WBG) to doubling (ADB) or even tripling (AfDB) absolute amounts of climate finance. However, some challenges remain: Mitigation vs. adaptation: The MDB joint report shows that major share of MDB support overall has gone towards climate change mitigation (80%). Greater need for scaling up climate action in transport and water sectors: An analysis of MDB commitments for infrastructure sectors - energy, transport, water and communications - over three years (2012-2015), as reported to the OECD DAC, highlights that mainstreaming seems to have occurred to a greater extent in the energy sector (49%) than in the transport (21%) and water supply and sanitation sectors (16%). Mainstreaming also varies by bank.
- Bilateral DFIs are especially important in their role in mobilising the much needed private investment, and as shown here, EDFI members are already mobilising financing for renewable energy projects in developing countries. However, some challenges remain: Mitigation vs. adaptation: Most of DFI financing has gone to renewable energy (i.e. mitigation), whereas there is an equal need to mobilize financing for climate resilience / adaptation projects. Similarly, there is a greater need for scaling up climate action in transport and water sectors There is also a need for more and better disclosure on the alignment of DFI portfolios with climate pathways – e.g. better reporting on the Rio Markers to the DAC system could be one way forward in this area.
- NDBs NDBs work mostly with a single market (there are excecptions DBSA in south africa and BNDES which have now more a regional reach ), a s a result they can be well integrated into natioal infrastrcture planning procecsses of the coutnry. They have also knowledge of the local financial amrkets, and know them well to understand local barriers to unlock low carbon infrastructure investment NDBs are prevalent accross advanced and developing countries. Amongst G20 countries, 15 out of 19 (excluding the EU) have at least a national development bank there are at least 24 ND banks with relevance to infrastructure financing While most NDBs are relatively small, some have substantial oprerations within their domestic contexts… this is the case of you look at the graph as you can see in our graph of Italy(Cassa Depositi e Prestiti), Korea, China, and Brazil. There is a difficulty in assess the share of NDBs portfolio level of mainstreaming across NDBs due to lack of harmonised approaches to reporting and disclosrue. Out of the NDBs that publish sectoral breakdowns of their porfoflio, the extent to which NDBs finances infrastructure and low-carbon and climate-resilient in particular varies notably. Most NDBs have introduced ‘green products’ targetting renewable energy and / or energy efficiency. However, several NDBs have takeing a leading role on supporting low carbon and climate resilient investments 40% of KFW domestic commitment went to towwards environemmental and related goals. In developing countries, NDBs increasingly work with multilateral and bilateral providers. TSKB reports that 50% of its loans are sustainability themed and much of this activity is done in partnership with Self reported on climate fooprint of their portfolio estimates vary widely BNDES climate exposre of porfolio