Climate Finance as a Catalyst for Leveraging Private

Climate Finance as a Catalyst for Leveraging Private

Climate Finance as a Catalyst for Leveraging Private Sector Financing in the Energy Sector: Examples in Latin America Carlos A. Cordova UNFCCC LAC Regional Workshop on NAMAs (Nationally Appropriate Mitigation Actions) September 14-15, 2015 Santiago, Chile Overview of Climate Finance Climate Finance: financial resources invested in mitigation and adaptation measures through financial instruments including loans, grants and guarantees, which have helped leverage additional

private finance Sources: public, private & intermediaries Instruments: range of tools, mechanisms and modalities Uses: mitigation vs. adaptation Readiness: plan, access, deliver, monitor Public Sources & Intermediaries US$ 137 Billion, or 42%, of total $331 Billion climate finance flows in 2014 (Source: CPI Global Landscape of Climate Finance, 2014) Ministries & Government Agencies Bilateral Aid agencies Export Credit Agencies UN institutions Development Finance Institutions Multilateral Development Banks (MDB) National Development Banks (NDB)

Bilateral Financial Institutions (BFI) Climate Funds Global Environment Facility (GEF) Adaptation Fund (AF) Climate Investment Funds (CIF) Green Climate Fund (GCF) National strategies & policy frameworks conducive to investment

Technical assistance, financial instruments & specialized knowledge Grants & loans at concessional terms (finite lifetime, sectoral focus) Private Sources & Intermediaries US$ 193 Billion, or 58%, of total $331 Billion climate finance flows in 2014 Project Developers: national/regional utilities, independent power producers, renewable energy Corporate Actors: manufacturers, corporate end-users Private Households: family level economic entities, high net worth individuals

Institutional Investors: insurance companies, pension funds, endowments Commercial Financial Institutions Private Equity, Venture Capital & Infrastructure Funds Uses of Climate Financing 91% mitigation 7% adaptation Renewable energy generation

Energy efficiency in industry and buildings Sustainable transport AFOLU & livestock management Water supply management Climate-resilient infrastructure Coastal protection Disaster risk reduction AFOLU & natural resource management Climate Financing Instruments

to Leverage Private Sector Investment 1. Policy Incentives: Feed-in tariffs Tradeable certificates Tax incentives Clean energy subsidies 2. Risk Management: Guarantees Insurance policies Contract-based instruments

3. Grants: Cash transfers In-kind support 4. Low-cost project debt: Concessional loans 5. Capital Instruments at commercial terms: Project-level market rate debt Project-level equity Balance sheet financing Address investor-specific needs Align public and private interests Enable scaled-up investments

Climate Finance Readiness Capacity of countries to plan for, access, deliver and monitor climate finance, both international and domestic, in ways that are catalytic and fully integrated with national development priorities and achievement of the MDGs (Source: UNDP, 2012) Climate Finance Readiness Process Plan Capacity to plan for the supply, management and use of climate finance resources Access Deliver

National capacity to combine vs. blend resources for access to wider range of financial instruments Capacity to deliver finance, implement and execute activities at the regional, national or local level. Monitor National capacities and systems for monitoring and evaluating the

impact of climate finance on mitigation and adaptation goals Effective: assess climate finance flows Traditional: multilateral implementing entities (e.g. GEF) National system: financial oversight & management Tracking financial expenditures on climate change activities within and outside the national budget

Efficient: prioritize climate actions and match priorities with resources Direct: accredited entities from recipient countries (e.g. Adaptation Fund) Execution services: procurement, contracting, hiring Database systems & informationcollection processes Equitable: integrate resources over time Enhanced: national fund management with international

fund oversight (e.g. GCF) Coordination among entities: macro level alignment with national development strategies Developing indicators & assessment processes How Can We Help? Climate Finance Solutions through E-learning Climate Finance Solutions through Collaborative Partnerships LAC LEDS Network: Launched in Alajuela, Costa

Rica (Nov 2012), followed by webinar series on LEDS for the Spanish-speaking LEDS community and a web-based open community of practice to promote information sharing, networking and online collaboration among Latin American LEDS practitioners and policymakers Climate Finance Solutions through Global & Regional Fora Latin American & Caribbean Carbon Forum: Annual event that brings together a range of private and public sector stakeholders to explore solutions for mobilizing climate finance and to discuss alternative pathways to low carbon development in the region Carbon Expo: Largest global, multi-sectoral climate finance and carbon market platform for facilitating innovation, promoting enhanced understanding of new

policy instruments and identifying ways to access and leverage climate finance. Other World Bank Climate Finance Readiness Initiatives Climate Investment Funds: CTF The CTF fund its a $5.3 billion Clean Technology Fund (CTF), a funding window of the Climate Investment Funds, to provide scaled-up financing to middle income countries to contribute to the demonstration, deployment and transfer of low carbon technologies with a significant potential for long-term greenhouse gas emissions savings. The CTF differs significantly from other mitigation-focused, multilateral climate instruments by focusing on drive down technology costs, and stimulate private sector participation, and catalyze transformative change that can be replicated elsewhere. CTF and the Private Sector

The private sector is a key player in the CTF, with 30% of all investment plan allocations going to private sector projects and programs specified in these plans. In 2013, the CIF embarked on new financing paths that put greater emphasis on reducing barriers to private sector participation. The Dedicated Private Sector Programs (DPSP) under the CTF were created to finance operations that can deliver scale and speed while maintaining country priorities. The DPSP are currently in their second phase and have allocated a total of $ 508.5 million to eight programs reaching countries as diverse as Chile, Colombia, Indonesia, Mexico, Turkey, Haiti , Honduras, Ghana, and Mali. Chiles Solar Power and Energy Efficiency Example: The government of Chile has designed a plan that taps $200 million from the Clean Technology Fund (CTF) ) to address key risk, cost, and liquidity barriers by providing concessional financing and technical assistance intended to stimulate the development of Chiles solar power and energy efficiency markets, therefore stimulating, securing

and enhancing private sector investment. Thank you! For more info, contact: Carlos Cordova [email protected] World Bank Group 1701 18th St NW Washington, DC 20006

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