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Replicating and Scaling-up Climate Finance

Lessons from the San Giorgio Group

OECD, Paris 18-19 March 2014Jane Wilkinson

Director

An Overview of CPI Work 2

San Giorgio Group

2

• Core framing inquires– What is the role and reasons for public finance?

– What are the best delivery mechanisms for public monies?

– How can international and national public investment flows be aligned with each other and with private investments?

– How do we ensure learning?

The San Giorgio Group assembles financial intermediaries and institutions actively engaged in green, low-emission climate

resilient finance

An Overview of CPI Work 3

Case studies: analytical framework

• Complex interactions between all stakeholders

• Investment, returns and profitability

• Risk allocationarrangements

An Overview of CPI Work 4

SGG case studies overview

EIBmultiple

EE

PPCRNepal

Adaptation

KFCPIndone

siaFores

try

Non-renewables

World Bank Risk

Instruments

First-loss Protection

Mechanisms

Risk Mitigation Instrument

s

Policy Risk

Instruments

Instruments

Renewables

time

mark

et

dep

loym

en

t

RD&D Deployment & Diffusion

Commercial

maturity

Montalto di Castro

ItalySolar PV

WalneyUKOffshore wind

JädraåsSwedenOnshore wind

ProsolTunisiaSWH

OuarzazateMoroccoCSP

CIFs+multipleCSP

An Overview of CPI Work 5

Prosol Tunisia Small-Scale Renewables

Goal• To accelerate the penetration of Solar Water

Heaters in the residential sector by engaging local commercial banks

Challenges

• High up-front cost Lack of consumer financing

• Distorting subsidies Perverse policy incentives

• Knowledge gaps Risk aversion

Measures

USD million 60 0.224.0

Investment Subsidy

Capacity and Awareness-

building

Credit Mechanism

An Overview of CPI Work 6

Ouarzazate I CSP Morocco

Goal• To develop a large scale Concentrated Solar Power plant

that can pave the way for a portfolio of CSP in Morocco and the region

Challenges• Early development stage tech Viability gap• High capital cost Lack of

commercial finance• Multiple partners Cooperation &

coordinationFinancing

GoM– MASEN- Grant $ 126- Equity $ 40

- Subsidy $280

CTF (WB/AfDB)- Loan $197

IFIs (AfDB,ADB,EIB,KFW/BMZ/BMU,

EC)- Loans $639- Grants $56

Private Developer- Equity $120

% of Project cost:

30% 13.5%47.5% 9%

An Overview of CPI Work 7

Indonesia KFCP Peat Forest Rehabilitation

Goal• To demonstrate a credible, equitable and effective

approach to rehabilitating peat forests that couldinform efforts in other locations and geographies.

Challenges• Technical and scientific feasibility questionable, little know-

how Test technical approaches and scientific methods

• Potential conflict with local communities Construction, operation phase, permanence

• Policy and legislative uncertainty Overcome poor zoning, contested land tenure, unclear

approval processes

An Overview of CPI Work 8

Nepal - PPCREngaging the Private Sector in Climate Resilience

Goals• To tackle farmers’ barriers to climate resilience by

engaging private agribusinesses to train farmers on climate resilient agricultural practices

• To build models for making climate resilience a long-term business

Challenges

• Awareness and know-howDevelop tailored capacity building measures, leveraging

companies’ networks and incentives to train farmers in their supply chains

• Access to climate-adaptive agricultural inputs and equipment Facilitate market entry to equipment provider

• Lack of access to financeBuy down banks’ risks with innovative risk-sharing mechanisms

An Overview of CPI Work 9

How to scale up green finance?

• Develop well-articulated domestic enabling environments to encourage further private investment.

• Continue to invest in, and ensure effective use of, international public finance, which play a critical role in facilitating low-carbon and climate-resilient investments (consider specific context!)

• Provide new and improved mechanisms to address risks, e.g. policy risk insurance and first loss mechanisms Viabilit

y

Know-ledge

Reduced

Risk

Enabling Environment

Public finance

Risk mitgation

BRAZILCHINAEUROPEINDIAINDONESIAUNITED STATES

+39 041 2700 426Island of San Giorgio Maggiore 830126 VeniceItalyclimatepolicyinitiative.org

…helping nations spend their money wisely