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Dr. Binu Parthan Asia Adviser
Policy Dialogue on Infrastructure Financing Strategies for Sustainable Development in South and South-west Asia 26 January 2017, Kathmandu
Infrastructure Financing by Green Climate Fund
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Asia and Infrastructure
• Asia’s GDP to be 52% of global GDP in 2050;
• Infrastructure investments carbon and resource intensive – unsustainable;
• Climate Impacts - Human settlements/infrastructure - 5 most vulnerable Cities
• Climate Change & Climate Finance;
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The Green Climate Fund
• Operating entity of the financial mechanism of the UNFCCC;
• Centrepiece of long-term finance under UNFCCC
• Secretariat since December 2013 Songdo;
• Financing Mechanism of Paris Agreement;
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Our Vision
• Promote a paradigm shift towards low-emission and climate-resilient development
• Induce a change in the daily decisions investors and consumers make
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GCF relevance to Asia
• Direct Access; • Maximum Country
ownership; • Private Sector; • Range of Instruments–
Grants, Debt, Equity, Guarantee;
• Scale – Climate Finance; • Accreditation – diverse
partners - private • Balanced Governance;
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Resources
• $10.3 billion in pledges
• $9.9 billion (97%) in signed contributions (as in January ‘17)
• 50/50 split between adaptation & mitigation
• 50% of adaptation resources for SIDS, LDCs and African states
Adaptation (50%)
Mitigation (50%)
SIDS, LDCs & Africa
(at least half)
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Mandate & track record
• Alignment with Fund objectives
• At least 3 year of operations
Project size
• Micro (>10mn)
• Small (10-50mn)
• Medium (50-250mn)
• Large (>250mn)
Fiduciary functions
• Basic
• Specialized
Environment & Social risk category
• A (high)
• B (medium
• C (low)
Fit-for-purpose accreditation
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As of 19 December 2016 48 entities accredited to date, 147 (71) in pipeline
Accredited Entities
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Strategic Results Areas
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Potential Investment Priorities
FORESTRY
Ecosystems and ecosystem services
Livelihoods of people and communities
Transport
ENERGY generation and access
Mitigation Reduced emissions from
Infrastructure + built environment
Buildings, cities, industries and appliances
Forests and land use
Adaptation Increased resilience of
CITIES
AGRICULTURE
Health, food and water security
RESILIENCE OF SIDS
2 4
5
3
1
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Types of Instruments & Interventions
Grants
Loans
Guarantees
The GCF will make its resources available through accredited entities in the form of:
Grants • e.g. Adaptation needs, technical assistance – ( KfW Bangladesh)
Debt
• Senior and Sub-Debt • e.g. to provide liquidity or assist in absorbing high up-front costs (EBRD –
Global)
Equity
• e.g. to provide early stage equity needed to develop a project to full bankability – (Acumen – Solar East Africa)
Guarantees
• e.g. to bear specific risk and crowd-in private sector investors (IDB – Green Bonds –LAC)
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35 projects/programmes with USD 1.5 billion in GCF funding
Portfolio composition
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Portfolio composition
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Expected climate impact and results Portfolio
Mitigation impacts 183 MtCO2eq
Adaptation impacts 103 M beneficiaries
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Geographic and thematic distribution of the pipeline
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Funding Proposals received
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Mitigation impacts 2.3 GtCO2eq
Estimated climate impact & results
Adaptation impacts 162 million beneficiaries
12%
0%
1%
6%
27%
22%
18%
14%
Energy access & generation
Transport
Energy efficiency
Forestry & land use
Livelihoods
Health, food & water security
Infrastructure resilience
Ecosystem
Total requested GCF funding by results areas: Public sector (%)
56%
20%
8%
8%
1%
1%
0%
7%
Energy access & generation
Transport
Energy efficiency
Forestry & land use
Livelihoods
Health, food & water security
Infrastructure resilience
Ecosystem
Total requested GCF funding by results areas: Private sector (%)
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GCF pipeline: Concept notes 169 CNs totaling USD 7.9 billion in GCF funding
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Iterative process
Country programme
Entity programme
Pipeline development
Funding proposals
Project implementation
Results & learning
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Structured Dialogues
GCF programming Elements
Country Programmes
Entity work programmes
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Country programs
INDCs, NAPs or other strategies & plans
Country’s GCF priorities
Led by NDA/focal point
Stakeholder engagement
Entity work programs
Responds to country priorities
Identifies regional or multi-country initiatives
Pipelines
Project concepts to seek preparation funding or early feedback
Funding proposals developed for funding
Programming Roadmap
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Country Programmes
Asia 22 countries 2 endorsed
Pacific 14 countries 10 endorsed
Africa 45 countries 16 endorsed
Latin America Caribbean
15 countries 4 endorsed
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Country agenda & GCF
pipeline • Adaptation: SIRF Fund,
desalination, climate-proof
buildings
• Mitigation: RE&EE, transportation,
waste-to-energy
• Cross-cutting: Coastal
ecosystems, land use change and
forestry
• 9 projects | USD 170 M
GCF engagement
• Readiness | USD 300K
Structured dialogue
• Readiness week
• Board meetings
• Regional engagement
Country Programmes Snapshot: Antigua & Barbuda
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Entity Work Programmes State of Play – Direct access entities
Total: 18
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Country engagement • Strong stakeholder
consultation process
GCF engagement • Pipeline: USD 458 M
Structured Dialogue • Readiness Week
• Board meetings
• COP 22
Action Plan
Entity Work Programmes Direct access entity snapshot
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GCF pipelines
INDCs NAPs
Country and Entity
Programmes
GCF programming Summation
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What is on offer?
• Support for project/ programme development
• Especially micro-to-small size projects
• Up to $1.5M per project preparation request
How to apply?
• Accredited entities, especially direct access, submit requests
• Request submitted with project/ programme concept
• In conjunction with no-objection letter from NDA/focal point
What is assessed?
• Secretariat assesses concept against investment criteria
• Also assesses request for justification of needs & GCF policies
• Executive director approves requests
Project preparation facility
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Impact potential
Paradigm shift potential
Sustainable development potential
Responsive to recipients needs
Promote country ownership
Efficiency & effectiveness
tCO2e for mitigation and number of people benefitting – assumptions, methodologies, relative to economy, benchmark.
Economic and, if appropriate, financial soundness, as well as cost-effectiveness ($/tCO2e)and co-financing, adequacy, appropriateness of concessionality, financial viability, indicators
Country ownership and capacity to implement – coherence alignment with climate change strategies, track-record experience of entities, stakeholder engagement and feedback received
Vulnerability and financing needs of beneficiary in targeted group. Economic and social development of country, absence of alternative financing sources, need for strengthening institutions and implementation capacity
Wider economic, environmental, social , gender co-benefits – indicators detailed.
Innovation, scaling-up replication, capturing and sharing learnings, long-term financially sustainable continuation, policy and regulatory frameworks – shifting incentives, mainstreaming
Investment Criteria
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Loan-Solar Energy Development in Tarapaca
• CAF – 143 MWp PV Power plant – Atacama Solar SA -– Chile;
• $ 49 million loan – 20 years;
• $ 265 million, Co-finance 81.5%, Debt and Equity;
• Chilean Commercial Banks – limited role – large RE projects;
• mitigation – 3.7 m tCO2e
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Equity –Universal Green Energy Access
• Deutsche Bank – Investment Fund – off-grid energy, 50 investments – Benin, Kenya; Namibia, Nigeria, Tanzania
• $ 78.4 million equity – $ .16 million TA facility – Fund size $ 300 million , public and private – 15 years;
• RE -Off-grid, mini-grid, industrial
• Mitigation – 50 tCO2e
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Climate Resilient Infrastructure - Bangladesh
• KfW – 45 Cyclone shelters, 80 km road access – Bhola, Barguna, Satkhira, pilot climate resilient urban infrastructure – drainage, flood protection, Water supply, sanitation- Satkhira
• $ 40 million grant – 6 years;
• $ 40 million, Co-finance 50%,
• Highly Vulnerable, scaling up
• beneficiaries – 10.5 million;
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Why the PSF?
Interventions possible
Access to the private sector
• To mainstream climate change mitigation and adaptation
actions in the private sector.
• Long-term debt, credit lines and refinancing
• Equity to develop a project to full bankability
• Guarantees to bear specific risks
• Accredited entities with private sector operations.
• Present funding proposals spontaneously or in response to
calls for proposals.
Private sector facility
16
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Readiness Support
• Readiness is a strategic priority of the Fund: - help maximise effectiveness and reduce risks, good delivery;
• 143 designations; 109 readiness requests – 74 approved ~ US$ 22 million;
• 59 direct access entities supported, 17 accreditation gap assessment;
• 3 pipeline development support – 1 PPF – $ 1.5 million;
• 110 countries covered – info-sharing/exchange; Asia Dialogue – early 2017;
• NAPs Support – 2 Approved, 14 requests;
• REDD+ strategy and action plan.
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Infrastructure Investments in Asia
• High Upfront Capital;
• Insufficient revenues;
• Excessive Risk
• Buy-down Upfront Cost;
• Cash Flows Eased;
• Higher Risk Tolerance.
Without the Fund With the Fund
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Infrastructure Climate Finance
• Mitigation – Energy, Transport, Buildings/cities;
• Adaptation – resilience of infrastructure;
• Finance – Scale, non-grant instruments;
• Private sector, PPPs;
• GCF – ESS, Gender – stakeholder, country ownership, sustainability.
• Country Programme – Entry Point;
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Outlook • INDCs-Country/Entity
Programmes – CNs/FPs; • Concept notes – Funding
proposals – Investment Criteria, justification of why GCF and resource requested;
• PPF to support project development.
• Energy, Transport, Buildings/cities, infrastructure resilience, adaptation,
• Scale, Innovation, Private Sector, non-grant instruments.