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

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;

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;

Our Vision

• Promote a paradigm shift towards low-emission and climate-resilient development

• Induce a change in the daily decisions investors and consumers make

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;

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)

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

As of 19 December 2016 48 entities accredited to date, 147 (71) in pipeline

Accredited Entities

Strategic Results Areas

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

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)

35 projects/programmes with USD 1.5 billion in GCF funding

Portfolio composition

Portfolio composition

Expected climate impact and results Portfolio

Mitigation impacts 183 MtCO2eq

Adaptation impacts 103 M beneficiaries

Geographic and thematic distribution of the pipeline

Funding Proposals received

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 (%)

GCF pipeline: Concept notes 169 CNs totaling USD 7.9 billion in GCF funding

Iterative process

Country programme

Entity programme

Pipeline development

Funding proposals

Project implementation

Results & learning

Structured Dialogues

GCF programming Elements

Country Programmes

Entity work programmes

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

Country Programmes

Asia 22 countries 2 endorsed

Pacific 14 countries 10 endorsed

Africa 45 countries 16 endorsed

Latin America Caribbean

15 countries 4 endorsed

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

Entity Work Programmes State of Play – Direct access entities

Total: 18

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

GCF pipelines

INDCs NAPs

Country and Entity

Programmes

GCF programming Summation

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

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

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

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

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;

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

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.

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

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;

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.

Thank You

countries@gcfund.org

bparthan@gcfund.org