redd+ & the private sector: leveraging private sector finance for redd+ implementation – unep,...
TRANSCRIPT
Leveraging private sector finance for REDD+ implementationTime Expert Cluster Agenda
10:15 Welcome
10:20 – 10: 40 Presentations by: • Victor Galarretta, President of Advisory Board MDA and Programa
Nacional de Conservación de Bosques y Cambio Climático• Satya Tripathi, Director of the United Nations Office for REDD+
Coordination in Indonesia (UNORCID)
10:40 – 11:00 Presentation: Overview of REDD+ financing mechanismsRuben Lubowski, Chief Natural Resource Economist – EDFJacinto Coello, Program Officer – UNEP FI
11:00 – 11:20 Break-out sessions:1. Price guarantees – EDF and Permian Global2. Risk mitigation instruments- UNEP and GCP
11:20 – 11:30 Feedback from respective break-out sessions
11:30 – 12:00 Stuart Clenaghan, Founder - Green Gold ForestryDiscussion: Practical applications in the context of Peru Building an implementation roadmap towards COP Paris
12:00 – 12:15 Expert cluster conclusions
Current Profile of REDD+ Finance
93.6%, Public sector
0.1%, Private sector
0.1%, Other
0.4%, Public-private sectorPrivate Foundations, 5.8%
Source: Forest Trends 2014, REDDX, based on data from 7 countries; Voluntary REDD+ Partnership Database.
Public pledges to 2020:Bilateral: $4.9 billionMultilateral: $3.1 billion
Context
Transformational change impossible without transforming the private sector
Needed: redirection of private capital at grand, unprecedented scale
Discussion is not about prioritizing private over public finance
Discussion is about the smartest use of public, philanthropic and other sources of finance to achieve transformation
Overview• Challenge is redirecting capital for agriculture and rural
development
• Need production and protection—underpinned by carbon accounting
• Lower average risk-adjusted cost of capital for more sustainable investments – Providing more certain revenue for carbon/environmental services– Attract lower cost, lower risk capital from:
• institutional investors, government, philanthropy, mission-oriented investors, consumer goods and agribusiness companies, carbon markets, etc.
• Mechanisms needed at international, national, local levels
A “Bridging” Proposal: Minimum price guarantees
• Public/philanthropic donors guarantee minimum price that at least covers costs during transition to future carbon markets (10-15 years)
– Example: Pilot Auction Facility (PAF) for Methane & Climate Change Mitigation developed by the World Bank
– “Put” options as a guarantee that carbon credits can be sold at a minimum price confidence to invest in “clean” projects.
• Reduces risks for suppliers/investors while keeping upside.
Proposal for Private Investment in Pipeline of Carbon Credits • “Rental with option to buy”
– Example: Buyer would pay $1-3 for right but not the obligation to buy credit at discount to market price in 2020-2025 (“call option”).
• Less risky than buying credits outright for buyer.• Additional upside for seller. • Appreciation / risk-mitigation if carbon prices rise.• Could help monetize carbon revenue stream.
How might PAF minimum price guarantee model be applied to REDD+?
http://www.pilotauctionfacility.org/content/videos
• Would it work to auction off put options for REDD+? Are there other criteria to prioritize “bids”?
• What would be the criteria for eligible reductions?
• Should options these be tradable and, if so, who would be eligible to exercise?
• Who could bid?
• Who could finance?
A framework for understanding private land use finance
For what?Where?
HIGH RISKLARGE SCALE
HIGH RISKSMALL SCALE
LOW RISKLARGE SCALE
LOW RISKSMALL SCALE
What?
Project finance Project bond
Private equityListed equity
Corporate loans
Mortgages
Barriers? Tech, market risks Political, country risks
Lack of readiness
How?
Risk guarantees Risk insurance
Etc.Institutional readinessIncentives (FITs)
Carbon pricing though Advanced Market Ms
Bundling Junior co-financing Market readiness
Etc.
Source: UNEP FI