Scaling up private investment for the SDGs and climate action: the potential of blended finance NDBs and Green Investment Banks • 26-27 June 2017, Mexico City Naeeda Crishna Morgado Policy Analyst, Green Investment and Development, OECD

Why ‘blend’? Infrastructure investment and the 2°C goal Significant infrastructure investment gap Ongoing issues in mobilising private finance: lack of pipelines, real and perceived risks Source: OECD (2017), Investing in climate, Investing in Growth

What is blended finance? Strategic use of public or private finance (with a development mandate) to mobilise additional, commercial capital for the SDGs Non-Development mandate Non-concessional Public Blended finance transactions / approaches Private Mobilising Development Mandate Concessional / non-concessional Public Private FINANCING SOURCES FINANCING STRUCTURE USE OF FINANCE Source: OECD (2018 forthcoming), Blended finance for the SDGs

Example: Global Energy Efficiency and Renewable Energy Fund Non-Development Mandate Mobilising Mobilising Private investment Structured fund of funds Private investors Senior share Junior share Equity Specialist RE private equity funds Equity Greenfield RE projects Mobilising Development Mandate EU, Norway, Germany FINANCING SOURCES FINANCING STRUCTURE USE OF FINANCE Source: OECD (2018 forthcoming), Blended finance for the SDGs

Recent trends: increasing interest in ‘blending’ Blended finance facilities established between 2000 and 2014 Source: Commons Consultants Analysis, WEF (2016)

Recent trends: blended finance is mobilising private investment Private finance mobilised as a result of development finance, in 2012-15 Both mitigation & adaptation, 4% Adaptation only, 1% Mitigation only, 21% Syndicated loans, 27% Shares in CIVs, 15% Credit lines, 8% Guarantees, 41% DIC, 8% Source: OECD DAC 2016 survey on amounts mobilised from the private sector by official development finance interventions

Blended finance: issues to address Blended finance has significant potential, but… Blended finance and risk mitigation cannot replace strong enabling environments for green investment Standards are needed to ensure concessional climate finance crowds in, without crowding out More work is needed to mobilise private investment for adaptation, and across a range of countries Better monitoring, evaluation and reporting is needed to assess effectiveness of blended climate finance

Facilitating role of NDBs in climate action: Recommendations for governments NDBs a key player, but under considered in the international landscape Most NDBs are implementing climate finance (see new CPI / IDB work on NDBs in Chile, Mexico and Brazil) Difficult to assess level of mainstreaming across NDBs due to lack of data Governments should: Facilitate a stronger role for NDBs in the NDC process Encourage NDBs to put in place climate strategies & improve disclosure on financing Promote collaboration between MDBs, bilateral DFIs and National Development Banks Most NDBs have introduced ‘green products’ targetting renewable energy and / or energy efficiency In developing countries, NDBs increasingly work with multilateral and bilateral providers Difficult to assess level of mainstreaming across NDBs due to lack of harmonised approaches to reporting Self reported estimates vary widely In addition, in order to scale up climate action, governments should encourage all the major development finance actors - MDBs, National Development Banks, and bilateral development finance providers - to work together to scale up support for countries. The three groups of actors - domestic, multilateral and bilateral, all bring complementary strengths which should be harnessed collectively.

For more information: OECD work programme on blended finance, www.oecd.org/dac/financing-sustainable-development/development-finance-topics/blended-finance.htm OECD – G20 project ‘Growth, Investment and the Low-Carbon Transition, www.oecd.org/environment/cc/g20-climate/ OECD work on tracking amounts mobilized from the private sector for development, www.oecd.org/development/stats/mobilisation.htm Thank you.