Using green credit lines to foster climate investment

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Presentation transcript:

Using green credit lines to foster climate investment Igor Shishlov @ishishlov @I4CE_

I4CE – Institute for Climate Economics 3 research areas addressing the issues faced by actors involved in the energy transition

Next 15 years critical to ‘shift trillions’ Source: New Climate Economy Report (2014)

Barriers to environmental lending Investment environment Economic Financial Legal Demand-side (end borrowers) Low awareness of technologies/ financing options Trade-off between long- and short-term benefits Lack of capacity to prepare business plans Supply-side (LFIs) Lack of capacity to assess projects Unsuitable lending practices Lack of risk management mechanisms Profitability considerations Source: I4CE (upcoming)

Green Credit Line PFI Policy dialogue Grant Funds / guarantees Consultants LFIs Government Funds Technical assistance End-borrowers Public policies Source: I4CE (upcoming)

Example: SUNREF program by AFD Source: AFD

Financial benefits of GCLs Lower interest rates Reduce the cost of capital Public subsidies within a GCL Longer tenor Address the temporal mismatch Increased grace period Guarantees Reduce technology/political/FX risks Incentive payments Incentivize demand for green loans Source: I4CE (upcoming)

Non-financial benefits of GCLs Stage in green lending Technical assistance to LFIs to end borrowers Barriers addressed Identification and marketing Market studies, portfolio assessment Energy audits, providing information on potential funding Low awareness of green investment opportunities Appraisal Feasibility studies, technical audits, financial assessment Support in drafting business plans and investment proposals Lack of capacity to evaluate/draft green investment proposals Product delivery Support in design and deployment of new financial products Accompanying end borrowers during project implementation Unsuitable financial products and/or lending practices Monitoring and evaluation Development of monitoring and evaluation tools Support in the assessment of the project Lack of capacity to monitor and evaluate ongoing projects Source: I4CE (upcoming)

Challenges to GCL deployment Financial additionality and market distortion Concessional vs commercial pricing Lack of harmonized evaluation tools Limited internal uptake & TA capitalization No track record of GCLs for adaptation

igor.shishlov@i4ce.org www.i4ce.org Thank you! igor.shishlov@i4ce.org www.i4ce.org