Topic: finance

Striking the Balance: Ownership and Accountability in Social and Environmental Safeguards

Sarah Parsons — Thu, 11 Apr 2013 15:05:46 -0400

Executive Summary

Many governments around the world have put in place systems to help ensure that investments in changes such as infrastructure projects, government programs or new national laws do not bring undue harm to their citizens or environment. The effectiveness of these systems in successfully preventing negative impacts varies widely. Developing countries tend to have a particularly difficult time ensuring that investments within their borders meet minimum social and environmental standards. As a result, many financial institutions have established their own policies to help ensure that their investments do not result in harm to vulnerable communities or ecosystems. These policies are generally known as “safeguards.” Although safeguard policies provide vital protection against risks to people and the environment, properly designing and implementing these policies means navigating complex relationships between financial institutions, governments, and the citizens of recipient countries.

The World Bank (the Bank) has been at the forefront among multilateral development banks in developing safeguard policies. In recent decades, the Bank has experimented with different approaches to social and environmental protection. These approaches respond in part to variations in the way in which countries receive money from the Bank, such as investments in projects versus policies. They have also emerged in reaction to the changing global landscape. Some developing countries have become richer and created stronger systems to protect people and the environment. The global community has also realized the value of letting developing countries define their own development path. At the same time, the pressing need to protect our global common goods and most vulnerable communities has become more apparent.

This working paper seeks to help the Bank and other financial institutions take stock of experiences to date and distill lessons for the future. We look at four different approaches to protecting against social and environmental harm: the traditional safeguards approach, which applies to most project lending; the Use of Country Systems approach, which the Bank has applied to some project lending on a pilot basis; the approach used for Program for Results investments, which applies to the Bank’s results-based lending pilot; and the approach used for Development Policy Loans, which applies to loans that support changes to policies and institutions.

While all four of these approaches rely on the rules and institutions of the recipient country, they do so to different degrees. Through an analysis of the strengths and weaknesses of each of approach, we arrive at seven lessons for the World Bank and other financial institutions looking to balance ownership and accountabil¬ity in their social and environmental policies:

Building on country safeguard systems can enhance ownership and incentives for safeguard implementation.
Minimum standards and positive incentives can clarify requirements and encourage countries to strive toward more ambitious social and environmental goals.
Safeguard implementation requires anticipating risks, planning to deal with those risks, managing and monitoring implementation, and responding to harm.
Proper safeguard implementation requires people on the ground to engage, collaborate and problem solve.
Recipient country safeguard systems still need support.
Citizens play a key role in any effective safeguard system.
To successfully balance ownership and accountability, safeguard approaches need to recognize differences among countries, sectors, and projects.

Mobilizing Climate Investment: The Role of International Climate Finance in Creating Readiness for Scaled-Up, Low-Carbon Energy

Sarah Parsons — Fri, 22 Feb 2013 15:20:51 -0500

Executive Summary

Between now and 2050, developing countries need an estimated $531 billion per year of additional investment in energy supply and demand technologies in order to limit global temperature rise to 2° C above pre-industrial levels. To achieve this scale of investment, developing country governments and custodians of international public finance will need to deploy limited public finance in ways that leverage an unprecedented volume of private sector investment. Despite growing global investment in low-carbon energy and falling costs, it will be difficult to achieve the scale and urgency of investments needed without the appropriate policy, institutional, industry, and financial conditions. Governments and their international partners need to undertake “readiness” activities designed to put in place the conditions that attract scaled-up investment and enable a transformation toward low-carbon energy development pathways.

Drawing on six developing country case studies, this report identifies a set of key lessons and insights for readiness. The report develops a framework to identify and prioritize readiness activities that will require public financial support to create the conditions necessary to scale up investments in renewable energy and energy efficiency (collectively referred to as low-carbon energy). The report discusses the implications of the findings for international climate finance and draws a number of recommendations for the Green Climate Fund (GCF). It targets international public funds and institutions looking to accelerate investment in low-carbon energy, as well as developing country governments looking to identify and prioritize activities for funding.

Enabling conditions for scaling up investment

We identify a number of policy and institutional, industry, and financial sector conditions that can attract scaled-up public and private investment in low-carbon energy. Policy and institutional conditions include plans and targets for low-carbon energy, institutional capacity to effectively implement climate change and energy policies, laws supporting investment in low-carbon energy, and regulatory and fiscal instruments to implement laws. Industry conditions include the capacity of developers to prepare bankable projects, information on renewable resource availability or options to conserve energy, engineering capacity, and the presence of a support industry and enabling infrastructure. Financial conditions include a stable financial sector with the capacity and range of financial products needed to support low-carbon energy.

In six case studies, we analyze the role that enabling activities have played in promoting scaled up investment in low-carbon energy, and the role that international public finance has played in supporting such activities. These case studies examine energy efficiency in Thailand, wind power in South Africa, solar water heaters in Tunisia, geothermal power in Indonesia, wind power in Mexico, and energy efficiency in India. Taken together, the case studies suggest two overarching determinants of success in scaling up investment: government leadership and effective responses to pricing distortions. When government leadership is strong, a commitment to policy and institutional reform and implementation of stated goals usually follows. This in turn strengthens the investment climate and increases investor confidence. In cases where market failures severely distort the market in favor of carbon-intensive energy sources, it has been more difficult to create the conditions that attract investment in low-carbon energy.

Lessons learned for the design of readiness activities

The case studies also reveal a number of lessons about the design of readiness activities and the role of international partners in supporting them.

Small amounts of long-term funding for enabling activities can help scale up investment

In each case study, small investments in enabling activities—from several hundred thousand dollars to several million dollars—helped pave the way for scaled up private and public investments by supporting the creation of conducive policies and market conditions. International support has been most effective when sustained over five or more years. Technical support can also be more effective if international advisors are integrated into national institutions and report to national, rather than international, authorities.

International support is likely to be more effective if it identifies and targets a few critical barriers to investment. In countries with comparatively few enabling conditions for investment, attempts to simultaneously surmount all investment barriers may result in resources being spread too thin to achieve a significant impact. Chapter 4 presents a framework that can aid governments and their international partners in identifying activities to support.

Strengthening the enabling environment should not end when investment begins. In each case study, readiness activities and larger investment took place simultaneously. Even in cases where the investment climate was already strong, there was still scope for additional enabling activities to address specific gaps.

Integrated, inclusive planning processes and policy and institutional reform are key to attracting investment

The integration of low-carbon energy into a broader development agenda can enhance coordination and alignment between different sectors of the economy. Civil society and private sector actors can bring valuable expertise and experience to the planning process, and play important roles in ensuring that low-carbon energy policies and plans are realistic, robust, and tailored to the needs of the country. International support should be aligned with national plans and priorities for effective and sustained outcomes, and should be flexible enough to respond in a timely manner to evolving priorities.

Changes to the policy and regulatory environment proved crucial to attracting investment on a significant scale in the case studies. International support for the design of policies is likely to be effective only if it is demand-driven and not seen as infringing on national sovereignty. Countries that have set up their own financial mechanism to support low-carbon energy projects are well positioned to implement their objectives effectively and independently, thereby reducing their reliance on international partners to finance their low-carbon energy needs.

Having the appropriate institutions in place to develop, implement, and regulate policy reforms—and empowering them with the mandate and resources to carry out their functions effectively—helped ensure that policies were coherent and consistent, which increased investor confidence.

In key institutions, strengthening the capacity of staff and management to carry out their functions is an important readiness activity that often requires international funding support. The case studies suggest that capacity-building support is most effective when carefully targeted to address particular skills gaps.

Tackling information barriers and strengthening industry and financial sector capacity can unlock investment

Public support for broad-scale renewable resource assessments or exploration can provide information on resource availability that is key to attracting investor interest. Similarly, measures to familiarize industry and other actors with low-carbon energy options—such as training centers, awareness campaigns, and seminars and workshops that bring together stakeholders—can strengthen industry knowledge of and capacity to implement renewable energy projects, and raise awareness of the potential cost savings from energy efficiency.

International support plays an important role in facilitating learning and demonstrating new financing models for renewable energy, as well as strengthening industry’s capacity to develop and implement low-carbon energy projects. In some cases, international support to strengthen the capacity of small and medium enterprises (SMEs) and improve their access to financing for low-carbon energy projects has helped unlock investment by this sector of the market.

Financial institutions can play a key role in opening the market for low-carbon energy technologies. However, some financial institutions lack knowledge of and experience with these technologies. Strengthening the capacity of financial institutions to support renewable energy and energy efficiency projects, including through pilot financing programs, has been important in scaling up domestic sources of finance for low-carbon energy in several cases. In some cases, the high risk—real or perceived—of investing in low-carbon technologies without a proven track record in the country has deterred domestic financial institutions. Mechanisms that carefully allocate risks to those best placed to manage them can help attract financing from domestic banks and other financial institutions.

A framework for guiding readiness support for low-carbon energy investments

Building on the experiences of the six case studies, we propose a framework to guide governments and their international partners in determining how best to provide readiness support to countries with low-carbon energy sectors in different stages of development. The framework describes some of the activities required to strengthen the enabling policy and institutional environment for investment. In the early stages of development, these include support for assessing energy options, engaging stakeholders in the energy planning process, capacity building for government agencies and civil society, technical support for developing plans and strategies, and outreach activities. In later stages, activities include support for designing and implementing regulations and fiscal instruments, and targeted capacity building for government agencies, including local governments.

The proposed framework also describes some of the activities needed to strengthen the enabling industry and financial conditions for investment. In early stages of development, these include renewable resource assessments and energy conservation awareness campaigns, capacity building for project developers and financial institutions, support for technology transfer and localization, feasibility studies and environmental and social impact assessments, and support for financial sector reform. At later stages, activities include strengthening engineering capacity for low-carbon energy projects, supporting ancillary industries (such as upgrading grid infrastructure), and supporting financial institutions to assess and finance low-carbon energy projects.

Recommendations for the Green Climate Fund

The six case studies illustrate different approaches that various international partners have used to support readiness activities. The lessons learned are intended to inform the recently established GCF as it attempts to identify how best to support a paradigm shift toward low-emission and climate-resilient development pathways. Although the GFC’s detailed operational modalities are not yet defined, it could take a number of approaches to support readiness. These include supporting readiness directly or partnering with existing institutions; establishing distinct channels and allocations for readiness or integrating enabling activities into existing channels and allocations; and supporting readiness through the private sector facility.

Communicating the "Financeability" of Energy Efficiency Projects (EEPs): Guide to Data Needs for Financing EEPs in China

Sarah Parsons — Tue, 08 Jan 2013 12:12:48 -0500

Executive Summary

The purpose of this guide (Guide) is to help industrial companies (Hosts) finance energy efficiency projects (EEPs) at their facilities as defined in Annex C of this document. The Guide is designed to help Hosts know what information is required of them by financing entities (Financiers) to streamline the evaluation and financing process. This Guide can also help financial institutions, energy services companies (ESCOs), vendors, and other project developers better understand the information required to finance EEPs. The Guide draws from the authors’ experiences and insights gained through extensive work with Hosts, Financiers, ESCOs, prestigious universities such as Shanghai Jiaotong University (SJTU), and other stakeholders in the financing of EEPs. It was developed in partnership with Chinese and global Financiers and energy efficiency experts.

Findings indicate that Hosts can accelerate and enhance the financing process and likelihood of success in three ways:

Communicating with Financiers as early as possible to understand their informational or structural needs, their financing decision-making criteria and processes, as well as any special services that the Financiers provide (i.e., technical assistance in designing EEPs).
Performing a “self-screening” assessment of any proposed EEPs that many Financiers would evaluate, such as type of Host or technology, size of project, and so on.
Providing as much detailed and accurate information as possible at the beginning of the financing process since plentiful data will increase credibility with Financiers.

Hosts often experience delays and rejection of EEP financing because Financiers were not provided critical Host and project data in a timely and accurate manner. This has prevented Financiers from receiving a compelling picture of the benefits and (limited) risks of a promising EEP. Being prepared to present the correct data to Financiers results in a smoother financing process and a much higher probability of success.

This Guide is designed to:

familiarize Hosts with the type of data most Financiers use to evaluate EEPs, as set forth in Annex A: EEP Assessment Indicators, and explain why the data are important;
explain the general indicators used by Financiers to evaluate Host and project attractiveness and why these indicators are used;
explain what information is important during the different stages of the financing process;
help a Host conduct its own assessment of its EEP prior to submitting an application to prospective Financiers, to help improve the quality of the financing application and likelihood of success;
highlight common mistakes Hosts make when seeking energy efficiency financing, and illustrate the impact different financing mechanisms have on a Financier’s evaluation and requirements of the Host and the EEP.

By using this Guide to become more familiar with the financing process for EEPs, Hosts can improve their success rate in securing attractive external financing to increase their facilities’ energy efficiency.

Emerging Actors in Development Finance with Potential Social and Environmental Risks: China & Brazil

Christine Potochny — Tue, 11 Dec 2012 10:00:24 -0500

WRI’s work on emerging actors in development finance is led by the International Financial Flows and the Environment (IFFE) team.

The goal of this research is to improve the environmental, social, and climate change policies that govern emerging actors’ investments, and to ensure that local communities and civil society organizations impacted by the investments are able to engage with “emerging actors” more effectively. This preliminary research focuses on Chinese and Brazilian overseas investments and begins to look at the growth drivers and geographic trends of those investments.

A Changing Global Landscape

The landscape of development finance is rapidly changing. In the last decade, major emerging economies such as China and Brazil have been fueling a growing trend of South-South flows by increasingly channeling their overseas investments to other developing countries.

By taking this new approach, China and Brazil are surfacing as major international investors, their activities driven by financial institutions such as:

the Export-Import Bank of China (China ExIm),
the China Development Bank (CDB), and
the Brazilian Development Bank (BNDES).

Other commercial banks and state-owned and private enterprises also have roles to play in this process. These “emerging actors” finance and invest in major initiatives designed to open new markets and to forge strategic relationships.

Many of these investments comprise small and medium size projects developed by private SMEs. Others constitute large-scale, high impact projects requiring access to and management of natural resources. The projects are reshaping the relationship between investors and recipient countries, as well as posing new opportunities for environmental and social sustainability initiatives.

Research Focus

Our work focuses on exploring questions such as:

How are Chinese and Brazilian overseas investments impacting development finance and the environment?
What unique characteristics do China and Brazil display in their approach to environmental and social sustainability?
What opportunities can be created for both investor and host countries?
How should the environmental and social risks of increasing OFDI be managed?

Strategy: Three Elements

Investor Country (China & Brazil Strategy)	Engage governmental organizations to develop environmental and social guidelines to govern overseas investments.
	Engage companies and financial institutions to develop and implement environmental and social risk management policies.
	Build the capacity of local civil society organizations to promote stronger environmental and social guidelines.
International Strategy	Study on coherence of international trade and financial treaties and multiple environmental agreements.
International Strategy	Enhance the role of emerging actors in international and bilateral investment standard setting.
Host Country Strategy	Work with host country governments, business partners of emerging economy investements and local civil society organizations to facilitate stronger environmental and social performance among foreign companies.

Building on WRI’s record of independent research, our experience in convening a wide range of local and international stakeholders, and our close partnerships with organizations in China, Brazil, and multiple host countries in Africa and Asia, as well as international organizations, the International Financial Flows and the Environment (IFFE) supports efforts by investors, host countries, and international actors to move towards environmentally and socially sustainable development that benefits all parties.

A Closer Look at China’s Overseas Investment

China is surfacing as a major international investor through nationally owned financial institutions such as the Export-Import Bank of China and the China Development Bank.

These Chinese “emerging actors” are financing major initiatives to acquire natural resources, open markets, and forge strategic political ties. They are increasingly financing large-scale, high impact projects beyond their borders — such as hydropower plants and gas pipelines — which may pose new challenges for environmental and social sustainability.

How do we ensure that Chinese investments abroad align with sustainability objectives by observing high environmental and social standards?

The following presentation - Emerging Actors in Development Finance: A Closer Look at China’s Overseas Investment - begins to look at the growth drivers and geographic trends of Chinese overseas investments.

This collection of figures and charts is based on preliminary research conducted by a team of Chinese scholars and compiled and edited by Bruce Jenkins, WRI consultant, and Xiaomei Tan, WRI Senior Associate. The scoping research concluded in April 2011 and includes data from various sources that are updated frequently. Tao Hu, WRI Senior Associate and Yingzhen Zhao, WRI Research Assistant continued this research, revised and updated the slide deck in August 2012. The data is circulated to stimulate timely discussion and critical feedback and to influence ongoing debate on emerging issues. WRI will continue to update the data as our research moves forward.

A Closer Look at Brazil’s Overseas Investment

From 2001 to 2011, Brazil’s per capita GDP more than tripled. At the heart of this domestic economic boom is the Brazilian National Development Bank (BNDES).

How do we ensure that Brazil’s investments abroad align with sustainability objectives by observing high social and environmental standards?

This presentation - Emerging Actors in Development Finance: A Closer Look at Brazil’s Growth, Influence, and the Role of BNDES - begins to look at growth drivers and trends of Brazil’s overseas investments.

Credits: Roland Widmer, Athena Ronquillo-Ballesteros, Catarina Freitas, Tao Hu and Yingzhen Zhao of WRI’s International Financial Flows and the Environment Project (IFFE) and Xiaomei Tan of WRI China. An earlier version of this slide deck was prepared with the help of Bruce Jenkins, Kirk Herbertson, Alisa Zomer and Catarina Freitas.

Public Financing Instruments to Leverage Private Capital for Climate-Relevant Investment: Focus on Multilateral Agencies

Sarah Parsons — Thu, 06 Dec 2012 10:12:49 -0500

Executive Summary

As private sector investment flows within and into developing countries rapidly increase, the public sector has a unique opportunity to ensure that these flows are directed to meet critical climate change investment needs. This paper informs the use of public funds to leverage private sector investment in climate-relevant projects. It focuses on the public sector’s use of financing instruments, which can help improve the risk-reward profile of climate-relevant projects, especially when combined with a foundation of complementary climate change policies and financial regulations.

This paper draws on the experiences of two types of multilateral institutions responsible for providing or intermediating finance to climate change projects in developing countries: (1) climate funds and (2) development banks. It maps the financing instruments available to various public actors, with a focus on three significant institutions: the Global Environment Facility, the Clean Technology Fund, and the World Bank Group. Future working papers will map the activities of other public institutions, including bilateral, national, and regional development banks; government agencies; and public-private partnership funds.

The results of these working papers will be aggregated into detailed analyses and recommendations that inform the future public provision of climate finance with respect to leveraging private capital.

Findings from this paper for public actors and international mechanisms, like the Green Climate Fund, include the need to:

1. Better tailor the use of public financing instruments and maximize flexibility in the use of these instruments. This includes:

Expanding the use of financing instruments beyond loans to equity and guarantees in order to mitigate specific risks faced by the private sector in different geographies.
Coordinating support for domestic climate change policies and robust financial markets with project finance.
Targeting grant support to markets where access to finance is most challenging and where public finance is instrumental in market development. This includes grant finance to poorer countries with less robust financial markets, as well as for new technologies that cannot achieve commercial returns without initial public support.
Capitalizing international mechanisms like the Green Climate Fund in a manner that allows maximum flexibility in the use of different financing instruments. Specifically, the governments of developed countries should consider providing a reasonable amount of grant funding to the Green Climate Fund and its Private Sector Facility to ensure that a suite of instruments can be used flexibly as needed to most effectively mobilize investments. Loans, equity, de-risking instruments, or investments in other funds will provide a suite of products for the Fund to most effectively leverage private capital in ways that are most appropriate for individual programs or projects.

2. Address internal, institutional barriers to private sector investment; for example, by:

Improving internal coordination and cooperation with the aim of offering a complementary suite of financing options for, or to attract private sector investment into, projects.
Instituting incentives for employees to proactively consider options to increase private sector participation in projects, while maintaining appropriate checks to ensure that private sector activities are not unnecessarily subsidized.
Streamlining fee structures and transaction processing times for all products, but particularly non-loan, non-grant instruments.
Improving tracking and monitoring systems, as well as data transparency and availability to better identify and incorporate best practices in leveraging private capital.
Familiarizing recipient governments with more complex instruments, like guarantees, to enable them to use such instruments when appropriate.

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

Maggie Barron — Mon, 26 Nov 2012 15:41:50 -0500

OpenClimateNetwork.org

Visit openclimatenetwork.org for the latest analysis, project info, expert perspectives, and more.

Reiterating a pledge made in Copenhagen in 2009, the Cancun Agreements of December 2010 formally commit developed countries to collectively provide resources “approaching USD 30 billion for the period 2010 - 2012” to support developing countries’ climate efforts. This so-called “fast-start” finance will help developing countries, particularly the poorest and most vulnerable, mitigate (reduce) their greenhouse gas emissions, and adapt and cope with the effects of climate change. These pledges also present an opportunity to build trust between developed and developing countries in the international climate arena, in turn fostering progress towards a comprehensive post-2012 international climate agreement.

WRI has synthesized available information on countries’ pledges and measures they have taken to make the pledged resources available to developing countries. The accompanying table sets out both the amounts and the mechanisms by which funding would be delivered. WRI has also looked at how countries indicate whether their pledges will provide “new and additional” funds compared to what they provide as official development assistance. In-depth analysis on a subset of countries’ fast-start finance contributions is available separately.

This table will be continuously updated as more information becomes available.

Q&A on this Analysis

(Updated on November 26, 2012)

Have developed countries met their fast-start finance pledge?

Based on our research, as of November 26, 2012, 23 developed countries and the European Commission have publicly announced their individual fast-start finance pledges, in addition to the European Union’s collective pledge. These pledges total USD 33.92 billion. While this represents a significant step in the right direction, the extent to which these pledges are consistent with internationally agreed principles for fast-start finance is unclear. The Cancun Agreements mandate that fast-start funds have a “balanced allocation between adaptation and mitigation,” be “new and additional,” be “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa,” and include “forestry and investments through international institutions.” Because the details of this mandate have not been defined, it is not clear that developed countries’ fast-start finance contributions fulfill these criteria.

Finally, ensuring that pledges are actually delivered will be essential. According to reported information of the pledged funds, USD 28.06 billion has been requested and/or budgeted by the executive bodies of the countries during the fast-start period. In some cases, the legislative bodies have also approved these requests. The actual delivery and implementation of the finance, however, can be complicated to track, and is generally not documented in countries’ fast-start finance reports.

Do the funds have a “balanced allocation between adaptation and mitigation”?

Countries often specify the general objective that their fast-start funds will support. For example, of the USD 1.58 billion mobilized for fast-start by Germany in 2010 and 2011, 48 percent will support mitigation, 28 percent will support adaptation, 21 percent will support REDD+, and 3 percent will support multipurpose activities. In its 2010 fast-start finance report, Germany highlighted the challenges of identifying suitable adaptation projects as the reason for this, and recognized the need to adjust the allocation of funds across the three areas of mitigation, adaptation and REDD+. In the case of both Japan and the United States, a large majority of fast-start finance supports mitigation objectives. The grant-based portion of their contributions, however, gives more balanced consideration to adaptation. Several countries involved in the Interim REDD+ Partnership — a process created parallel to the UNFCCC to ensure effective and sustainable REDD+ (reduced emissions from deforestation and forest degradation) actions over the next few years — have also specified that at least 20 percent of their funds will support REDD+. However, there is no agreed-upon definition among countries of what constitutes a “balanced allocation.”

Are the pledged funds “new and additional”?

“New” funding represents an increase relative to pledges or allocations from previous years. A number of pledges include restated or renamed commitments already made in the past. For example, Japan’s Hatoyama Initiative is a restructuring of the previously announced Japanese Cool Earth Partnership, with some new resources included in the Initiative. Countries such as the United Kingdom and the United States are counting previous commitments to the Climate Investment Funds (CIFs) as part of their fast-start finance pledge. The United States also counts its annual contribution to the Montreal Protocol Fund, a long-standing commitment that dates back more than two decades.

Funds that are “additional” ensure that their delivery does not result in the diversion of funds from other important development objectives. In other words, climate mitigation and adaptation funds should be additional to development aid. Parties to the UNFCCC have not yet achieved consensus on a clear and specific definition of ‘additionality’ that can be applied uniformly to developed country financial pledges. As a result, countries have proposed a variety of methods for defining the additionality of their fast-start finance.

Do the pledges include “investments through international institutions”?

Countries are channeling investments through a mix of multilateral, bilateral, and public-private institutions. Several countries, including Japan and the United States, are channeling a considerable amount of their funds through export credit agencies and other public-private channels. The Climate Investment Funds(CIFs) and the Global Environment Facility (GEF) are the primary multilateral institutions of choice through which other funds will be channeled. The governance of the funds has implications for the effectiveness and perceived legitimacy of the overall climate finance architecture. Developing countries generally prefer that institutions governing finance ensure developing country ownership of funded activities and prioritize funding for climate vulnerable countries. Developed countries tend to emphasize the need to minimize bureaucratic costs and ensure the effective use of resources.

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States, and Africa”?

Countries under the Convention recognize that developing countries are highly vulnerable to climate change impacts because they have fewer resources to adapt to the effects of climate change, which can include increased droughts and floods, rising sea levels, and greater uncertainty in the agricultural sector. Least developed countries (LDCs) and small island developing States (SIDS) in particular are recognized as needing special consideration due to their extreme vulnerability. For these reasons, developed countries have pledged to prioritize fast start funds for the “most vulnerable countries.” Several countries are channeling their fast start finance through the Least Developed Countries Fund or the Adaptation Fund, many are channeling finance directly to SIDS and LDCs, and Australia in particular states that it will channel about one third of its fast-start finance to SIDS and about one quarter to LDCs.

What types of financial instruments are countries using?

There are several different types of financial instruments countries are using to deliver their fast-start finance, including grants, loans, equity, loan guarantees, insurance, and private investments. Many countries have provided some information on the type of financial instruments used. For example, the US reported providing USD 4.7 billion in grants through Congressional appropriations, USD 2.7 billion in development finance and export credits, which mostly take the form of concessional loans. Norway reports that all of its fast-start finance will be grants. Meanwhile, Japan’s fast-start finance includes grants and loans that meet ODA standards, finance in the form of ‘other official flows’, and may also count leveraged private finance, though this is ambiguous. However, reporting on the type of financial instrument used is neither comprehensive nor consistent. For example, little information is reported on the concessionality of the loans when used.

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

The UNFCCC system for developed countries to report on the delivery of climate finance faces several challenges, which limit the utility of available data. For example, countries currently use multiple methods for reporting and often provided insufficient information even where requested. To address this, the Cancun Agreements mandate more frequent reporting by developed countries using an enhanced common reporting format.

While these enhanced reporting provisions will be essential for successful tracking of developed country climate financial flows, they will not be ready in time to provide guidance for reporting on the short-term, fast-start finance. In the meantime, the Cancun Agreements invited developed country Parties to submit information to the UNFCCC secretariat, for compilation, on the resources provided to fulfill their fast-start finance commitment by May 2011, 2012, and 2013. Nine developed countries and the EU submitted their reports on or around the most recent May 2012 deadline. While the Cancun Agreements include reporting provisions for fast-start finance, it does not provide guidance on what these reports should include, resulting in reported information that is neither fully comparable, transparent, nor complete, as is demonstrated by the gaps in information in WRI’s fast-start table, the Open Climate Network’s fast-start finance assessments, and in a report by IIED assessing the transparency of the May 2011 fast-start finance reports. The UNFCCC secretariat hosts a fast-start finance module on its finance portal that enhances the comparability of the reports but it remains limited to information provided by developed country Parties. It also does not capture information available on the faststartfinance.org website or on individual donor or recipient websites, or other sources such as NGOs, the private sector or multilateral development banks.

To build trust with developing country counterparts, developed countries should improve their fast-start finance reporting in the future, for example, by including more comprehensive, comparable and transparent information on the following seven elements in their annual fast-start finance reports: scale, method for determining that the money is “new and additional,” channeling institutions, objective, geographic distribution, status of the pledge, and type of financial instrument.

Athena Ballesteros, Emily Chessin, Kirsten Stasio, and Remi Moncel contributed to earlier versions of this Q&A.

Moving the Fulcrum: A Primer on Public Climate Financing Instruments Used to Leverage Private Capital

Christine Potochny — Wed, 25 Jul 2012 15:11:56 -0400

Executive Summary

The Problem: Projected climate change mitigation investment needs in developing countries–including for low-carbon sectors–are significant, growing, and may not be met. Experts estimate new investments of up to $300 billion annually by 2020, growing up to $500 billion annually by 2030, are required to mitigate developing countries’ greenhouse gas emissions to levels in line with global targets. While industrialized nations have committed to mobilizing new funds of $100 billion annually by 2020 to meet these needs, this level of funding is far from what is required.

One Solution: Redirect the private sector’s growing investment in developing countries to help fill the growing climate finance gap. McKinsey estimates that the financial stock—that is, the total value of outstanding stocks and bonds—of developing countries grew by $11 trillion in 2011. By intervening to improve the investment attractiveness of climate change-relevant markets, the public sector has a significant opportunity to harness and redirect these significant private sector capital flows away from fossil fuel-driven sectors and toward low-carbon development.

The Challenge: Mobilizing private sector investment will require better targeted public support that improves the risk-reward calculus of lowcarbon markets. The private sector seeks markets that exhibit (i) attractive returns relative to associated risks over an appropriate investment timeframe (“attractive risk-reward calculus”) as well as (ii) adequate size, liquidity, and transparency. These conditions are often absent in developing countries due to the nascent natures of both low-carbon and financial markets in these geographies.

Recommendation: To improve the risk-reward calculus of investments—arguably the most fundamental barrier to leveraging private capital—the public sector can complement support for low-carbon policies with direct finance that manages the following risks:

Political and macroeconomic risks. Political risk guarantees, interest-rate/currency exchange products, and local currency loans can help investors and project developers financially manage political (for example, political instability) and/or macroeconomic (for example, exchange rate volatility) risks. As these financing instruments are not easily accessible in poorer countries, by providing these instruments, the public sector can catalyze low-carbon investment in geographies where access to finance is most challenging.
Low-carbon market risks, including policy, technology, and operational risks. These risks, which range from unexpected policy changes to technology failures, can affect both new and mature low-carbon markets. In newer low-carbon markets, public financing instruments like first-loss equity and debt investments and concessional loans can be instrumental in encouraging early investment. Projects in more established low-carbon markets—like solar, wind, and energy efficiency—can benefit from flexible loans, partial risk and credit guarantees, and risk sharing facilities.

Given the varied investment conditions across developing countries and their respective low-carbon markets, each market will require a unique combination of finance and policy support to scale-up private sector investment. Future WRI publications, drawing on private sector perspectives, will delve deeper into how public climate finance providers—whether governments, development finance institutions, or export-credit/aid agencies—can tailor direct finance to scale-up private sector investment in different markets.

Vulnerability and Adaptation: Finance

Kevin Lustig — Mon, 16 Jul 2012 10:36:02 -0400

Our work focuses on building the capacity of national governments to manage and channel scarce funds to those who need them most – and on building the capacity of civil society organizations to hold governments accountable for this spending. We also explore how to improve the ability of governments to mobilize domestic funding sources, and use innovative financial instruments to support adaptation initiatives.

Project: Adaptation Finance Accountability Initiative

Climate finance for developing countries to adapt to climate change and strengthen climate resilience has increased in recent years in the form of both international commitments and domestic spending. But there are significant questions about the implementation of these funds:

How much adaptation finance is actually available within developing countries?
How is it being directed and used and by whom?
Is it reaching the local level? Are the needs of the poorest and most vulnerable being met and do they have a say in how the finance is used?

To address these essential issues, Oxfam, the Overseas Development Institute, and the World Resources Institute – together with civil society groups in developing countries – are launching the Adaptation Finance Accountability Initiative. The initiative’s purpose is to examine how climate adaptation and resilience finance is delivered at the local level, pilot new tracking and monitoring tools to improve finance transparency, and press for strengthened accountability for adaptation and resilience finance.

Building on ongoing work at national, regional and global levels to monitor and strengthen accountability for adaptation finance, the initiative will initially focus on Nepal, the Philippines, Uganda, and Zambia in collaboration with civil society groups there. We will also work collaboratively at the regional and global level to share civil society lessons of adaptation finance monitoring and advocate for increased transparency and accountability, including with international institutions and donors.

Together we will:

Develop tools to enable civil society and other stakeholders to track and monitor adaptation finance flows from a multitude of sources down to the local level.
Identify institutional constraints to the effective delivery of climate finance to poor and vulnerable groups, and opportunities to empower local civil society to overcome these constraints.
Support national and local civil society capacity to advocate for improved transparency, coherence and alignment of climate finance, and increased accountability to citizens for the use of this finance.
Develop opportunities for South to South learning by enabling civil society groups across a number of Asian and African countries to share insights, exchange experiences, and jointly develop advocacy strategies.
Distill lessons from piloting monitoring tools and advocacy to improve transparency and accountability in climate finance delivery
Influence global efforts to mobilize and manage climate finance, including the oversight under the UNFCCC, the operationalization of the Green Climate Fund, and bilateral institutions delivering climate finance.

Climate Finance and the Private Sector

Christine Potochny — Sat, 16 Jun 2012 16:38:50 -0400

Experts estimate developing countries will require new investments of up to $300 billion annually by 2020—growing up to $500 billion annually by 2030—to adequately limit their growing greenhouse gas emissions¹. These countries will also require several hundred billion additional dollars to protect themselves from the worsening physical and economic impacts of greenhouse gases already in the atmosphere. While developed countries, through international agreements, have committed to channeling $100 billion by 2020 to developing countries for their climate mitigation and adaptation activities, this level of investment is clearly far from what is required.

Recognizing this funding gap, public actors have become increasingly interested in using public funds to leverage private capital investment in climate change projects in developing countries. Private sector investors—whether individual investors, private equity including venture capitalists, or larger institutional investors like pension funds, insurance companies, or sovereign wealth funds—have assets under management representing several trillions of dollars globally. In addition, global, regional, and local financial institutions have the capacity to provide much needed capital and financial services to finance privately-developed climate change projects – if the terms are right.

Fostering private participation in low-carbon markets can not only addresses near-term development needs, but also ensure the longer-term viability of these markets. Thus, a unique opportunity exists for public and private actors to work together to increase climate change-related private capital flows to developing countries.

A WRI Cross-Institute Initiative to Respond to a Window of Opportunity

Responding to this opportunity, in 2011, WRI’s Markets and Enterprise (MEP), Institutions and Governance, and Climate and Energy (CEP) programs, recently launched a cross-Institute initiative focused on Climate Finance and the Private Sector. The initiative aims to improve the effectiveness of public climate finance with respect to catalyzing private capital flows to developing countries. Bridging private and public sector perspectives, it engages with government agencies, public financial intermediaries, as well as private investors and project developers. The initiative’s conclusions will inform the provision of all climate finance, whether channeled through development banks, aid agencies, public-private funds, or international mechanisms like the Green Climate Fund. Initially, the Initiative will focus on leveraging private sector participation in low-carbon development through the targeted use of public financing instruments.

Three Work Streams to Leverage Private Sector Participation in Low-Carbon Developing Country Markets

The project is comprised of three work streams that examine how donors and intermediaries can more effectively use financial, and other, instruments to leverage private capital and thus create transformative climate change outcomes. These work streams focus on development finance institutions, public-private partnership funds and initiatives, and bi-lateral climate finance frameworks, respectively. Through these work streams, the Initiative will address important questions, including:

What types of public support best respond to private sector requirements in low-carbon development markets?
can governments and public-private initiatives more effectively work together to leverage private capital, particularly in poorer developing nations and “small and medium enterprise” markets?
What safeguards must the public sector institute to ensure that private capital is leveraged at the lowest cost to the public, while generating the greatest environmental benefits?
How should the roles of different types of public financing institutions and governments in leveraging private capital be delineated?
How successfully have existing sources of finance from development banks, international mechanisms , and public-private funds, leveraged private capital?
What lessons can be learned from past successes and failures, whether in climate finance or in other development arenas?

_{(1) Estimates from IEA 2008 and McKinsey & Company 2009 projects to stabilize worldwide GHGs to 450 ppm CO2e, which would provide a 22-74% chance of staying below 2⁰C warming by 2100, according to the Intergovernmental Panel on Climate Change (2007)}

LEARN MORE: Download our brochure for more information on Climate Finance and the Private Sector.
ADDITIONAL RESOURCE: WRI contributed to the Green Growth Action Alliance’s Green Investment Report. Download the report.

COP 17: Durban

Kevin Lustig — Thu, 10 Nov 2011 13:42:52 -0500

UPDATE: Read WRI’s summary of the outcome of the Durban talks and review of key issues: Reflections On COP 17 In Durban

More information on China and climate change at ChinaFAQs.

From November 28 to December 8, 2011, the United Nations hosted the 17th Conference of the Parties (COP) in South Africa.

WRI experts were in attendance at this latest meeting under the UN Framework Convention on Climate Change (UNFCCC) to help inform the talks. Below, you can find a variety of materials from the World Resources Institute that shed light on key areas of international climate policy.

Adaptation

World Resources Report 2010-2011: Decision Making in a Changing Climate: WRI’s flagship report offers specific, practical strategies and innovative case studies to inform how to integrate climate change risks into national policies and planning.
Report | Website

Making Adaptation Count: Concepts and Options for Monitoring and Evaluation of Climate Change Adaptation: A practical framework for monitoring and evaluation systems to track the success and failure of adaptation initiatives.

Finance

Power, Responsibility, and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance: An objective analysis of ongoing efforts to finance mitigation and adaptation in developing countries.

Greenhouse Gas Accounting

Greenhouse Gas Protocol Product Life Cycle Accounting and Reporting Standard: Provides requirements and guidance for quantifying and publicly reporingt an inventory of GHG emissions and removals associated with a specific product.
Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard: Provides requirements and guidance for preparing and publicly reporting a GHG emissions inventory that includes indirect emissions resulting from value chain activities.

International Agreement

Building the Climate Change Regime: Survey and Analysis of Approaches: Seeks to identify concrete pathways for building an international “climate change regime” by surveying academic literature and proposals by NGOs and governments.

Assessing Non-Annex I Pledges: Building a Case for Clarification: Builds a case for the need to clarify the assumptions, methodologies, and other critical details underlying non-Annex I GHG mitigation activity pledges.

Science

Blog post: Five Takeaways from the IPCC Report on Extreme Weather and Climate Change
Blog post: IPCC Report Adds To Studies Tying Climate Change To Extreme Weather
Blog post: Study Testing Skeptics’ Critiques Reconfirms Basic Climate Science
Blog post: Q & A On The Release Of Climate Science 2009-2010

Technology

Two Degrees of Innovation—How to Seize the Opportunities in Low-Carbon Power: A strategic framework for policymakers seeking to capitalize on the low-carbon transition.
Working Paper | Fact Sheet

Grounding Green Power: Bottom-Up Perspectives on Smart Renewable Energy Policy in Developing Countries: Identifies key components of smart renewable energy policy in developing countries.

Summary: Workshop on How to Measure, Report, and Verify Climate Finance

Kirsten Stasio — Tue, 09 Aug 2011 15:19:54 -0400

OpenClimateNetwork.org

Visit openclimatenetwork.org for the latest analysis, project info, expert perspectives, and more.

An informal summary of WRI’s June 2011 workshop on the measurement, reporting, and verification (MRV) of finance provisions in the Cancun Agreements.

On the sidelines of the international climate negotiations in Bonn, Germany in June 2011, the World Resources Institute hosted a workshop to facilitate a technical discussion on the MRV of finance provisions of the Cancun Agreements, with a particular focus on the reporting of climate finance. This workshop, which was co-chaired by Laurence Blandford from Environment Canada and Benito Jiménez from the Ministry of Foreign Affairs of Mexico, consisted of an informal forum of experts from developed and developing country governments, international organizations – including the UNFCCC, the OECD, and the World Bank – and civil society.

The first session of the workshop focused on: the goal(s) of reporting climate finance under the Convention; how information and reporting practices of the OECD Development Assistance Committee can contribute to or complement these goal(s); and, what role civil society and private sector initiatives can play in helping the Convention fulfill these goal(s). The second session looked more specifically at how existing guidelines can be enhanced in order to fulfill the provisions of the Cancun Agreements. The third and final session of the workshop focused on the process for making an enhanced reporting system under the Convention operational, including implications for both new and existing institutions and entities under the Convention.

Discussions during the workshop yielded many ideas and proposals for moving forward on developing an enhanced system for reporting climate finance. It highlighted several areas of agreement among participants. It also highlighted several areas where more work needs to be done and more questions that need to be resolved by the COP and other relevant entities.

WRI has prepared an informal summary of the workshop’s presentations and discussions. It should not be taken to reflect the official positions of any government or institution present at the meeting.

Download the full summary (PDF, 343 Kb)

Bottom Line on Public-Private Finance Tools for Energy Efficiency

Maggie Barron — Thu, 30 Jun 2011 08:33:11 -0400

On-bill financing

How does on-bill financing provide capital for energy efficiency?

On-bill financing allows a loan for energy efficiency measures to be repaid over time via an additional line item on the recipient’s utility bill, which decreases repayment risk for the lender. The lender in “classic” utility on-bill financing has traditionally been the utility itself. Hybrid models have also emerged in which public and private funds are pooled to offer low-interest loans, with repayment similarly attached to the utility bill. The utility then collects the payment and returns it to the lender, which lowers the lender’s administrative costs. The utility customer benefits from lower energy costs after retrofits, and typically pays loans back over a period of about 2–5 years.

Where has this model been implemented?

One example of a successful on-bill financing program is the Connecticut Energy Efficiency Fund’s Small Business Energy Advantage Program, which is administered by two electric utilities in the state. The fund finances low-interest loans for projects using pre-approved contractors, and eligibility is determined by the customer’s payment history rather than by credit check. In the case of one utility, United Illuminating, over 25% of the small business customer base has participated in the program.

Commercial Property Assessed Clean Energy (PACE) Financing

How does Property Assessed financing work?

Property assessed financing1 reduces repayment risk and lowers interest rates by securing loans with a tax lien on the property. The key attributes of property assessed financing are that programs offer upfront loans for voluntary energy efficiency upgrades, which are paid back through an extra line item on the property tax bill. Payments should be less than the energy savings to yield a net gain for the consumer.

How are property assessed (PACE) loans channeled to projects?

Some cities issue bonds to raise money that they lend directly to borrowers for upgrades. Another option leverages commercial banks to provide loans, either to property owners directly or to Energy Service Companies (ESCOs). Such programs rely on commercial banks to make loans to companies for retrofits; the city simply assigns the liens on the properties to the bank as security. Loan terms typically vary from 5–20 years and interest rates are low, reflecting reduced risk because the loan is senior to all other obligations.

Was PACE financing deemed a violation of mortgage agreements in the U.S.?

Tax liens are commonly used by cities to fund public services, and the mortgage industry in the U.S. has accepted this as standard practice. However, commercial PACE programs require that property owners obtain consent from their mortgage holders before participating if the PACE loan has priority repayment ahead of the mortgage. This is in part to avoid the resistance that residential PACE programs encountered from major mortgage underwriters, which has largely stopped residential PACE programs in the United States. Commercial PACE programs have thus far been allowed to continue without being deemed a violation of mortgage lending rules.

Where has this model been implemented?

Seventeen U.S. commercial PACE programs are either in operation or planning, and several Canadian cities are considering programs. Proven successes include the Sonoma County Energy Independence Program and Boulder, Colorado’s Climate Smart Program.

Sustainable Energy Utility Model

What is a Sustainable Energy Utility?

A Sustainable Energy Utility (SEU) is an institution whose core service is to facilitate access to energy efficiency. It is typically created through legislation to administer financing programs, offer technical services, and coordinate the services of private ESCO’s and banks. An SEU is not a financing mechanism in and of itself – rather, it is a “one stop shop” that leverages financing tools, reduces transaction costs for lenders, and organizes actors to make energy efficiency significantly easier.

Where are SEU’s already at work?

Vermont, Wisconsin, Oregon, New York, Delaware, and the District of Columbia all have independent not-for-profit providers of energy efficiency services that perform the functions of an SEU. Efficiency Vermont is one of the oldest: founded in 2000, it has significantly reduced the upfront cost to deliver energy savings. It is funded by a “wires charge” on each kWh sold in Vermont, which had previously been given to the utilities to perform demand side management. Delaware’s SEU was authorized to issue tax-exempt bonds and collect funds from other sources. It will create a Sustainable Energy Revolving Fund making loans at 3.5–5% interest rates, and can also award rebates.

Loan Guarantees

How do loan guarantees improve financing?

Energy efficiency investments are often perceived as risky by banks because of their unfamiliarity with the technologies and investment structures used, as well as the monitoring needed. Companies can typically only borrow money to finance these measures if they have good credit and give the lender recourse to their assets as a guarantee. However, when a public agency with good credit offers a loan guarantee, banks can lend at lower interest rates and/or extend the term of the loan because the guarantor has promised to ensure timely repayment. Individual loans or a portfolio of loans can be covered by either partial or full risk guarantees.

Loan Loss Reserve Funds

What is a Loan Loss Reserve Fund?

A loan loss reserve fund (LLRF) is another way of backing energy efficiency borrowers. If the borrower defaults, then the lender is paid back out of the reserve fund, reducing or eliminating repayment risk. A LLRF can secure a single loan or a portfolio of loans, and is often used for the latter. One example is the loss sharing facility implemented by the Global Environment Facility (GEF) and the International Finance Corporation (IFC) as part of the China Utility-Based Energy Efficiency (CHUEE) program. The IFC and the GEF set up a LLRF that guarantees loans made by local commercial banks to energy management companies who finance upgrades for their customers. This “Loss Sharing Facility” will refund 75% of the first 10% of the loan amount in case of default, and 40% of any losses on the remaining 90% of the loan amount. With $USD 50 million in loss reserve funds contributed by the GEF and IFC, the program seeks to mobilize $USD 0.7-1.45 billion for energy efficiency project financing from the private sector.

What is the difference between a LLRF and a loan guarantee?

A LLRF is another way to guarantee a loan without relying on the credit of an institution as Guarantor. An actual sum of money must be set aside in an escrow account, rather than an organization pledging its credit. Either one can be structured to repay full or partial losses in case of default.

Loan guarantees and reserve funds can work in conjunction with other types of loans. They can also be coupled with PACE programs to make mortgage lenders more comfortable that PACE loans will not increase mortgage defaults. For example, California passed a law in 2010 establishing the PACE Reserve Program to help local jurisdictions raise bond revenues at lower cost to fund their PACE programs, and thereby offer lower interest rates to consumers. A LLRF could be seeded by public funds but become self-sustaining if funded by a fee on each loan.

How can governments raise funds to leverage additional private-sector lending?

The five financing programs described above can be implemented by local, state, and federal governments in cooperation with the private sector. Such programs have leveraged significantly more private investment than their cost to administer, but do still require some upfront public investment. Governments can raise funds by establishing a small utility fee on electricity sold, requiring utilities to re-invest some revenues in energy efficiency, and/or issuing bonds.

In summary, barriers to financing energy efficiency can be overcome through public-private financing tools. Small investments by government to reduce the risk of lending to energy efficiency projects can unlock major private sector investment, as well as significant environmental benefits.

Resources for Further Information

MEDIA ADVISORY: Asia Clean Energy Forum Kicks-Off June 22, Philippines

Lauren Zelin — Thu, 16 Jun 2011 13:20:23 -0400

Leaders exchange ideas on clean energy innovation, business models, policy and investment at ACEF2011

The Asia and Pacific region will be one of the most important areas for clean energy over the next several decades.

The Asian Development Bank (ADB), the U.S. Agency for International Development (USAID) and the World Resources Institute (WRI) will co-host the premiere knowledge-sharing platform for clean energy investment in Manila, Philippines, from June 22-24, 2011. The 6th Asia Clean Energy Forum (ACEF) will explore issues in the clean energy sector including policy, regulation, financing and innovative business models; all under the theme of “New Business Models and Policy Drivers: Building the Low-Carbon Future.”

Senior representatives from the host organizations along with energy leaders from around the world will participate in the event.

The Opening Plenary session on June 22 will include remarks from Haruhiko Kuroda, ADB President, and Mohamed El-Ashry, Senior Fellow, UN Foundation and Chairman of the Renewable Energy Policy Network (REN21).

On Friday, June 24, Jennifer Morgan, Director of WRI’s Climate and Energy Program, will give the closing plenary speech “A Vision for a Low Carbon Future.”

Throughout the week, WRI experts will be featured in panel discussions on topics including renewable energy policy, carbon and energy finance, greening public transportation, ESCOs, universal access to energy, energy efficiency financing, low emission development strategies, and more.

WHAT:
Asia Clean Energy Forum (ACEF) 2011, a detailed program of events is available here.

WHEN:
ACEF: June 22 – June 24, 2011

HIGHLIGHTS FOR MEDIA:

Wednesday, June 22, 2011 9-10:30 a.m.: Opening Plenary Session with remarks from Haruhiko Kuroda, ADB President, and Mohamed El-Ashry, Senior Fellow, UN Foundation and Chairman, REN21

Wednesday, June 22, 2011 10:30 a.m.: Media Availability with WRI experts

Thursday, June 23, 2011 6:00 p.m.: Cocktail reception hosted by WRI, ADB and USAID

WHO:
WRI experts are available for media interviews, including:

Jennifer Morgan, Director, Climate and Energy Program
Athena Ballesteros, Project Manager of the International Financial Flows and Environment Project
Dr. Zou Ji, China Country Director
For more information on WRI experts click here

WHERE:
ADB Headquarters, 6 ADB Avenue, Mandaluyong City, Philippines

RSVP:
To receive a press pass or to set up interviews, please contact:
DC: Lauren Cole at lcole@wri.org
Manila: Emily Chessin at echessin@wri.org
Beijing: Xiaohua Sun at xsun@wri.org

Low-Carbon Development in Emerging Economies

Kevin Lustig — Mon, 13 Jun 2011 15:25:58 -0400

Today’s major emerging economies — countries such as Brazil, China, India, Indonesia, and South Africa — face the challenge of increasing economic development while also overcoming serious barriers to energy access and reducing greenhouse gas (GHG) emissions. These countries recognize the need for a shift to low-carbon climate-resilient development, but seek solutions that do not compromise growth.

It is possible to meet this challenge while addressing climate change. WRI’s vision is that these countries make a clear link between low-carbon growth and long-term prosperity, and support policies and incentives that advance national development priorities while significantly reducing GHGs. If successful, these countries would redefine the conventional growth paradigm, and offer innovative solutions that set the world firmly on a low-carbon and climate-resilient path.

Use the links below to explore WRI’s work on emerging economies:

WRI’s work by country:

(Click on a highlighted country for publications and other resources)

The New Frontier in Environmental Finance

Tue, 07 Jun 2011 12:49:55 -0400

China’s overseas presence has brought a new way of doing business to the world.

Chinese/中文 (PDF, 452 Kb)

By 2030, China may become the largest economy in the world. Less than one decade from now, emerging markets including Brazil, China, India, Mexico and Russia, will comprise half of world’s top 10 GDP list.

The global remapping of economic power presents significant opportunities and challenges to U.S. and European policymakers and companies operating in emerging markets, especially as businesses strive to operate amidst growing populations, resource scarcity and environmental degradation.

Emerging Actors in Development Finance

WRI’s work on emerging actors in development finance is led by the International Financial Flows and the Environment initiative. The goal of this research is to improve the environmental, social, and climate change policies that govern emerging actors’ investments, and to ensure that local communities and civil society organizations impacted by the investments are able to engage with “emerging actors” more effectively. A preliminary aggregation of existing and original data and figures are available online.

As the founder and Chief Investment Officer at Caravel Management, an emerging and frontier markets investment fund, former chair of the U.S. Export Import Bank, and current chair of the board of the World Resources Institute (WRI), I have watched the emergence of new financial actors from several perspectives. China’s overseas investments have been of particular interest, especially given the marked success of the country’s “go global” strategy and the strengthening of U.S.-China trade relations.

New Opportunities

U.S. investors in emerging markets have seen opportunities in Chinese companies’ growing presence overseas. For instance, China has made significant advances in clean energy technologies in areas such as solar, wind energy and electric cars. These investments and achievements are helping to shape markets and set the direction for future industry standards. As Chinese companies bring these technologies and standards overseas, there are increasing opportunities for partnerships and cooperative ventures between U.S. and Chinese enterprises with similar interests.

New Challenges

At the same time, Western governments’ export credit agencies have begun to see China as a formidable competitor. For several years, developed countries’ export credit agencies have come together at the Organisation for Economic Co-operation and Development (OECD) to ensure that cooperation and competition take place on a level playing field, and to develop mutually acceptable standards that promote environmental protection. As China’s presence grows, these same institutions are reaching out to China’s agencies as well as those of other non-OECD member states. Greater participation of China in the OECD—even if not as a member obligated to OECD standards—would generate positive economic and environmental benefits.

New Risks

Similarly, U.S. environmental groups that have monitored the environmental and social impacts of Western overseas investors have begun to turn their attention to Chinese investors, in an effort to ensure that local communities have a voice in projects that affect them. China is now among the world’s top five largest investors. Naturally, with $50bn per year in overseas investment and a particular appetite for natural resources and infrastructure, China draws inevitable scrutiny of its operational standards in emerging and frontier countries.

New Partnerships

From all of these perspectives, China’s overseas presence has brought a new way of doing business to the world. China’s investments have brought much-needed capital and infrastructure to sub-Saharan Africa and other regions. Yet in many cases, a lack of information and understanding of the culture of China’s investors and financial institutions can lead to fear in the United States and other Western countries.

This is now changing. The Global Environmental Institute (GEI), a Chinese nongovernmental organization, produced a book entitled Environmental Policies on China’s Investment Overseas which examines the political and economic contexts in which China’s overseas investments operate. GEI’s book provides greater clarity on how the Chinese government is seeking to promote and regulate overseas investments.

WRI supported the English translation of the book and is hosting GEI and a delegation of Chinese government officials in Washington, DC on June 8th and New York City on June 10th. The purpose of the launch is to encourage a dialogue among Chinese, U.S. and international policymakers and stakeholders on emerging environmental and social standards for China’s overseas investments.

This publication will help to build awareness among U.S. and other English-speaking audiences. GEI’s book speaks frankly about the progress and challenges that the Chinese government, companies, and financial institutions have faced in going global. Most importantly, it signals the possibility for engagement and partnership between U.S. and Chinese companies under terms that reduce risk and enhance the returns for both investors and the countries and communities in which they invest.

Mr. Harmon is the Chairman of WRI’s Board of Directors.

Topic: finance

Striking the Balance: Ownership and Accountability in Social and Environmental Safeguards

Executive Summary

Mobilizing Climate Investment: The Role of International Climate Finance in Creating Readiness for Scaled-Up, Low-Carbon Energy

Executive Summary

Enabling conditions for scaling up investment

Lessons learned for the design of readiness activities

Small amounts of long-term funding for enabling activities can help scale up investment

Integrated, inclusive planning processes and policy and institutional reform are key to attracting investment

Tackling information barriers and strengthening industry and financial sector capacity can unlock investment

A framework for guiding readiness support for low-carbon energy investments

Recommendations for the Green Climate Fund

Communicating the "Financeability" of Energy Efficiency Projects (EEPs): Guide to Data Needs for Financing EEPs in China

Executive Summary

Emerging Actors in Development Finance with Potential Social and Environmental Risks: China & Brazil

A Changing Global Landscape

Research Focus

Strategy: Three Elements

A Closer Look at China’s Overseas Investment

A Closer Look at Brazil’s Overseas Investment

Public Financing Instruments to Leverage Private Capital for Climate-Relevant Investment: Focus on Multilateral Agencies

Executive Summary

Findings from this paper for public actors and international mechanisms, like the Green Climate Fund, include the need to:

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

OpenClimateNetwork.org

Q&A on this Analysis

Have developed countries met their fast-start finance pledge?

Do the funds have a “balanced allocation between adaptation and mitigation”?

Are the pledged funds “new and additional”?

Do the pledges include “investments through international institutions”?

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States, and Africa”?

What types of financial instruments are countries using?

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

Moving the Fulcrum: A Primer on Public Climate Financing Instruments Used to Leverage Private Capital

Executive Summary

Vulnerability and Adaptation: Finance

Project: Adaptation Finance Accountability Initiative

Climate Finance and the Private Sector

A WRI Cross-Institute Initiative to Respond to a Window of Opportunity

Three Work Streams to Leverage Private Sector Participation in Low-Carbon Developing Country Markets

COP 17: Durban

WRI on COP17 Durban

Media

Commentary

Adaptation

Finance

Greenhouse Gas Accounting

International Agreement

Science

Technology

Summary: Workshop on How to Measure, Report, and Verify Climate Finance

OpenClimateNetwork.org

Bottom Line on Public-Private Finance Tools for Energy Efficiency

On-bill financing

Commercial Property Assessed Clean Energy (PACE) Financing

Sustainable Energy Utility Model

Loan Guarantees

Loan Loss Reserve Funds

Resources for Further Information

MEDIA ADVISORY: Asia Clean Energy Forum Kicks-Off June 22, Philippines

Low-Carbon Development in Emerging Economies

Use the links below to explore WRI’s work on emerging economies:

WRI’s work by country:

The New Frontier in Environmental Finance

New Opportunities

New Challenges

New Risks

New Partnerships