The SDG Knowledge Hub of the International Institute for Sustainable Development (IISD) provides the July update on global climate finance institutions.
Institutional Finance Update: Investors Increase Climate Action, MDBs Support Energy Efficiency and Green Transport Initiatives
During the month of July, several multilateral development banks (MDBs) advanced their climate finance targets with various loans and grants announced in support of climate change mitigation and adaptation projects. Investors expanded their focus list of companies that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement on climate change.
Investors Step up Action Ahead of Global Climate Action Summit
In the run-up to the Global Climate Action Summit (GCAS), to be held in San Francisco, US, in September 2018, investors scaled up engagement with “systemically important” GHG emitters by adding 61 companies to Climate Action 100+, a collaborative five-year global initiative committing investor signatories to engage actively with the world’s top emitting companies.
ADB Issues Its First Euro Denominated Green Bond
The Asian Development Bank (ADB) raised 600 million Euros to help finance climate change mitigation and adaptation projects through the issue of its first Euro denominated benchmark green bond. The seven-year green bond has a coupon rate of 0.35% per annum payable annually and a maturity date of 16 July 2025. Proceeds of the green bond will support low-carbon and climate-resilient projects funded through ADB’s ordinary capital resources and used in its non-concessional operations.
The Bank reported it is now in position to achieve its US$6 billion annual climate financing target by 2020. Out of the US$6 billion, US$2 billion will be allocated for adaptation through more resilient infrastructure, climate-smart agriculture (CSA), and better preparation for climate-related disasters. US$4 billion will be dedicated to mitigation through scaling up support for renewable energy, energy efficiency, sustainable transport, and building smart cities.
ADB, EIB Finance Green Transport in China, Italy
ADB signed a US$200 million loan agreement with Minsheng Financial Leasing (MFL), as part of a US$400 million financing package, to roll out environment-friendly buses and promote green public transport in China.
ADB’s loan to MFL will be used to finance the leasing or purchasing of green buses, including electric bus batteries, with focus on the central and western regions of China. Another US$200 million of the financing package will be funded by commercial co-financiers to help MFL finance green vehicles, as well as batteries and charging stations for electric vehicles. Apart from ADB’s assistance, the Global Environment Facility (GEF) has provided technical assistance to strengthen the capacity of bus operators.
Green transportation also received support in Europe, where the European Investment Bank (EIB) agreed to provide Enel X Mobility with a ten-year loan of 115 million Euros to support the financing of around 14,000 new charging stations for electric vehicles throughout Italy. Enel X Mobility’s project, with a total investment of around 300 million Euros, aims at promoting climate-friendly innovation and electric mobility and will be implemented over the next five years.
NDB Backs GHG Emission Reduction and Clean Energy Sector Development Project in South Africa
The New Development Bank (NDB) proposed a US$300 million loan to the Development Bank of Southern Africa (DBSA), with which it will finance 50% of a US$600 million project in South Africa to support greenhouse gas (GHG) emission reduction and renewable energy projects. DBSA will implement the project over 15 years, from 2018-2033.
The proposed NDB loan will be in the form of a two-step loan to DBSA, which in turn will be on-lent to its identified sub-projects, including the wind, solar, and biomass energy sectors.
IDB Supports Latin American Countries with Loans and Grants for Energy Efficiency Projects
The Inter-American Development Bank (IDB) approved several loans, with Green Climate Fund (GCF) resources, for efforts by Argentina, El Salvador and Paraguay to support energy efficiency investments by SMEs. The IDB loans are each for a 20-year term, with a grace period of five and a half years and a 0.75 fixed interest rate. These loans are additional to technical cooperation grants provided by the Bank.
The IDB will finance Argentina’s project seeking to increase SME investments in renewable energy and energy efficiency by providing greater access to finance. The project will be executed by the Banco de Inversión y Comercio Exterior, with a US$100 million loan. Funds will go to small-sized renewable energy generation projects (mainly biogas and biomass) and efficiency improvements in industrial processes, including equipment replacement and co-generation. In addition, the IDB will provide Argentina with US$3.6 million in technical cooperation grants geared at promoting energy efficiency investments by SMEs, which will replicate the IDB’s Energy Savings Insurance strategy.
El Salvador will receive a US$20 million IDB loan to empower SMEs from all sectors with access to long-term credit needed for energy efficiency investments. The Banco de Desarrollo de El Salvador will implement this project which, aims at strengthening efforts in El Salvador to reduce energy consumption by SMEs and bring down GHG emissions. The loan program will be supplemented by a non-reimbursable US$1.7 million technical cooperation grant to be used to develop energy savings measurement and financial risk transfer instruments to encourage the structuring of technically sound and financeable investments in energy efficiency.
With a US$20 million IDB loan, Paraguay will promote improved long-term productivity and energy efficiency investments by SMEs in the industrial sector. The Agencia Financiera de Desarrollo will execute the program, which seeks to increase access to medium and long-term finance for energy efficiency investment projects, while providing SMEs with access to new technologies and business models that increase their productivity. The IDB will support Paraguay with additional US$3 million in technical cooperation grants geared at promoting energy efficiency investments by SMEs. As with Argentina, the goal is to replicate the IDB’s Energy Savings Insurance strategy.
Publications Assess Credit Risk and Opportunity, Help Catalyze Finance for Innovation to Address Climate Change
The UN Environment Programme Finance Initiative (UNEP-FI) and Acclimatise published a report titled, ‘Navigating a New Climate: Assessing Credit Risk and Opportunity in a Changing Climate,’ which focuses on the physical risk and opportunities arising from climate variability, extreme events and longer-term shifts in climate patterns. The study constitutes the second in a two-part series and is based on outputs of a working group of 16 banks piloting the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. The first report in the series was published in April 2018.
The UNFCCC Technology Executive Committee (TEC), the Climate Technology Centre and Network (CTCN) and the Green Climate Fund (GCF) published the Executive Summary of a forthcoming report on catalyzing finance for incubators and accelerators. Titled, ‘Catalyzing Finance for Incubators and Accelerators: Addressing Climate Change through Innovation,’ the document identifies ways to catalyze finance for climate technology incubators and accelerators in developing countries. It aims to inform the GCF as it develops terms of reference (ToR) for a request for proposals on climate technology incubators and accelerators for consideration by its Board.