Torvanger a 20150709_1730_upmc_jussieu_-_room_107
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Transcript of Torvanger a 20150709_1730_upmc_jussieu_-_room_107
Climate finance:
New sources, new instruments, more effects?
17:30-17:50 Sources and instruments for climate finance Asbjørn Torvanger, CICERO 17:50-18:05 Mobilizing capital for green infrastructure investments Kate Eklin, OECD 18:05-18:20 Results-based financing for mitigation: Choosing the right “triggers” to drive “paradigm” shift Randall Spalding-Fecher, Carbon Limits AS 18:20-18:35 Smart Unconventional Monetary (SUMO) policies: Giving impetus to green investment Romain Morel, CDC Climat 18:35-19:00 Panel discussion and Q&A: Morel, Spalding-Fecher, Eklin, Torvanger
Our Common Future under Climate Change, Paris, 7-10 July 2015 Parallel session 4404, Thursday 9 July 17:30-19:00, UPMC Jussieu, Room 107 Lead convener: Asbjørn Torvanger, CICERO
Our Common Future Under Climate Change:
Parallel session 4404:
Climate Finance: New sources, New instruments, More effects?
UPMC Jussieu, Room 107, Paris, 9 July 2015
Sources and instruments for climate finance
Asbjørn Torvanger, PhD
CICERO
Setting the stage for Climate Finance
• Huge need for CF for low-carbon and climate-resilient
infrastructure and energy, not the least in developing
countries (DCs)
• Public finance likely insufficient (100 bill. $ and beyond)
• Private finance has large potential, but a number of
barriers exist: Long-term; High risk; Low short-term
return?
My presentation: * Sources and actors of climate finance (G7 report)
* Study on incentivizing private climate finance for DCs * An innovative instrument: Green bonds
Main findings
• Global green transition requires trillions USD
• Public and private finance
• New opportunities due to cheaper renewable energy
• Business certainty and predictable regulatory and economic frameworks essential
• Governments have strong toolkit (finance, grants, concessional loans, risk coverage measures)
• Strong political will needed for USD 100 billion to DCs’ transition
Instruments available to public entities for de-risking and
cost reducing:
Mobilize private finance for climate change mitigation and
adaptation in developing/emerging countries
Classification of financial instruments according to
de-risking or reducing the cost of an investment
Category Name De-risking Cost reduction
Rev
enu
e
sup
po
rt
po
licy
Feed-in tariff
Feed-in premium
Tradable green certificates
Tendering process
Cre
dit
enh
ance
men
t
Export credit guarantee
Interest rate subsidy
Loan guarantee
Partial credit guarantee
Securitization
Dir
ect
inve
stm
ents
Concessional loan
Equity investment
Grant
Public-private partnerships
Insu
ran
ce First-loss insurance
Public political risk
insurance/guarantee
Debt-for-climate swaps
Financial instruments for de-risking and cost reduction:
Incentivize private climate finance in DCs
Category Name Leverage
factor
Scaling-up Reliability
Rev
en
ue
sup
po
rt
po
licy
Feed-in tariff High Medium
Feed-in premium High Medium
Tradable green certificates Low N/A
Tendering process High N/A
Cre
dit
enh
ance
men
t
Export credit guarantee Low/High Medium
Interest rate subsidy High Low
Loan guarantee Low/High Medium
Partial credit guarantee Low/High Medium
Securitization High Low
Dir
ect
inve
stm
ents
Concessional loan High High
Equity investment High Low
Grant High High
Public-private partnerships High Low
Insu
ran
ce
First-loss insurance High Low
Public political risk
insurance/guarantee High Low
Debt-for-climate swaps Low N/A
Green Bonds • A Bond:
A fixed-income financial instrument of indebtedness of the issuer to the holders. The issuer is obliged to pay holders interest and/or to repay the principal at a later date
• A Green Bond:
Supports sustainable development, low-carbon growth and climate change resilience
• Motivation: Economic (future markets, new investors, capital for large green infrastructure) Public image Ethical (CSR)
CICERO’s second opinions
CICERO involved in Green Bonds
since 2007
Independent reviews of the issuers’
framework for selecting projects
and investments eligible for Green
Bond funding, so-called ‘second
opinions’
Based on latest science:
Top-down and qualitative
assessments of sustainability and
climate-friendliness
CICERO has a major share
of the independent review market
CICERO’s shades of green
Dark green Medium green Light green
Aiming at low-carbon, climate change resilient future • Long-term perspective (2050) • Best available technology; for longer term • Avoid fossil lock-in • Prioritize most reliable investments and projects • Governance: sustainability strategy, capability • Macro impacts: supplier chain, life cycle Dark – Implementing long-term solution Medium – On way to long-term solution Light – Short-term benefits, but not long-term solution
Green Bonds:
Challenges and way forward
Definition of greenness * Aim at 2050 low-carbon infrastructure
* Risk management:
Climate policy and climate change impacts
* Climate change resilience
* Best available solution (over next few decades)
* Environmental factors
More compact instrument – Standardization * Branding and confidence building
* Reduce risk for window dressing and green washing
* Simplify assessment and assurance
Issues for panel
• Most promising sources of climate finance globally
• Most promising instruments to mobilize finance
• What government measures most efficient to incentivize
private climate finance?
• How assess efficiency of government measures?
(e.g. leverage ratio; output measures)
• Delimitation of climate finance vs. ODA, vs. commercial
investments (without government support)
• Potential and best application of results-based finance?
• How best overcome barriers to clean energy
investments?
• How adapt Green Bonds to developing country needs?