Climate Finance and Public Policies for Sustainable Growth Perspectives of a National Development Bank

Transcription

1 Climate Finance and Public Policies for Sustainable Growth Perspectives of a National Development Bank Marc Engelhardt Climate and Environmental Finance Conference Seminar Mexico City, 26 April 2017

2 Outline 1 Green Finance: Background 2 The Role of Development Banks in Green Finance 3 Example KfW 4 Summary

3 Green Finance: Background

4 Fifty Shades of Green: Example of Green Bond Principles renewable energy - energy efficiency - pollution prevention and control - sustainable management of living natural resources - terrestrial and aquatic biodiversity conservation - clean transportation - sustainable water management - climate change adaptation - eco-efficient products, production technologies and processes Source: International Capital Markets Association (ICMA), Voluntary Process Guidelines for Issuing Green Bonds, 2016; Practice/green-bonds/green-bond-principles/ Umwelt- und Klimazusagen Geschäftsbereich KfW Entwicklungsbank 4

5 Agenda 2030 and Green Finance potential synergies (e.g. protection of freshwaters) : At least 10 of out the 17 SDGs have a strong and direct link to environmental challenges " Green Finance is central to SDG implementation potential trade-offs (e.g. bioenergy)

6 Paris Climate Agreement and Green Finance (1) Limiting of global temperature increase to degree corridor Net zero greenhouse gas emissions after 2050 Common framework for climate policy of industrialised and developing countries Continuous increase of ambition by review and re-submission of national climate plans (NDCs) in 5 year cycle Industrialised countries continue to provide international climate finance for developing countrues at a level of at least 100 billion USD p.yr. By 2020 Redirection of financial flows to support low-carbon development Cross-Sectoral Transformation: Change of Policies, Technologies & Markets 6

7 Paris Climate Agreement and Green Finance (2) Shifting investment from fossil fuel power plants and extraction to renewables and efficiency Source: IPCC WG III AR5, Chapter 16,

8 The Role of Development Banks in Green Finance

9 Key Barriers for Private Sector Green Investment in Developing Countries Risks are perceived as too high Lacking familiarity with markets and political and legal framework Projects (incl. development/preparation cost ) not profitable Individual projects are too small and not easily aggregated Incompatibility with investment strategy & regulatory provisions of investors

10 The Role of Development Banks provide long-term finance reduce political and policy risks as anchor investor aggregate small individual projects absorb part of the cost or risk using concessional finance structuring finance, supporting feasibility studies, planning and tendering support an environmentally and socially sound implementation efficient application of instruments: e.g. loans, equity, grants, guarantees, insurance, technical assistance support enabling environment and policy framework

11 Regional Pattern of Climate Finance Flows (CPI-2015) Klimafinanzierung International financial erfolgte cooperation zum Großteil is important, inländisch but: climate Internationale finance is largely Klimafinanzierung fed from sollte domestic sich sources, fokussieren auf Länder, key Instrumente role for national und development Technologien banks! Source: Climate Policy Initiative: Global Landscape of Climate Finance 2015,

12 Example for Cooperation Between Development Banks: The International Development Finance Club (IDFC) The IDFC is a network of 23 leading development finance institutions with mandates for national, sub-regional, regional and international activities around the world In 2015, new commitments of the IDFC Members added up to approx. USD 650 bn The work of IDFC in 2016/17 focusses on implementing the sustainable development goals (SDGs) including private sector mobilisation and the climate targets agreed at COP-21 in Paris 12

13 Example KfW

14 KfW s Green Finance Domestic and International Activities by KfW Group 35,3 bln. Euro of total of 81,0 bln. 44% 2016 Domestic International Privatkundenbank Mittelstandsbank Kommunalbank KfW IPEX-Bank DEG KfW Entwicklungsbank Support for Environment and Climate 28,4 Mrd. International 7,3 Mrd. 1,8 Mrd. 0,6 Mrd. 4,8 Mrd. 66% 14

15 Green Bonds Made by KfW Highlights of KfW s Green Bond Issuances Distribution by renewable energy type in KfW green bonds KfW has been issuing Green Bonds since 2014 totalling EUR 9.2 bn; market share of around 7% 2016: 4 bonds amounting to EUR 2.8bn (4% of total funding) EUR, USD, AUD, GBP and SEK with potentially more currencies to come Large and liquid sizes in benchmark maturities not exceeding the average duration of the qualifying assets (2016: 8.6 years) Comparable to other KfW bonds regarding structure, pricing, rating KfW Green Bonds are eligible for the green bond indices " BofA Merrill Lynch Green Bond Index", "Barclays MSCI Green Bond Index", "S&P Green Bond Index" & "Solactive Green Bond Index" Higher share of pension/investment funds (36% vs %) 15

16 Funding the Energy Transition: KfW s Programs Over 100 bln. EUR in KfW s action plan on energy transition since 2012 KfW-Program Renewable Energy Energy Efficient Construction und Modernisation Standard Power and power/heat generation Integration of renewables into the electricity system Increasing the flexibility of electricity generation and demand Information technology for the energy transition Housing Municipal Buildings Energy Efficiency in Companies Commercial Buildings Premium Heat generation and geothermal energy Production and Processes Waste Heat Storage Battery systems and photovoltaics Municipal Energy Efficiency Offshore Wind Energy Energy and City Rehabilitation District energy Supply Energy Efficiency Investment loans Syndicated Corporate Loans for Energy and Environment 16

17 KfW Internationally Renowned Efficiency Support System Energy-efficient Construction and Refurbishment Support of consulting and investments are coordinated with the German Energy Saving Ordinance Efficiency requirements are more challenging than the Energy Saving Ordinance Support is technological neutral - Heating technology and building envelope Every investor can make a request ( Principle of everyman ) - Width of refurbishment The higher energy efficiency, the more attractive the promotion Depth of refurbishment Main role of the quality control (for example support by qualified experts) Well established efficiency label: 17

18 International Example Ecocasa Programme in Mexico Energy Efficient Housing Programme Challenges Residential sector being responsible for 17% of energy consumption in Mexico with increasing tendency Ambitious climate goals: until 2030 reduction of GHG emissions by 25% (not conditioned) and by 40% (conditioned) Approach Part of National Appropriate Mitigation Action (NAMA) for Sustainable Housing Promoter: Sociedad Hiptoecaria Federal financial incentives & technical assistance Beneficiaries: low & middle income groups Criterion: at least 20% less CO2 emissions compared to standard residences Developers can choose technologies Impact Target: 32,450 energy efficient houses and rental apartments until 2023 So far: 26,355 building contracts for signed, ~19,000 already built Emission reduction: 25 Ktons of CO2 p.yr. Volume of financing: Financiers / Total: 265 mn EUR donors: KfW: 147 mn EUR incl. KfW, IDB, CTF, BMZ, LAIF, NAMA-Fac and EU LAIF

19 International Example: Solar Power Plant Ouarzazate (Morocco) Supporting the Implementation of the Moroccan Solar Plan Solar Park Ouarzazate: 3 Phases, 3 Technologies, 4 Power Plants, approx. 560 MW Noor I 160 MW Parabolic trough With 3 hours of thermal storage Investment :633 million EUR KfW: 115 million EUR Noor II + III 200 MW Parabolic trough Noor II 150 MW Tower Noor III each at least 5 hours storage Investment 1.76 bln EUR KfW: 654 million EUR Noor IV 70 MW Photovoltaics KfW: 60 million EUR Providing large scale, long-term concessional finance for innovative energy systems 19

20 Summary

21 Summary Green Finance has strong international drivers and many national benefits Development Banks are critical agents of a green transformation Many business opportunities exist but: national policy framework is essential No business as usual: changes in strategy & portfolio, organisation, safeguards, external relations 21

22 Thank you for your attention! Marc Engelhardt Head of Department Development & Sector Policies KfW Development Bank KfW Palmengartenstrasse Frankfurt am Main Germany Fon