FINANCING GREEN PROJECTS IN AGRIFOOD SECTOR EXPERIENCE FROM THE EBRD REGION

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1 FINANCING GREEN PROJECTS IN AGRIFOOD SECTOR EXPERIENCE FROM THE EBRD REGION Dana Kupova Principal, Energy Efficiency and Climate Change

2 What is EBRD? Multilateral financing institution established in 1991 to support transition to market economies Owned by 65 countries, the EU and the EIB 30 billion capital base 41 billion portfolio 9.2 billion average annual business in the past 3 years 3 key operational principles Sound banking Transition impact Environmental sustainability The EBRD has a target of 40% of its investments to be towards green projects by The share of green investment in agribusiness was 25% in 2016, equivalent of EUR 200m. 2

3 How we differ in terms of project assessments? Credit and financial risks How projects are assessed at the EBRD: Environmental and social risks Integrity analysis Civil society engagement Market transition impact Green Economy Transition impact 3

4 How does the EBRD support? Directly from EBRD: loans, equity investments or guarantees Mobilising additional commercial sources Indirectly via local partner financial institutions: lending, leasing EBRD (+OTHER) COMMERCIAL FINANCING For eligible investments which face particular barriers: Targeted facilities priced below market terms Selective partial investment grants or incentive payments First-loss cover or guarantees POLICY DIALOGUE CONCESSIONAL CO-FINANCING Working with governments on legislation that creates optimum conditions for green investments Supporting the development of legal instruments and best practice guidelines TECHNICAL ASSISTANCE Resource efficiency audits Capacity building for local financial institutions (staff training, marketing, green retail lending products) Climate vulnerability assessment Project structuring support (e.g. tendering, investment guidelines) Support to adopt operational or CSR-type standards (energy management, buildings certification, reporting) 4

5 What are the key barriers for technology deployment? Low market penetration of technologies FINTECC provides information on climate technologies through its technical assistance Knowledge gaps & capacity FINTECC offers project preparation support to develop bankable projects Inadequate regulatory framework Availability of financial instruments FINTECC is working with governments to support frameworks that incentivise technology transfer FINTECC offers grants along with EBRD lending to support investment in eligible climate technologies Underdeveloped supply chains FINTECC connects clients with suppliers of climate technologies

6 How we address the barriers? Example 1: FINTECC approach FINTECC It supports companies to implement advanced climate technologies that reduce greenhouse gas emissions and/or increase climate resilience by providing grants and technical assistance in the context of an EBRD investment. EXAMPLES OF ELIGIBLE TECHNOLOGIES early adopters High-grade thermal insulation of buildings Solar cooling Efficient irrigation systems Heat recovery systems LED lighting Water, fertilized management systems SECTORS & CLIENTS All private sector, non multinational clients are eligible. The programme targets primarily the Corporate sector. COUNTRIES FINTECC is funded by the GEF, the EBRD and the EU

7 How we address these barriers? Example 2: Value chain approach A number of products of the EBRD already address SMEs and assist them in becoming more competitive and efficient, such as credit lines or Advisory Services for Businesses New instruments are being piloted which leverage the network of larger aggregators (often financed directly by the EBRD) to strengthen the position of SMEs in the global value chains. EBRD Financing Sustainable Value Chains Technical Assistance Non-TC support EBRD financing EBRD technical assistance (through established donor funded frameworks of the EBRD) Company financed directly by the EBRD Tier 1 suppliers Tier 2 suppliers Aggregator Technical assistance for innovation in operations, productivity, management and mitigation of environmental, sustainability and health and safety risks, adoption of quality standards. 7

8 Producing sustainable agricultural products in Morocco CLIENT AND PROJECT Elephant Vert is a Morocco-based producer of innovative bio-fertilisers, biopesticides and bio-stimulants. The EBRD is supporting the company to boost research and development and to quadruple production capacity, marketing and distribution of these climate-friendly agricultural inputs. FINANCING PLAN EBRD loan Other financing sources FINTECC grant support 24 million 27 million 0.4 million A new bio-fertiliser production site benefits from partial grant support from EBRD s Finance and Technology Transfer Centre for Climate Change programme. FINTECC aims to accelerate the uptake of advanced resources efficiency technologies in countries with low market penetration rates. GREEN ECONOMY IMPACT Bio-fertilisers are produced by recycling organic agricultural and municipal wastes. This reduces landfill volumes and contributes to a low-carbon circular economy. 2.5 tonnes of waste are recycled to produce 1 tonne of bio-fertiliser. The project will enable the recycling of 3% of Morocco s annual municipal waste. Unlike chemical fertilisers which lead to loss in soil fertility and leaching, biofertilisers enhance soil fertility and reduce irrigation water use by 50%. Greenhouse gas emission reductions of over 150,000 tonnes of CO 2 are estimated from avoided landfilling and the replacement of chemical fertilisers. Photo credit: 8

9 Helping Moroccan food producer invest in advanced efficient technologies CLIENT AND PROJECT A family-owned Moroccan SME producing confectionary products for local and export markets. EBRD is providing support for the construction and operation of a new production site on the outskirts of Casablanca. The total investment value is of 15 million. INVESTMENT PLAN EBRD loan (in Moroccan Dinars) of which finance for sustainable energy measures Grant support for adopting advanced technologies Other commercial and own financing 4.6 million 2.2 million 0.3 million 10.4 million SUSTAINABLE ENERGY MEASURES Assessment funded by the EBRD Special Shareholders Fund evaluated feasibility of on-site PV generation and recommended additional energy efficiency measures (average payback of 6 years): Roof-mounted PV system Ice-based energy storage system to balance daily energy use and supply between cooling and cold storage needs Energy management system and ISO Energy recovery from furnace chimney High-grade thermal insulation of building. TECHNOLOGY TRANSFER SUPPORT The project benefits from partial grant support from EBRD s FINTECC programme which aims to accelerate the uptake of advanced resources efficiency technologies in countries with low market penetration levels and underdeveloped supply chains. IMPACT OF PROJECT Fuel savings of some 600 tonnes of oil and annual emission reductions of 2,200 tonnes of CO 2 (equivalent to the annual footprint from driving 500 average household cars in the UK). At the time of signing, the planned roof-mounted solar installation of 1.4 MW was the largest of its kind in Morocco. 9

10 Climate technology transfer Increasing water efficiency in fruit plantations CLIENT Tunisian branch of an international agribusiness specialised in producing fruits and vegetables for European and North African markets. EBRD SUPPORT Supporting the establishment and operation of an 80ha agricultural plantation in Bizerte Governorate, focused on cultures of raspberries and other fruits. Agricultural producers in North Africa face increasing water shortages and deteriorating water quality. Thus the investment includes advanced water harvesting and water recycling systems. ADVANCED SOLUTIONS Some of the advanced water efficiency solutions supported with EBRD finance were: Rainwater drainage for collection UV & chlorine treatment for disinfection Nutrient control and computerised drip irrigation. INVESTMENT PLAN EBRD loan 4 million of which climate resilience finance 1 million PROJECT IMPACT Rainwater harvesting reduces the company s water consumption by over 30% Reduced loss of soil fertilisers (P, Fe, K) through water recycling and introduction of hydroponic cultivation Wastewater treatment reduces the environmental impact caused by discharge of effluents. 10

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12 Mainstreaming green financing Results in 2006 YTD 2017 FINANCED 1,400 projects and credit lines SIGNED 24.7 billion of green financing REDUCED 97 million tonnes of CO 2 /year 1,000+ directly financed projects with green components, and 290 credit lines to locals financial institutions for onlending to smaller projects For projects with a total value of 145 billion In green financing represented 36% of EBRD s total business, up from only 15% in Emission reductions more than annual energy emissions of Romania +annual water savings of 200 mln m 3 since 2013 equal to a third of Londoners water use 12

13 Mainstreaming green financing Green economy investments A green economy is a market economy where investments are made taking account of their environmental impact and with particular concern for the sustainable use of natural resources. Green economy projects, or project components, can be from the following areas: Energy efficiency Renewable energy Water efficiency Resilience to climate change Waste minimisation and materials efficiency Pollution control and environmental compliance 13

14 The EBRD mandate and the green economy Credit and financial risks How projects are assessed at the EBRD: Environmental and social risks Integrity analysis Civil society engagement Market transition impact Green Economy Transition impact 14