Practical approach to climate finance View from the donors: CIFF´s experience

Practical approach to climate finance View from the donors: CIFF´s experience

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  ciff.org Practical approach toclimate finance View from the donors: CIFF´s experience Side event, Carbon Expo Sonia Medina, Director, Climate Change, The Children’s Investment Fund Foundation 28th May 2015 1
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  Total levels climateinvestment is not enough to limit temperature increase to 2°C 2 Sources: Climate Policy Initiative, 2014; World Economic Forum, 2013; OECD DAC, 2013; Joint Report on MDB Climate Finance, 2014 Domestic development banks, 69 Bilateral flows; 14 Others; 11 Other multilateral flows; 24 Multilateral development banks; 19 25% 23% 15% 22% 4%1% 10% Renewable energy Energy efficiency Other energy Transport Land Use Waste and water Cross cutting 17% 12% 14% 17% 11% 26% 3% EU Latin America Africa and Middle East East Asia and Pacific South Asia Non EU Europe and Central Asia Regional Public climate finance has better data available. Bilateral and multilateral finance is concentrated in renewable energy and energy efficiency. Africa and South and Central Asia receive most bilateral climate finance, while Eastern Europe and Central Asia receive most multilateral climate finance. by region by sector 6% 19% 29%15% 31% Europe Latin America Africa and Middle East East Asia and Pacific South and Central Asia 30% 25% 13% 9% 23% Transport and storage Energy generation and supply General environmental protection Land use Other Public: $137bn Private: $193bn PUBLIC CLIMATE FINANCE: $137bn Bilateral climate finance: $14bn by region by sector Multilateral DB climate finance: $19bn • Bilateral figures from OECD DAC include the full value of interventions tagged with climate change mitigation both as a ‘principal’ and as a ‘significant’ objective. • Multilateral Development Banks – a group comprising AfDB, ADB, EBRD, EIB, IDB, WB fand IFC – figures identify the climate component of projects only. • Other multilateral flows include other regional development banks and the EIB financing for ‘old ‘EU member states. • Other public climate finance sources comprise direct public contributions from government agencies and ministries and national and multilateral climate funds. • CPI estimate that an additional $60bn of domestic climate finance is provided by government budgets (not included here). Private climate finance is poorly understood – the figures here include renewable energy investment only. $331billion Global climate finance in 2013 $5-6 trillion Needed for energy sector alone through 2020.
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  Capital is available,it just needs to be unlocked 3 There a number of key barriers to private sector investment: • Viability / cost gap: Green technologies cost more and have lower returns • Knowledge gap: Developers, investors and users do not understand the opportunities • Risk gap: Investors perceive a range of risks in green investments, and not all risks are covered by existing risk coverage
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  CIFF’s Climate ChangeStrategy aims to accelerate high value decarbonisation by supporting and replicating large-scale leadership efforts Mission: • Recognising that children living in poverty in developing countries have the greatest vulnerability to climate change, CIFF aims to accelerate high value decarbonisation by supporting and replicating large-scale leadership efforts. Purpose: • Demonstrate that ambition in tackling climate change is politically and economically feasible and desirable. Approach: CIFF’s focus on ambition implies the following: • We are not seeking incremental improvements, we are seeking systems change • We start by backcasting from where we need to be in 2050, not by forecasting from where we are today, so that we can escape inertia and change trajectory • We have a high appetite risk where we think we can deliver transformational impact Large- scale leadership efforts Accelerate action High value decarbonis ation CIFF’s climate strategy emphasises an ambitious, high-risk, cutting edge approach to achieving systemic change 4
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  Climate philanthropy isonly <0.1% of total climate finance: At $0.3bn, the large climate philanthropies comprising the Funders Table are a rounding error! However, philanthropy is uniquely positioned to help address the climate finance gap by pulling powerful finance levers that other stakeholders cannot. Philanthropy can therefore use its relatively small resources to play a catalytic role to create transformational change by: • Opening pools of capital • Being a catalyst to climate policy • Helping to speed up innovation • Motivating finance ministers 5 Philanthropy is a tiny fraction of climate finance, so why can CIFF and other funders help to overcome these barriers and unlock vital climate finance? Public finance: is addressing some gaps but lacks innovation, appropriate tools, speed, and sometimes “crowds out” private capital. Philanthropy: can test innovative approaches, take risks, be nimble and react quickly to windows of opportunity, and is an honest broker that is not politically driven.
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  Transformational change requiresinterventions throughout the value chain: Enforcement
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  Transformational change requiresinterventions throughout the policy-making process: Enforcement Leverage
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  Research-based advocacy 16% Technical Assistance 17% Advocacy 7%Collaborative research and technical assistance 27% Global leverage 6% Litigation 5% Research >1% Regranting 22% CIFF’sclimate programme ($155m) has primarily funded technical assistance and research- based advocacy with NGOs NGO 80% NGO - private sector partnership 12% Government partnership 8% Government >1% Approved funds by grantee category Approved funds by primary intervention type European Climate Foundation 2008-15; $44m Latin American Regional Climate Initiative 2012-15; $4.1m Client Earth 2014-17; $11.5m C40 Cities Climate Leadership Group 2011-16; $12.6m HFCs Campaign 2009-17; $13.9m 2015 Strategy: Climate Briefing Service & Climate Justice 2014-15; $1.4m China Air Quality 2014-17; $9.2m China Carbon Pricing 2012-18; $20.3m China Grids 2014-19; $12.8m Mobility Brazil 2015-18; $9.8m Reconciling food production and forest protection in Brazil 2015-18; $9.9m China Sustainable Cities Program 2012-20; $33.2m 21CPP Mexico 2014-17; $4.4m 2015 Strategy: UNSG 2014-15; $0.6m 21CPP Mexico 2014-17; $4.4m China Grids 2014-19; $12.8m 2015 Strategy: UNSG 2014-15; $0.6m China Carbon Pricing (Phase 2) 2015-18; $17.4m Reconciling food production and forest protection in Brazil 2015-18; $9.9m All other grants 2008-19; $179.6m Recent investments have increasingly emphasised ‘actionist’ interventions and partnerships with government and the private sector 2015 Strategy: Deep Decarbonisation & Evaluating National Offers 2014-15; $3.7m CDP 2014-17; 6.8m China Coal Cap 2013-16; $8.8m Mitigation Action Plans & Scenarios 2010-16; $17.0m China Coal Finance 2014-15; $0.3m 9
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  Case study Climate financefor Cities: CIFF’s role 10 Philanthropy can help to create an enabling environment that encourages private sector investment in urban infrastructure Intervention opportunities for philanthropy: Support for cities to prepare projects for investment, including the development of a pipeline of low carbon infrastructure and climate smart investment plans Helping to secure access to capital, including international climate finance and power to raise capital at the city-level (e.g. take on debt and issue bonds) Increasing cities credit worthiness: improving access to private capital by demonstrating that cities are unlikely to default on their debts Development of innovative financing mechanisms: to attract large sale institutional investors to finance city climate investments Existing CIFF programme Credit worthiness in cities with C40 Aim: to tackle barriers relating to investor confidence in cities, lack of bankable projects, and investor bias to least cost projects. Approach: • training for 20 cities on climate –smart capital investment planning • technical assistance to 8 cities to gain a credit rating • Encourage sharing of best practice • re-shape city investment projects to make them bankable • promote assessment of co-benefits in investment decisions, not just low cost • Research to develop infrastructure finance exchanges that provide better product offerings for cities The world bank estimates that ʺevery dollar invested in creditworthiness of a developing county is likely to mobilise more than US $100 in private sector financing for low-carbon and climate resilient infrastructure” Programme-Related Investments (in pipeline) Example: seed-fund or guarantee first loss in a green infrastructure fund dedicated to cities