The Coalition for Green Capital hosted a high-level roundtable on Green Banks in Emerging Markets on April 21, 2017 in Washington, DC. The event, organized alongside the IMF spring meetings, featured leading climate finance experts from government, private finance and the NGO community. The day was organized as a discussion, exploring how Green Banks (through either purpose-built entities or adaptations of existing institutions) might facilitate an increased flow of investment into low-carbon projects in developing economies at the scale required to achieve international climate goals. The session was engaged, wide-ranging and productive and was grounded in an understanding that business-as-usual will not get us to our goals. As estimated by the OECD, post-Paris commitments by Development Financial Institutions will result in an approximate increase of $46 billion annually (including public finance + private leverage) towards the annual low-carbon investment gap[1]. This only fills 6.1% of the IEA estimated $759 billion annual gap that exists between current investment levels and the “Meet NDC” scenario[2].
The discussion was also grounded in an understanding that getting private capital to move quickly and at scale will require market conditions that will support both competitive returns and provide affordable low-carbon for customers. To achieve these conditions of attractive returns and affordable energy, discussion focused on understanding the gaps and barriers that need to be bridged and how national Green Banks can play a useful role in the evolving climate finance architecture.
A key take away from the discussion was that Green Banks offer a flexible model for country-specific approaches. It was noted that form must follow local function, and the first step is to identify what local barriers exist. Taking the Green Bank concept forward, will require a shift from the general macro concept to identifying country-specific opportunities around priority markets, gaps and barriers. Participants acknowledged that powerful new approaches are needed that are focused, accelerated, dedicated, at scale and local.
It was also noted that the time is ripe for innovative thinking about local ownership of climate finance. Participants pointed out that investment decisions are inherently local, and there is growing demand for local solutions. Post-Paris, as countries around the world look to convert their NDCs into investment pipelines, Green Banks offer a useful mechanism to support local ownership and increasing investment in a way that allows for autonomy, flexibility and valuable political signaling.
Major themes of discussion centered on speed, scale, focus, retail and wholesale bridges, capacity (either new or adapted) and mainstreaming green investment. The discussion also focused on the need to address resilience and adaption as part of the climate finance approach in emerging markets.
Next steps coming out of the event are for CGC to incorporate the ideas and thinking that emerged from the scoping session into recommendations for the Hewlett Foundation on how to approach Green Bank creation (through new and/or existing institutions) in developing countries. CGC’s approach will focus on two broad levels. First, we will work to identify a small set of promising pilot countries or sub-national locations for potential Green Banks and build a phased implementation plan around these initial locations. Secondly, we will use these pilot projects to develop systematic approaches to institutional engagement of capital providers, investors and other major stakeholders in the clean energy finance architecture.
[1] OECD, “2020 Projections of Climate Finance Towards the USD 100 Billion Goal; Technical Note,” 2016.
[2] Clean energy includes renewable energy, energy efficiency, and other low-carbon technologies, such as nuclear and CCS. IEA, “World Energy Outlook – 2016,” OECD/IEA, 2016.