Two new reports from global leaders in climate finance identify the important role that public capital should play in scaling up private investment. Though neither explicitly names Green Banks, both effectively articulate the need for Green Bank-like solutions.
One report, from the Climate Policy Initiative, on key lessons in climate finance emphasizes the interaction of public and private finance:
National and international public finance play key roles building projects’ bankability by covering viability and knowledge gaps, driving huge increases in investment from the private sector.
Another report, authored by the International Finance Corporation, says there are $23 trillion in climate investment opportunities, and that public investment will play a crucial role in facilitating more private investment in that space:
Using public finance to scale up support for project preparation and development can play a critical role in encouraging investment. Furthermore, to attract private capital, investments must have adequate risk-adjusted returns and be of suitable size. This is particularly important in newer climate business areas where perceived risk is high, such as energy storage, or where aggregation models are unfamiliar in a developing-country context. Governments can increase their efforts to reduce risk (for example, by blending public and private finance), while also helping to aggregate smaller, de-risked assets, diversified across sectors and geographies, to attract institutional investors.
Both reports highlight the need for public dollars to prime the pump for private investment in clean energy. This exactly the role of Green Banks!
Green Banks have a proven history of doing exactly what these reports call for—deploying public capital to de-risk and increase private investment in clean energy projects. Examples of successful Green Banks include the Connecticut Green Bank, NY Green Bank, UK Green Investment Bank, Rhode Island Infrastructure Bank, and the Australian Clean Energy Finance Corporation—each Green Bank has used public dollars to increase private investment in clean energy. And by leveraging more private investment, Green Banks increase the impact of each public dollar devoted to deploying clean energy.
Green Banks are an important and effective tool in climate and energy finance. Global thought leaders clearly understand the value of the Green Bank approach. Now the institutional model needs to be spread around the world. This coming week, NRDC will hosting an event on Green Banks at COP22 in Morocco, and CGC will be speaking about Green Banks at an IDB-hosted conference in Lima on innovative finance.