The Clean Energy Future Blog
By Coalition for Green Capital
The CFF is modeled on Green Banks created in other countries, but marks the first Green Bank in Africa. When launched, the CFF is likely to be the first application of the Green Bank concept in a developing nation. This also marks the first time the GCF has funded a Green Bank anywhere in the world.
When operational, the CFF will use its own capital to catalyze multiples of private investment into a range of climate-related markets.
With support from Convergence Finance and ClimateWorks, CGC worked with the DBSA and South Africa-based partners Green Cape to help design the CFF, secure capitalization, and craft the GCF funding application.
CGC CEO Reed Hundt said, “We at CGC wish DBSA the best of luck in this new enterprise. The world is eager to see the CFF catalyze private clean energy investment in Southern Africa, as green banks have done in other markets. The battle against climate change very much needs reinforcements. CGC is also enormously grateful to Convergence Finance and the Climate Works Foundation for their generous support of this project.”
Andrea Colnes, director of CGC’s international program said, “We are thrilled to see this successful partnership with DBSA generate this vital and precedent-setting funding from the GCF. We think there’s a clear path for other countries to secure funding and form Green Banks, and interest has already begun to emerge in several developing nations.”
The GCF’s decision is important because it is one of only a handful of projects where GCF funds will flow directly to a local public finance institution. The DBSA, a “direct access” accredited entity under the GCF, will use these funds to launch the CFF as a dedicated Green Bank program within the local financial ecosystem and tied to local priorities. The GCF is providing concessional debt capital to the CFF, which will enable the CFF to catalyze additional private investment from local commercial banks and asset managers.
Following the Green Bank model, the CFF will focus its investments to “crowd in” private investment at the project level in green sectors where projects currently struggle to access affordable financing at commercial terms. In this way, the CFF will offer globally significant proof-of-concept value to middle- and lower-income nations seeking to create local institutions that address market barriers and scale up the high levels of private investment required by Paris climate commitments.
The DBSA has been in close discussions with the Green Bank Network (GBN) – an organization formed to foster collaboration and knowledge exchange among Green Banks – about GBN membership, and the CFF hopes to soon to join the GBN. DBSA has been invited to speak at the GBN’s flagship event, the Green Bank Congress, on November 29, 2018. CGC serves as the co-secretariat for the GBN.
ABOUT CGC
The Coalition for Green Capital (CGC) is a leading expert, advisor and implementer of Green Banks, dedicated clean energy finance institutions that blend multiple sources of capital to catalyze grater investment in GHG reducing technology. CGC has created multiple Green Bank and related entities, which have driven over $2 billion of investment. CGC has led Green Bank formation and investment efforts in the US for a decade, and is eager to expand its international activities based on its work in South Africa.
By Coalition for Green Capital
Green Banks in the US have been powerful tools for driving capital into clean energy markets.
CGC reviewed annual reports and transactions at nine US-based Green Banks from their inception through fiscal year 2017. At the end of 2017, these institutions participated in transactions representing more than $2.3 billion of cumulative clean energy investment. Nearly $1.7 billion of the overall investment came from private sources, demonstrating the continuing ability of Green Banks to leverage private dollars into clean energy markets.
Over the past six years, public to private leverage ratios have increased as Green Banks become more effective at crowding in private investment. In the past year, leverage ratios hit all-time highs. For example, the Connecticut Green Bank achieved a public to private investment leverage ratio of 8:1 for FY 2017, double the 4:1 ratio achieved in FY 2014. This new high raises Connecticut Green Bank’s overall leverage ratio to 6:1. Future leverage ratios are expected to increase as Green Banks develop streamlined methods for attracting private capital. For example, the New York Green Bank, which currently has an overall leverage ratio of 3:1, expects to increase its overall leverage portfolio to 8:1 by 2025.
Notable projects in FY 2017/2018 included New York Green Bank’s $54.3 million loan to Motivate International, parent of the Citibike bike share network. This marks one of the first major transactions in clean transportation sponsored by a Green Bank, paving the road for greater activity in the sector. To date, the majority of observed Green Bank projects were solar and energy efficiency projects.
Ambitious projections from the New York Green Bank, Rhode Island Infrastructure Bank, and Michigan Saves have set Green Bank transaction totals on track to exceed $2.9 Billion by the end of fiscal year 2018. New Green Banks, including those CGC helped develop in Nevada and Colorado, will soon begin financing clean energy projects in their states as well. Operating under an independent, nonprofit model, these organizations represent a new wave of Green Banks that can drive investment into clean energy projects across the U.S. This activity cements a trend of increasing investment as new and existing Green Banks ramp up operations across the US.
As Green Bank operations grow in scale, new pools of capital are becoming available for Green Bank use. These include the $1 billion fund announced by the New York Green Bank for domestic investment, funds under development at NYCEEC and Inclusive Prosperity Capital (formerly part of the Connecticut Green Bank), and program related investment (PRI) from a variety of foundations expressing greater interest in the Green Bank movement.
To further catalyze Green Bank investment and capitalize on the observed trends, CGC is developing a new initiative called the American Green Bank Consortium. The Consortium, designed as a domestic trade association for Green Banks, will serve as the currently missing connective tissue in the Green Bank ecosystem to drive investment volume and efficiently share innovative clean energy financing practices among members. Members will include new and existing Green Banks as well as developers and capital providers that frequently partner with Green Banks. The Consortium is scheduled to launch in Q1 2019 and will work to catalyze even greater Green Bank investment over the coming years.
The nine Green Banks reviewed were: the California Lending for Energy and Environmental Needs (CLEEN) Center, the Connecticut Green Bank, the Hawaii Green Energy Market Securitization (GEMS) Program, the Montgomery County Green Bank, Michigan Saves, the New York City Energy Efficiency Corporation (NYCEEC), the New York Green Bank, the Rhode Island Infrastructure Bank, and the Solar and Energy Loan Fund (SELF).
DC Mayor Signs Green Bank Bill
By Coalition for Green Capital
On Tuesday afternoon, Program Director Alex Kragie (center right in photo) represented the Coalition for Green Capital at the bill signing of the Green Finance Authority Establishment Act, which created a Green Bank for the District of Columbia. Mayor Muriel Bowser gave an inspirational talk about our obligations to affect climate action at the local level, given the temporary absence of leadership on the federal level. This DC Green Finance Authority is the latest step in Mayor Bowser’s celebrated efforts to make DC a national leader on climate issues.
Alex writes:
It was tremendously gratifying to see a project that the Coalition for Green Capital has been involved with since inception come to fruition. The DC Green Finance Authority is now in a position to reduce carbon emissions while simultaneously creating jobs and economic activity throughout DC. The Coalition for Green Capital, with our partners at the District Department of Energy and Environment, wrote the initial report that spurred the creation of the Green Finance Authority Establishment Act, and we advised the government throughout the lead up to this momentous day. We look forward to continuing to work together with the DC Green Finance Authority to continue DC’s national leadership position on clean energy.
By Coalition for Green Capital
TORONTO, 5 April 2018 – Convergence and ClimateWorks are partnering with the Coalition for Green Capital (CGC) and the Development Bank of Southern Africa (DBSA) to support the establishment of the Climate Finance Facility (CFF), which hopes to be the first “Green Bank” in an emerging market.
The CFF will rapidly scale up private investments in climate-friendly infrastructure projects in the Southern African Development Community (SADC) region, which faces significant climate mitigation and adaptation challenges. Currently, electricity generation is still 90% fossil fuel based and over 50% of people have no access to electricity. The region needs clean energy solutions that reduce energy costs, expand access, increase reliability, lower emissions, and support socio-economic development.
“Clean power and water are the lifeblood of economic growth and should be abundant and affordable across the developing world,” notes Reed Hundt, CEO of CGC. “Achieving climate investment goals, however, requires a massive surge in private sector-led spending on low-carbon infrastructure. The Climate Finance Facility is designed to meet this need with a mandate to crowd in private investment in green infrastructure.”
A lack of affordable financing has been a key barrier to the rapid deployment of climate-friendly projects, such as those in the renewable energy and water sectors. The CFF will address market barriers by co-financing projects with local commercial banks through subordinated debt / first loss positions, and providing credit enhancements primarily in the form of tenor extension to crowd in private capital. The CFF will initially target Rand-based economies countries connected to the Southern Africa Power Pool (SAPP), such as South Africa, Namibia, Lesotho, and Swaziland.
The CFF will be a unique application of the Green Bank model, adapted for emerging markets conditions. Rather than establish a new standalone institution, the standard in developed markets, the CFF will be a self-sustaining and distinct entity within the DBSA, with its own balance sheet and dedicated operations.
“Green banks have shown they can catalyze the market for low-carbon, resilient infrastructure innovations. ClimateWorks is delighted to support work by CGC and South African partners in the race to pioneer the model in an emerging economy,” says Ilmi Granoff, Director of Sustainable Finance at ClimateWorks.
Convergence awarded a Design Funding grant to CGC to support the DBSA with critical business planning, institutional design, financial product support, capitalization and operationalization of the CFF. The Government of Canada provided funding for Convergence’s Design Funding to pilot new blended finance vehicles that aim to catalyze private capital at scale for sustainable development.
“The CFF is globally significant,” says Joan Larrea, CEO of Convergence. “Its establishment will be a model for middle and lower income countries on how market barriers can be addressed in the climate sector and draw in private investment through blended finance. By supporting CGC and DBSA, we hope they pave the way for more institutions to replicate the CFF structure throughout the developing world.”
There has been strong support and interest from stakeholders to date for the CFF, including from the South African Department of Environmental Affairs, the Green Climate Fund, as well as several major commercial banks and development finance institutions in the region.
ABOUT CONVERGENCE
Convergence is the global network for blended finance. We generate blended finance data, intelligence, and deal flow to increase private sector investment in developing countries.
Convergence accepts Design Funding applications on a continuous basis, and reviews applications every quarter. To be considered for the next review cycle, practitioners must submit their applications by May 31, 2018. Find out more here.
ABOUT CLIMATEWORKS
ClimateWorks Foundation is a team of researchers, strategists, collaborators, and grant-makers who are committed to climate action and believe in the power of collective philanthropy. A non-governmental organization that works globally, ClimateWorks collaborates with funders, regional and research partners, and other climate leaders to strengthen philanthropy’s response to climate change.
ABOUT CGC
The Coalition for Green Capital (CGC) is a non-profit organization focused on accelerating the growth of clean energy markets through the creation of Green Banks.
CGC offers a unique and proven capacity as the leading creator, advocate, and expert on Green Banks since 2009 and works directly to support the formation of Green Banks with governmental and civil society partners, and provide on-going consulting and guidance to operating Green Banks.
ABOUT DBSA
The Development Bank of Southern Africa (DBSA) is a leading development finance institution working across the African continent. Established in 1983, our purpose is to promote economic and social development, growth and regional integration through infrastructure finance and development.
The DBSA plays a catalytic role in delivering infrastructure in the energy, transport, water and telecommunications sectors, with a secondary focus on health and education. We operate across the infrastructure value chain from planning, preparation, and financing to implementation, delivery and maintenance.
At the core of our business, is our vision of a prosperous region, free from poverty. Our mission is to support economic growth through investment in economic infrastructure and improve the quality of life for all, through the development of social infrastructure.
By Coalition for Green Capital
Coalition for Green Capital, NRDC and Climate Finance Advisors released a new policy working paper on potential of Green Banks to drive investments needed to meet the goals of the Paris Agreement.
MARRAKECH (November 14, 2016) – Leaders in global green investment today released a policy working paper, Green & Resilience Banks: How the Green Investment Bank Model Can Play a Role in Scaling Up Climate Finance in Emerging Markets, at an official side event of the 22nd Conference of the Parties (COP22) to the United Nations Framework Convention on Climate Change in Marrakech, Morocco.
The paper, authored by the Coalition For Green Capital, the Natural Resources Defense Council and Climate Finance Advisors, shows how Green Investment Banks are succeeding in countries such as Japan, the United Kingdom, Malaysia, Australia and the United States. Green Investment Banks are specialized public financing authorities set up to persuade private investors to increase and accelerate their investment in renewable energy and energy efficiency.
The paper also explores the potential of the Green Investment Bank model in emerging and developing economies. Emerging markets will need to leverage both public and private investment to address climate change. The paper notes that around the world, significant amounts of capital will be needed to finance the clean energy and other infrastructure projects required to meet the climate change mitigation and adaptation objectives of the Paris Agreement. Most of this financing will have to come from private sources. By some estimates, the required investment in sustainable infrastructure globally is up to $6 trillion per year, or $90 trillion by 2030. These investments can also contribute to the United Nations Sustainable Development Goals, including those focused on increasing access to sustainable energy.
Existing green investment banks are showing success. As reported in the paper, after only a few short years of operation, existing Green Investment Bank institutions have mobilized US$22 billion in private capital by committing or investing only $6.2 billion of public money. The paper highlights how Green Investment Banks are well placed to make effective and efficient use of climate funds from international facilities such as the Green Climate Fund, the Global Environment Facility and the Climate Investment Funds.
In emerging and developing economies, Green Investment Banks could make a difference in countries’ efforts in achieving the climate goals articulated in their commitments under the Paris Agreement, serve as a locus of financial innovation in local markets, and blend and coordinate investments by diverse public, private, international and domestic investors.
Jeff Schub, Executive Director of the Coalition for Green Capital, said, “This report lays out what could be a powerful institutional framework for driving climate investment. Green Investment Banks have already proven themselves a successful model for increased public and private investment in clean energy. CGC believes that the model can be adapted for new markets and play a critical role in building local institutional capacity. By tapping into international and domestic capital, national Green Investment Banks could accelerate achievement of climate targets.”
Doug Sims, Director of Strategy and Finance for NRDC’s Center for Market Innovation said, “Green Investment Banks have a growing track record in mobilizing the billions for clean and resilient infrastructure and that needs to grow to trillions. The model of an institution with special skills and a narrow mandate to increase investment can be readily adapted to the challenges of developing and emerging economies.”
Stacy Swann, CEO of Climate Finance Advisors said, “In emerging markets, the Green Investment Bank model has the potential to fill a unique financing need that exists between international sources of finance and local project. Operating locally, with a focused mandate on scaling up climate-smart investments, GIBs can complement and help accelerate financing that can support sustainable, resilient investment where it matters.”
About the Coalition for Green Capital
The Coalition for Green Capital is a non-profit organization that helps states and nation-states to create and run financing institutions aimed at increasing public-private investment in the new clean power platform. Founded by Reed Hundt and Ken Berlin in 2009, CGC now has the support of major environmental foundations and is working in more than a dozen states in the United States as well as at the international level. For more information, contact Executive Director Jeffrey Schub, at jeff@cgcstagingsite.wpengine.com
About the Natural Resources Defense Council
The Natural Resources Defense Council (NRDC) is an international nonprofit environmental organization with more than 2 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world’s natural resources, public health, and the environment. NRDC has offices in New York City; Washington, D.C.; Los Angeles; San Francisco; Chicago; Bozeman, Montana; and Beijing. Visit us at www.nrdc.org and follow us on Twitter @NRDC. For more information, contact Doug Sims at dsims@nrdc.org
About Climate Finance Advisors
Climate Finance Advisors is an advisory and consulting firm in the Washington DC area that works with public policy makers at the national and international level, as well as investors, bankers, fund managers, and project developers on issues related to climate finance, green banks and funds, and climate risk. Founded in 2015, Climate Finance Advisors has expertise in blended finance and development finance, and in structuring sustainable, resilient and climate smart investments. For more information, contact Stacy A. Swann at sswann@climate-fa.com
A Green Bank for the Garden State
By Coalition for Green Capital
The Market Opportunity
The report finds that NJ has a $40 billion investment opportunity in solar PV alone. In addition, the state has an untapped market for offshore wind and far deeper energy efficiency savings to be realized. These three technologies can support a clean energy economy in NJ. Today, NJ relies on nuclear power for electricity, natural gas for electricity and heating, and oil for transportation. But with nuclear plants preparing to close, base load must quickly be replaced by renewables to avoid greater dependence on natural gas.
Accelerating deployment of clean energy technology requires more investment to pay for the upfront cost. There isn’t enough public capital to pay for the investment, but private capital is not streaming at the scale and ease that is needed. Strategic and innovative use of limited public funds can spark private investment, and support new clean energy infrastructure and economic growth in the state.
New Finance Capacity is Needed
Though NJ has a number of programs and institutions meant to provide clean energy rebates, or financing for related infrastructure markets, there is no dedicated capacity and funding for clean energy project finance. This report outlines three options:
- Create a ring-fenced clean energy unit within the Governor’s proposed State Bank;
- Expand the authority of the state’s Infrastructure Bank (currently the Environmental Infrastructure Trust) to include clean energy; or
- Create a new stand-alone Green Bank, modeled on those used by neighboring states like New York and Connecticut.
The report explores these options and evaluates the pros and cons of each. In addition, the report describes the specific financing mechanisms and innovative tools, like commercial PACE and Environmental Impact Bonds, that could be deployed through a financing institution. New financing programs can also be tailored to address underserved communities that are often unable to access cleaner and cheaper energy.
NJ and Governor-elect Murphy have a perfect opportunity to make clean energy a focal point for a growing economy with modern infrastructure. It can learn from the best practices of Green Banks and related entities from around the country, including from right across the Hudson River. Whether with a new Green Bank or expansion of what already exists, NJ can tap a multi-billion-dollar clean energy market with smart use of public capital and innovative financing.
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