1. Demystifying Private climate Finance
Informing the international climate regime on the roles, potentials, and needs of private finance for climate investments
Remco Fischer - Programme Officer - Climate Change, UNEP FI 1

2. Climate change, private finance, and the international climate regime
Achieving a climate-compatible economy requires rechannelling of finance at unprecendeted scale
USD 1 trillion pa for decarbonizing energy
USD 400 billion pa for infrastructure resilience
USD 50 billion pa for halting tropical deforestation
Less than a third of that currently flowing
Evident that the gap needs to be filled with private finance
In developed countries mobilization will be driven by regulatory reform such as pricing carbon
In developing countries, international public finance will be required to unlock private climate finance
USD 391 billion in 2014
UNEP Finance Initiative

3. Institutional readiness Carbon pricing though Advanced Market Ms
The problem: the providers of public climate finance often don´t understand private finance
‘Private finance’
What?
Risk guarantees
Risk insurance
Etc.
Institutional readiness
Incentives (FITs)
Carbon pricing though Advanced Market Ms
Bundling
Junior co-financing
Market readiness
How?
In other words:
Most of the inputs into the negotiations today have focused on the potential GCF interventions. The how?
But they have not put the how in context of the ‘what’ and the ‘for what’.
The what has been left quite un-nuanced as ‘private finance’.
And the for what has been left quite un-nunaced as ‘mitgation and adaptation’.
The thing is that in fact a discussion before we can a real discussion on the ‘how’ we firstly need to know ‘for what exactly’ do we need private finance. And ‘secondly’ what kind of ‘private finance’ do we need to mobilise to achieve that objective.
Mitigation / adaptation
For what?
UNEP Finance Initiative

4. UNEP FI helps structure a more nuanced and conducive agenda on mobilising private climate finance
So what we are doing as UNEP FI is to clarify, or demystify on these missing pieces of the puzzle so that ultimately and accurate and informed discussion can take place on the best possible interventions.
The question of what is finance, be it private or public, needed for is key – because there is such a diverse set of things that developing countries may want to achieve and invest in. The list of possible interventions ranges from small-scale, off-grid renewable energy to large-scale carbon capture and storage; from land efficiency gains in agricultural production to expanding micro-insurance schemes for weather-related risks.
Another dimension on top of for what? Is where? And here again the diversity of country types is important when it comes to mobilizing private climate finance. One thing is to mobilize large volumes of private finance in a least-developed country of Sub-Saharan Africa. A very different thing is to do so in a large emerging and fastly growing economy.
UNEP Finance Initiative

5. Carbon pricing though Advanced Market Ms Institutional readiness
A nuanced and structured approach to mobilizing private climate finance
For what?
HIGH RISK
LARGE SCALE
HIGH RISK
SMALL SCALE
LOW RISK
LARGE SCALE
LOW RISK
SMALL SCALE
Where?
Project finance
Project bond
Corporate loans
Etc.
What?
Listed equity
Private equity
Mortgages
Tech, market risks
Political, country risks
Lack of readiness
Barriers?
Risk guarantees
Risk insurance
Carbon pricing though Advanced Market Ms
So what we are suggesting is a more methodical, more logical, less pre-emptive way of structuring an agenda on private climate finance.
It starts with the ultimate objective - what do we need finance for and where exactly do we need it? This gives essentially a set of four categories of investment or project types.
In a second step it is determined whether private finance is needed for that or whether public finance; but more importantly, what kind of private finance is needed exactly for the kinds of projects or investments identified previously.
Thirdly, what are the barriers that keep that kind of finance from flowing into that kind of project (or technology) and in the kind of country previously identified.
And then at the end one can have a much more accurate discussion on what say the GCF can do about that.
How?
Bundling
Junior co-financing
Market readiness
Incentives (FITs)
Institutional readiness
Etc.

6. For what? What? Barriers? How? Large-scale, on-grid renewable energy
Project loans
Project bonds
Private equity
Sponsor’s equity
What?
Large banks
Project sponsors
Inst. investors
Uneven playing field, capital costs
Lack of local-currency financing
Investment environment risks
Barriers?
Revenue support, cost-sharing
Currency risk hedging; mobilising domestic inst. investment
How?
Risk guarantees: policy risk insurance

7. For what? What? Barriers? How?
EE in operation and production processes
For what?
Corporate loans
Own equity
What?
Domestic banks
Project sponsors
ESCOs
Lack of familiarity among third-party financiers
Behavioral barriers: revenue-generation vs cost reduction
Barriers?
Incentives to FIs for on-lending; promotion of ESCOs
How?
Increase the profitability: negawatts

8. Demystifying Private Climate Finance
Three part series informs global climate community on private finance
UNEP Finance Initiative

9. Thank you Remco Fischer - Programme Officer - Climate Change, UNEP FI9