1. Jem Porcaro, USAID Contractor, USAID LEAD Program
Fast out of the Gate How Developing Asian Countries Can Prepare to Access International Climate Finance
Good morning ladies and gentlemen. My name is Jem Porcaro. I’m a USAID Contractor working on USAID’s Low Emissions Asian Development (LEAD) program. Today, I’d like to present the results of a recently published study/report by USAID entitled, “Fast out of the Gate: How Developing Asian Countries Can Prepare to Access International Climate Finance”.
Presented by:
Jem Porcaro, USAID Contractor, USAID LEAD Program
Presented at:
Regional Workshop on Options for an Innovative Climate Finance Regime in South Asia
New Delhi, India
August 19, 2013

2. Agenda Report Background and Objectives Climate Financing Overview
Findings
So, I would like to spend the next minutes covering the report’s background and objectives, followed by a climate finance overview (both at a global and regional level), and finally touch on some of the report’s findings. 2

3. Report Targets the 11 LEAD Focus Countries
Bangladesh
Cambodia
India
Indonesia
Laos
Malaysia
Nepal
Papua New Guinea
Philippines
Thailand
Vietnam
So, why is this report relevant to South Asia? Well, as I mentioned earlier, the report is the product of USAID’s LEAD program, which is a regional program funded by USAID’s Regional Development Mission for Asia (USAID/RDMA). LEAD is a five-year program designed to help Asian governments, businesses, and other institutions develop and implement low-emission development plans and strategies. The program is engaging to 11 countries in Asia, including Bangladesh, Cambodia, India, Indonesia, Laos, Malaysia, Nepal, the Philippines, Papua New Guinea, Thailand, and Vietnam.
The Low Emissions Asian Development (LEAD) program is a regional program funded by the United States Agency for International Development Regional Development Mission for Asia (USAID/RDMA). 3
For more information, visit

4. Fast out of the Gate Report
Aims to help developing Asian countries prepare to access climate financing
Reviews >200 sources of public and private sector climate finance for projects, businesses, and infrastructure for low emissions development
Intended Audiences:
Asian governments and policymakers
Public and private fund managers
Project developers and proponents
Local communities
The over-arching objective of the report is to help developing Asian countries prepare to access climate financing. It does so by characterizing the size and mechanisms of existing and anticipated climate financing, from public and private sources. In fact, the report is based on a review of more than 200 climate-related funds and financing mechanisms in the Asia region, as well as interviews with 27 developing financing institutions, banks, and private sector fund managers across seven countries. Let me point out that the focus of this report is mitigation - namely in the energy, forestry and agricultural sectors.
The intended audience of the report is namely Asian governments and policy makers but it is also applicable to public and private fund managers, project developers and local communities. 4

5. Database for Asia
Highlights climate funds and financing sources for Asia
Climate finance sources: public and private
Highlights eligibility, access, and MRV requirements
Builds on existing databases such as:
Climate Funds Update, Henrich Böll Stiftung and ODI:
Climate Finance Options, The World Bank and UNDP:
Based on the research for the report, LEAD has also prepared a database of climate financing sources eligible to the 11 LEAD countries. The database contains both public and private sources of climate finance, including donor, asset management and private equity funds. For each of these sources, it includes information on eligibility requirements, how to access the funds as well as MRV requirements. I should also point out that the database builds off of other widely used databases like Climate Funds Update and Climate Finance Options. 5

6. Comparison of LEAD Focus Countries
LEAD Country
2010 GHG Emissions (excluding LULUCF)**
(million tCO2e)***
Emissions Growth Rate 2000–2010 (excluding LULUCF)
(average annual percent)
2010 Population (millions)
2011 Nominal GDP (USD billions)
India
2,326.2
3.9%
1,210
1,843
Indonesia
823.4
3.2%
237
834
Thailand
381.9
4.1% 66
339
Malaysia
260.1
4.5% 28
247
Vietnam
197.4
6.3% 88
121
Bangladesh*
130.3
142
115
Philippines
148.9
1.8% 94
216
Nepal*
36.7
1.3% 26 18
Cambodia*
26.0
4.6% 13
Laos*
21.4 7 8
Papua New Guinea
10.9
-0.2% 11
CO2 emissions from energy use in Asia’s developing countries is expected to increase from 33% of the world total in 2008 to 45% by South and Southeast Asia represented ~10% of global CO2 emissions in 2008
So what was the impetus for the report? Well, in part it’s the recognition that, despite historically low GHG emissions per capita, Asia’s developing countries do play an important role in the global GHG balance. In fact, CO2 emissions from energy use in Asia’s developing countries is expected to increase from 33% of the world’s total in 2008 to 45% by This is a result of strong economic growth, population growth and urbanization. In fact, 8 out of the 11 LEAD countries studied or 2 out of the 3 South Asian countries, had higher average annual growth rates of emissions during the period then the global average (2.5%).
Another driver for the report is the recognition that GHG mitigation – while perhaps not a huge priority for some countries - brings with it co-benefits that can be tremendously valuable to even the smallest emitters. As we all know, these benefits include things like energy security, cost savings from energy efficiency, and improved energy access.
Emissions and emission growth source: WRI Climate Analysis Indicators Tool (CAIT) 2.0; six GHGs; excludes LULUCF. Population sources: Official country census for Bangladesh, Cambodia, India, Indonesia, Malaysia, and Nepal. National statistics office estimates for Laos, the Philippines, Thailand, and Vietnam. UN estimate for Papua New Guinea.
GDP source: CIA World Factbook 2010–2011.
* Classified as an LDC. ** Land Use, Land-use Change and Forestry. *** Tons of CO2 equivalent.

7. Climate Finance Landscape
Required
USD 10 trillion required globally between (HSBC) –equivalent to USD 1 trillion annually.
India and Southeast Asia alone require USD 144 billion annually. India alone represents 7% of the global total (BNEF)
Currently Available
USD billion per year available globally (Frankfurt School et al., 2012, and CPI, 2011).
Of which roughly three-quarters comes from the private sector (CPI)
Investments in renewable energy assets totaled USD billion in 2012 (BNEF).
Of this amount USD 8.2 billion, or 5.5% of the global total, was invested in the 11 countries in developing Asia, the vast majority of this from private sector sources.
Green Climate Fund expected to contribute USD 100 billion annually by 2020
Ok, with the background behind us, let me move on to what the climate finance landscape look like
Let me start off by saying that currently there is no commonly accepted definition of climate finance, which makes is difficult to accurately track and measure climate finance flows over time. However, the term is generally understood to include financial resources directed toward both adaptation and mitigation. It is also commonly understood that climate finance includes public and private sources from both developed and developing countries, and developed and developing countries can be recipients. This is generally the definition used in this report.
So with that disclaimer in mind, let’s look at some climate finance statistics to get a sense how current climate finance flows compare with what is required.
HSBC, the British multinational banking and financial services company, estimates that, during the decade 2010–2020, roughly USD 10 trillion in cumulative capital investments will be required in the low-carbon energy market globally, to meet the target threshold of 450 ppm of atmospheric C02 concentrations that will limit the global temperature increase to 2°C. This is equivalent to about USD 1 trillion per year (HSBC, 2010). This is broadly consistent with estimates from the IEA.
According to Bloomberg New Energy Finance, an estimated USD 74 billion of investment in clean energy will be required each year until 2025 in Southeast Asia, and USD 70 billion will be required annually in India, in order to address global warming. This adds up to a little less then USD 150 billion for the 11 focus countries (excluding Bangladesh, Nepal, and Papua New Guinea). So its clear that South and Southeast Asia require a substantial portion of the USD 1 trillion of clean energy investments required at a global level. In fact, India’s required investment alone represents 7% of the global total. The story becomes even more dramatic when you factor in adaptation, which is estimated to cost billions more per year.
Now let’s look at what is currently is available in the way of climate finance. Globally, estimates of existing public and private funds allocated for climate finance range from just over USD 200 billion to USD 364 billion annually. This is roughly 25% of what is required globally. So currently we are facing a shortfall of somewhere between USD 640 to 800 billion in climate investments per year. Interestingly, three-quarters of the current climate finance comes from the private sector. This is an important trend which is unlikely to change in the future so this an issue we will expand upon later, particularly in my colleague’s presentation tomorrow.
Drilling down a little bit further we see that investments in renewable energy represent the majority of climate investments – totaling roughly USD 150 billion in Of this amount USD 8.2 billion, or 5.5 percent of the global total, was invested in the 11 LEAD countries. Again, the vast majority of this USD 8.2 billion comes from the private sector sources. In fact, in India it represents 96% of current climate finance, In Nepal, its more like 73%.
Even if the Green Climate Fund does deliver its USD 100 billion, which is a big “if’”, the gap between what is required and what will be available is significant, no matter how you look at it. 7

8. Donor Climate Finance $35 billion $9 billion $26 billion Pledged
The LEAD focus countries in South and Southeast Asia represented approximately 18% of donor funded climate finance that has been approved.
The three South Asian LEAD countries represent approximately 7% of donor funded climate finance that has been approved.
$35 billion
Pledged
by donor countries
$9 billion
$26 billion
Approved projects and programs globally
Deposited into climate funds globally
$1.6 billion
Approved in the 11 LEAD focus countries
Donor countries have so far pledged USD 35 billion for climate-related activities, of which roughly USD 26 billion has been deposited into 25 public sector climate funds globally. A total of USD 9 billion worth of projects and programs has been approved globally. Let me point out that these figures apply only to public sector funds identified to date, and don’t include leveraging of funds through public or private institutions, which can be many times greater. Of the USD 9 billion approved to date for projects and programs globally, USD 1.6 billion (about one-sixth) has been allocated to the 11 LEAD countries. The data also shows that the three South Asian countries included in the study (India, Bangladesh and Nepal) represent almost 7% of the total approved funds, with India taking the lion’s share. This shows that significant financing is available for green growth in South Asia, but countries need to prepare to access this funding.
India: USD 490 million
Bangladesh: USD 64 million
Nepal: 45 million 8
Source: Climate Funds Update, and USAID LEAD program research. Numbers include 25 international climate funds

9. Donor Climate Finance in LEAD Countries
Germany’s Int’l Climate Initiative
GEF 5
GEF 4
This figure shows where donor funds are coming from, which countries they are go to and through which funds.
Japan contributes almost one-half of the USD 34.5 billion total climate pledges out of all donor countries, followed by the United Kingdom with 14 percent, and then the United States, Germany, and Norway with each contributing five to six percent of total climate pledges.
As mentioned earlier, the largest recipient of the USD 1.6 billion of approved donor funds is India, which accounts for roughly one-third of the total. In the case of India, the Clean Technology Fund (CTF) and the Global Environment Facility (GEF) are the primary sources of public sector financing. Bangladesh and Nepal, on the other hand, have more varied sources.
It’s also worth noting that aside from the approved funds specific to these 11 countries, about USD 104 million in funds have been approved for regional projects and programs and a further USD 543 million has been approved for global projects and programs that benefit these countries, as well as many others.
CTF
CTF
CTF
CTF
Australia’s Int’l Forest Carbon Initiative
CTF
Source: Climate Funds Update, and LEAD program research. Numbers include 25 international climate funds

10. Private Sector Climate Finance in LEAD Countries
Private Sector Renewable Energy Investments,
Nepal Total: Negligible
Bangladesh Total: USD 28 million (mostly in 2011)
Among the 11 focus countries, between 2009 and 2012, India was the largest recipient of private sector financing, consistently representing between percent of total renewable energy investment. This is largely due to the favorable regulatory environment for wind power in India. In contrast, during the same period countries like Bangladesh and Nepal, with the exception of Bangladesh in 2011, received no significant private sector clean energy financing. This situation presents a clear opportunity for the public sector to engage in capacity building both with governments and financial institutions to create a conducive regulatory environment and investment climate for the private sector.
India Total: USD 30.5 billion
Source: Bloomberg New Energy Finance 2013

11. Increasing Private Sector Finance is Key
LEAD Focus Countries1
Current public and private sector climate finance in the LEAD focus countries is less than USD 10 billion annually. Based on estimates by BNEF that climate investment required is USD 144 billion annually, investment volumes need to increase by ~14 X.
In addition to the need for increased climate investment, the geographic allocation of investment from the private sector has also been disproportionate with over 80% being allocated to India and Thailand alone.
Global
USD 9 billion
approved over the past decade from international climate funds2
USD 1.6 billion
USD 230 billion
invested per year in climate activities3
USD 8.2 billion
invested during 2012 in renewable energy4
Public
17.8%
Private
If we put public and private sector funding back together again we see that current public and private sector climate finance in the South and Southeast Asia is less then 10 billion annually. Based on estimates by Bloomberg that climate finance needs to reach USD 144 billion annually, investment volumes need to increase by ~14 times.
We also see that roughly 18% of funds approved from public climate funds over the past decade went to the 11 LEAD focus countries. However, only about 3.5% of private finance went to the same countries last year. Clearly, increasing private sector financing is critical to achieving the region’s climate finance targets. So is spreading climate finance more evenly across the region.
3.5%
1 Bangladesh, Cambodia, India, Indonesia, Laos, Malaysia, Nepal, Papua New Guinea, Philippines, Thailand, Vietnam
2 Source: Climate Funds Update and LEAD program research
3 Source: The Landscape of Climate Finance 2012, Climate Policy Initiative
4 Source: Bloomberg New Energy Finance, 2013. 11

12. Increasing Private Sector Finance is Key (cont.)
Global
India
Bangladesh
Nepal
USD 9 billion
approved over the past decade from international climate funds2
USD 490 million
USD 230 billion
invested per year in climate activities3
USD 6.1 billion
invested during 2012 in renewable energy4
USD 65 million
approved over the past decade from international climate funds2
USD 45 million
USD 0 billion
invested during 2012 in renewable energy4
Public
6.7%
Private
India: USD 490 million has been approved in 48 projects, 4 of which are concessional loans approved in 2012 under the Clean Technology Fund (CTF) and most of the remainder which are grants. About 25% of the USD 490 million was approved in 2010 and about 70% of this was approved in 2012.  In addition to the CTF, the main funders are GEF and Germany’s International Climate Initiative.
Bangladesh: Almost USD 65 million has been approved in 14 projects, and all but one are grants. The annual numbers show a large increase in 2012, which is due to three Pilot Program for Climate Resilience (PPCR) grants. The funding is from PPCR, Least Developed Countries Fund (LDCF), GEF, Global Climate Change Alliance (GCCA) (a single grant of USD million in 2009), and Japan’s Fast Start Finance.
Nepal: Just USD 44 million has been approved in 19 projects.  The year with the most funding approved was 2011, where the LDCF, PPCR, Scaling up Renewable Energy Program (SREP), and UK’s International Climate Fund among others provided grants for 14 projects. In 2010, the Global Climate Change Alliance provided a single grant of USD 11.7 million.
2.6%
1 Bangladesh, Cambodia, India, Indonesia, Laos, Malaysia, Nepal, Papua New Guinea, Philippines, Thailand, Vietnam
2 Source: Climate Funds Update and LEAD program research
3 Source: The Landscape of Climate Finance 2012, Climate Policy Initiative
4 Source: Bloomberg New Energy Finance, 2013. 12

13. Summary of Findings Donor climate funds are available to South Asia
25 funds, approved USD 1.6 billion in 11 LEAD countries (USD 600 million in India, Bangladesh and Nepal)
Private sector dominates
Private sector flows dominate climate finance globally and regionally.
Engagement needed with the private sector investors
Mitigate risk for marginal private sector climate investments
Donor climate funds are available in developing Asia. To date, 25 international public climate funds have approved USD 1.6 billion of projects and programs for the 11 focus countries. However, countries need to make systematic preparations in order to successfully access this funding. So far, India has performed relatively well as evidenced by the fact that roughly one-third of approvals have gone to them.
Currently, private sector climate finance is provided mainly through asset management companies, private equity, venture capital, public-private partnerships, commercial banks, and climate bonds. Compared to public sector mechanisms, the private sector is inherently more efficient at allocating capital based on a risk-return adjusted basis. To achieve the incremental USD billion of climate finance required annually, I think it is fair to say that the public sector will need to leverage its scare resources to stimulate additional capital flows through the private sector. 13

14. Summary of Findings Unique opportunity in alternative assets
Alternative asset investments present a new opportunity.
Importance of carbon markets decreasing, and climate bonds increasing
Decreasing role of carbon markets in leveraging investment.
Climate bonds are expected to make an increasing contribution.
Specialized climate banking emerging
Commercial banks are establishing specialized climate finance facilities.
An estimated one percent or less of the alternative asset class globally is allocated to climate-related investments. In Asia, about USD 31 billion of climate-related assets currently fall within the alternative asset class, including private equity. An increasingly greater allocation to this asset class creates a unique opportunity for the public sector to catalyze capital flows for investments related to climate finance. The private equity and venture capital asset class is expected to serve as one of the main channels for more climate finance to the 11 countries.
Climate bonds are expected to make an increasing contribution. In addition to private equity and venture capital, climate bonds could serve as another mechanism to fund the gap outlined above for the private sector. The cumulative total of all climate-related bonds issued over the last decade is USD 751 billion, or an average of USD 75 billion per year (Climate Bond Initiative and HSBC, 2012). The issuance of climate bonds for the 11 focus countries to date has been limited, but this is expected to contribute substantially, and complement commercial banks.
Most commercial banks lack designated business units or facilities for climate finance. Nevertheless, a number of banks have recently established such facilities with some success. These facilities typically use some form of partial risk guarantee, partial credit guarantee, interest rate subsidies, or term extension to motivate commercial banks to offer a specific climate finance product to their customers. The public sector might well underwrite these mechanisms to catalyze climate finance in the commercial banking sector. In addition to climate bonds, commercial banks will be the other major source of the billions of dollars of debt required annually by Asian developing countries to address climate change. 14

15. Summary of Findings MRV systems crucial
Monitoring, reporting, and verification frameworks and capacity is critical to access public finance.
Donor financing of climate initiatives lacks a common MRV system
MDBs are developing an initiative to track GHG emissions and climate finance flows.
Interviews by the research team with public sector fund managers across the region make it clear that, as efforts to address climate change increase, the ability to measure and manage GHG emissions will become a critical precondition for the allocation of financing. As investments into climate-related projects and businesses increase, it is likely that new elements of competition will arise for climate funds disbursed by international financial institutions. On the other hand, MRV was not highlighted as a requirement for access to private sector funds. 15

16. How to Get the Report
The report can be downloaded at

17. Thank you! For more information about the USAID Low Emissions Asian Development (LEAD) Program, visit 17