1. ENGAGING PRIVATE SECTOR INVESTMENT AT SCALE FOR CLIMATE CHANGE MITIGATION IN EMERGING ECONOMIES Insights from a GtripleC Project funded by the ASIAN DEVELOPMENT BANK by the ASIAN DEVELOPMENT BANK and the UNITED NATIONS FOUNDATION and the UNITED NATIONS FOUNDATION Developed by Murray Ward GtripleC www.GtripleC.co.nz

3. SHOW ME THE MONEY

5. SHOW ME SOME LIGHT SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY

6. SHOW ME SOME HEAT SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY

7. SHOW ME SOME COOL SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME

8. SHOW ME SOME MOVES SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME

9. SHOW ME SOME GREEN SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME THE MONEY SHOW ME SOME LIGHT SHOW ME THE MONEY SHOW ME SOME HEAT SHOW ME THE MONEY SHOW ME SOME COOL SHOW ME THE MONEY SHOW ME SOME MOVES SHOW ME THE MONEY SHOW ME SOME GREEN SHOW ME

10. Framing the mitigation challenge   OVER $4 TRILLION from 2010-2020....incl  2.2 trillion in zero and low carbon power generation  Over 2 trillion in energy efficiency   OVER $10 TRILLION from 2021-2030....incl  4.5 trillion in zero and low carbon power generation  Over 5.5 trillion in energy efficiency   AND THIS JUST IN THE ENERGY SECTOR   DOESN’T INCLUDE AGRICULTURE OR FORESTS

11. Trillions of dollars of investments Source: IEA WEO2009 Total global investment for power generation in the 450 Scenario

12. Supply side and demand side Source: IEA WEO2009 World energy-related CO 2 emission savings by policy measure in the 450 Scenario Incremental cf Reference

13. Framing the investment challenge   ~$5 TRILLION by 2020....means  ~ 2 trillion in equity finance  ~ 3 trillion in debt finance (using a conservative 60:40 debt:equity ratio)

14. Framing the investment challenge   ~$5 TRILLION by 2020....means  ~ 2 trillion in equity finance  ~ 3 trillion in debt finance (using a conservative 60:40 debt:equity ratio)

15. Assets under management at end of 2008 by the global fund management industry Trillions!

16. Finance and Investment “Ecosystem”

17. Wealth …and Funds Management

18. Through the lens of investment Climate Change Mitigation Policy

19. Hurdles for “green path” projects   Compared with “brown path” projects providing the same services

20. Risk Clouds

21. Financing green (or brown) projects

24. Risk Clouds

25. Rolling away the Risk Clouds

28. Rolling over the Risk Clouds

30. Examples of new and innovative ideas UNEP FI World Economic Forum Meeting the Climate Challenge: Using Public Funds to Leverage Private Investment in Developing Countries Nicholas Stern / LSE

31. Key messages from these “idea leaders”   We know where the money is, and is not.   There is enough money to achieve the mitigation task – in developed and developing countries.   We just need to unlock it.   The private sector can’t do this alone. It needs the public sector to set the framework and play its role within this framework. This involves governments of both developed and developing countries.

32. KEY QUESTION KEY QUESTION Is it possible through smart and targeted public sector interventions (policies and finance mechanisms) to sufficiently lower the risk environment of green investments in infrastructure in developing countries to enable lower cost-of-capital finance from institutional investors to be attracted...... at scale?

39. Why Institutional Investor Capital? Because here’s where trillions of $s are

40. BUT.... and it’s a big one!   Most institutional investors are looking for predictable rates of return, commensurate with energy infrastructure investing (particularly pension funds whose investment requirements are for long term investment horizons to match their long term predictable pension liabilities)   However, a gap exists between the risk/return expectations of such investors and the risk/return characteristics of clean energy and low carbon technology and infrastructure projects, especially in emerging developing country markets

41. Something of a “Catch 22”   Green investments in developing countries are too risky for institutional investors – so these trillions go elsewhere   Investors with higher risk appetite want correspondingly higher returns – so this cost of capital too high to bridge the “green gap”   Need a comprehensive ‘de-risking’ programme

42. “De-risk elements”.... a beginning menu   Host country policies that specifically and directly are supportive of investments in these sectors, including needed support for these to be implemented   Political and policy risk insurance   Mechanisms to address foreign currency exchange risk   In-depth capacity building of relevant public and private institutions and groups that are instrumental to the success, or otherwise, of investments in these sectors in these countries

43. Cost of capital and the ‘green gap’ DEBT side Typical debt finance % in developing countries Recent ‘coupon rates’ on Green Bonds

44. Institutional Investors and Green Finance Closing the risk spread INSTITUTIONAL INVESTORS Risk range across asset classes DEBT (Green Bonds) EQUITY

45. Institutional Investors and Green Finance Closing the risk spread INSTITUTIONAL INVESTORS Risk range across asset classes DEBT (Green Bonds) EQUITY

46. Institutional Investors and Green Finance Closing the risk spread INSTITUTIONAL INVESTORS Risk range across asset classes DEBT (Green Bonds) EQUITY

47. A two tier public-private fund for EQUITY

48. De-risk package ‘wrapping’

49. 10 billion EQUITY

50. 15 - 20 billion DEBT

51. A question (or two) for today   Assume this model is successful....and can flow tens of billions (and in time trillions) into mitigation projects and programmes in developing countries   How does this connect with the discussions on finance and funds and institutions currently occurring in the UNFCCC negotiations?   Should (and if so why and where?) public funds included in the “100 billion per annum from 2020” from developed countries be used for mitigation given the likely overwhelming needs for adaptation?

52. THANK YOU Further information: murray.ward@gtriplec.co.nz www.GtripleC.co.nz GtripleC