Green Climate Fund Private Sector Facility Jiwoo Choi May 2017,
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Green Climate Fund
Private Sector Facility
Jiwoo Choi May 2017,
Who are we?
2017
The Green Climate Fund
o A new global fund created to combat climate change by investing in low-emission and climate-resilient development
o Set up by United Nations Framework Convention on Climate Change (UNFCCC) to keep global average temperature increase well below 2° C
Established by 194 countries (UNFCCC Conference of Parties)
Over USD 10 billion pledged to GCF from developed countries
Began operations in Songdo, South Korea
First project approvals
Over USD 1.5 billion project portfolio
2014
2010
2013
2015
2016
2017
History
Expansion of Private Sector Facility (PSF)
Private Sector Facility
USD 961.5 million USD 1.2 billion
Public 45% Private 55%
GCF Funding Amount By Sector
• The PSF is not an “add on”; it is mainstream component of the GCF.
• To fund and mobilize institutional investors and leverage GCF’s funds to encourage corporates to co-invest with us.
Why?
How?
• De-risk investments; • Bundle small projects into portfolios; • Support capacity building; • Develop public-private infrastructure resilience partnerships; • Encourage innovation.
Specialization
Fund and mobilize institutional investors and corporate funding to leverage GCF’s funds with the private sector.
OBJECTIVE
• Debt and guarantees
• Equity
• Structure products
• Concessional loans
• Grants
Flexible Financing Instruments
• Clean energy • Energy efficiency • Climate-related innovation • Resilient infrastructure • Products and services for
vulnerable communities • Agriculture, forestry, food,
water security, and ecosystem preservation
Areas of Strategic Investment
How are we investing?
The Fund’s Six High-level Investment Criteria*
Impact potential
Paradigm shift potential
Sustainable development potential
Responsive to recipients needs
Promote country ownership
Efficiency & effectiveness
Potential of the programme/project to contribute to the achievement of the Fund's objectives and result areas.
Economic and, if appropriate, financial soundness of the programme/project, and for mitigation-specific programmes/projects, cost-effectiveness and co-financing.
Beneficiary country ownership of and capacity to implement a funded project or programme (policies, climate strategies and institutions).
Vulnerability and financing needs of the beneficiary country and population in the targeted group.
Wider benefits and priorities, including environmental, social, and economic co-benefits as well as gender-sensitive development impact.
Degree to which the proposed activity can catalyze impact beyond a one-off project or programme investment.
* The Fund has adopted its initial activity-specific sub-criteria and assessment methodologies.
Current Portfolio
11 private sector projects approved totaling
USD 1.2B
Current Portfolio
0
1
2
3
4
5
6
1.2 billion
5.45 billion
GCF Co-financing
Co-financing
Committed amount of GCF funding (Private)
Grant [VALUE]
Loan [VALUE]
Equity [VALUE]
Guarantee[VALUE]
By Financial Instrument (%)
Current Portfolio
Committed amount of GCF funding (Private)
Asia-Pacific 12.1%
LAC [VALUE]%
Eastern Europe
[VALUE]%
Africa [VALUE]%
By Region (%)
Innovative Investments
o Risk Guarantees for institutional investors: - GCF taking risks to have the securitized bonds rated at ‘AAA’ (FP006 IDB Green Bond) o Reverse Auctioning - Award of projects based on competitive tariff (FP030 IDB) o Equity for Bottom of pyramid (FP005 Acumen)
Private Sector Projects KawiSafi Fund
Countries GCF financing Accredited entity Financial instrument
Kenya and Rwanda USD 25 million Acumen Equity and Grant
• USD 20M in equity and USD 5M in grants for technical assistance for investing in 10-15 clean energy companies providing household solar technologies
• Universal access to energy for people at the bottom of the pyramid • Conversion of a social impact fund into a Green Impact Fund
• USD 42M private investment was achieved in August 2016 and the fund is being
raised for the second closing
• The valuation of off-grid solar energy solution providers (esp. Eastern Africa) is on the rise as the manufacturing cost has been reduced significantly and the mobile payment mechanism from consumers has stabilized
• Emissions reduction of 1.5 million tCO2e
Private Sector Projects Universal Green Energy Access Programme
Country GCF financing Accredited entity
Financial instrument
Benin, Kenya, Namibia, Nigeria,
Tanzania
USD 80 million Deutsche Bank Equity and Grant
• USD 78.4M in equity and USD 1.6M in grant
• Investment fund providing debt financing for decentralized energy service companies for off-grid and mini-grid systems in Eastern Africa
• Deutsche Bank intends to raise USD300M debt fund for the first closing in 2017 of which USD200M will be by the private sector
• The remaining USD100M will be raised from public sector including USD 80M from GCF. The public sector investment will be raised for the junior tranche which will act as the first-loss protecting private investment in the fund
• Emissions reduction of 50.6 million tCO2e
Private Sector Projects GEEREF NeXt
Countries GCF financing Accredited entity Financial
instrument
Multiple Countries - Global
USD 265 million EIB Equity and Grant
• USD 250M in equity and USD 15M in grant: fund of funds with the aim of being the first investor in RE/EE investment funds
• Significant climate impact due to the elevated multiplier effect
• Channeling institutional investors into renewable energy and energy efficiency investments in developing countries
• Emissions reduction of 769 million tCO2e
Where are we headed?
Focused Future Activity
o Accreditation for Direct Access Entities o Currently represent ~50% of accredited entities o Will focus on national and regional actors going forward
o Mobilizing Private Sector Investment at Scale
o RFP focused on leveraging large amounts of investment o Launching end of May, submissions end of August
o Support for REDD+
o RFP focused on REDD+ innovations o Hope to crowd-in more private sector
o Micro, Small, & Medium Enterprises
o Second RFP for MSME activity
How can you work with us?
How can you work with us?
Flexible Financing Instruments o GCF works through accredited entities to channel its resources to
projects and programmes.
o Accreditation is a process following due diligence which ensures our partners share the same objectives as the Fund, and that they have extensive experience and strong financial and managerial infrastructure.
o You can apply for GCF accreditation or work with an already Accredited Entity while you process your own accreditation, or work with another entity that is already accredited.
o GCF also issues Requests for Proposals to attract private sector investment
Rwanda
Morocco Ethiopia Kenya
Argentina
48 entities accredited to date
A Diverse Network of Partners
Senegal
Namibia
India Peru
South Africa
Mongolia
China
Korea Indonesia
RFP Mobilizing Funds at Scale
o USD 500 million allocated to mobilize private sector activity o investments of all sizes will be considered
o Objective is to drive investment by reducing risk
o Activity can be in nearly any area of mitigation or adaptation
o Consider less common investments in transportation, climate-proof infrastructure, urban energy efficiency, ecosystem services, and agriculture also
o Many types of private sector financing available
o Guarantee, debt, equity, some grants o Can offer more significant concession than most DFIs
o Guarantees, lower rates, subordinated positions, early stage equity, etc.
RFP Mobilizing Funds at Scale
o Who can participate? o Existing accredited entities o Entities that wish to be considered for accreditation (fast track)
o What makes a strong RFP submission?
o strong climate impact o high leverage o regulatory reform o Innovative & sustainable solutions o social impact including for the poorest and for women o activities in most vulnerable countries
o Why participate?
o Change the risk-return profile of your project to encourage investor participation
Jiwoo Choi Deputy Director a.i.,
Private Sector Facility
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