Green FinanceGreen finance broadly refers to financial investments flowing into sustainable development projects and initiatives, environmental products, and policies that encourage the development of a more sustainable economy and a range of another environmental objective. Green finance includes climate finance but is not limited to it. Read More
Green finance comprises:
- components of the financial system that deal specifically with green investments, including their specific legal, economic and institutional framework conditions;
- the financing of public and private green investments in different areas, including:
- provision of environmental goods and services,
- prevention, minimization and compensation of damages to the environment and to the climate
- the financing of public policies that encourage the implementation of environmental and environmental-damage mitigation or adaptation projects and initiatives.
Green finance Initiative (GFI) strives to increasing the level of financial flows from financial institutions, investment funds, insurance and also micro credit, available to the public, private and not-for-profit sectors to implement sustainable development goals.
The GFI aims to support National Development Banks (NDBs), Agencies and Local Financial Institutions in the promotion of financing strategies geared to mobilize private sector green investments.
Scope of Activities
Tailored support for National Development Banks to design and promote green financial instruments; Structuring a green financing strategy, including strengthening of its institutional capacity for NDBs.
Innovative Financial Solutions
Public–Private Partnerships (PPPs), interconnected zones, renewable energy, energy efficiency.
Financial Innovation Labs (LABs) to promote dialogue with regulators, capital markets and financial sector stakeholders.
Where it is implemented
2MW biogas plant financed in the province of La Pampa
The goal of the program is to improve the efficiency and sustainability of energy production and use in Argentina. It is expected that the program increases SMEs´ investments in renewable energy ("ER") and energy efficiency ("EE"), through access to medium and long-term financing, thereby reducing greenhouse gas ("GHG") emissions and contributing to the country´s climate and energy goals.
In the long term, the cumulative results of the effective operation of the biomass, biogas, and energy efficiency sub-projects funded by our partners are expected to lead to more efficient and sustainable patterns of energy production and use.Read More
The program is executed jointly by the Foreign Trade and Investment Bank (BICE), who leads the financing, and the IDB, who leads the technical cooperation.
This program uses Green Climate Fund (GCF) resources, along with co-financing from BICE and IDB, to develop and offer financial mechanisms designed to meet the specific needs of RE and EE projects and investments. We offer standard financing tools, such as loans that can be combined with instruments like the Energy Savings Insurance (ESI), to reduce perceived and real risks for project developers and SMEs, thereby helping to remove investment barriers.
The credit line encourages leverage of other sources of capital mainly through: (i) a minimum capital requirement in financed projects (e.g. from developers/SMEs as final beneficiaries of the sub-loans); and (ii) credit exposure limits per client.
Sector-specific uncertainties critically influence investment decisions in renewable energy and energy efficiency. For example, understanding how certain technologies work, the evolving regulatory framework for EE and RE, or the existence or volatility of a renewable energy resource. In this context, the demonstrative effect of public intervention becomes crucial to promote and attract private financing and create a cluster of energy efficiency and renewable energy investments backed by a carefully designed incentive structure. This includes financial incentives, guaranteed and third-party verified energy savings, risk-sharing mechanisms such as energy savings insurance, and international standards for ESG.
An additional challenge is overcoming the macroeconomic and operating challenges in the COVID-19 environment. At the same time, this program represents a vital opportunity to support Argentina and its SMEs in the low-carbon economic recovery phase.
Through year-end 2020, five sub-projects have been financed for the construction and operation of biogas and biomass plants to produce thermal and electric energy in different provinces of Argentina. Taken together, the total installed capacity is 10.5 MW with expected CO2e emissions reductions of 27,017 tCO2e per year. These sub-projects have leveraged USD 12.8 million of private financing from SMEs/third parties.Read More
Pipeline development activities continue. Many webinars and capacity building sessions have been carried out and are planned to build institutional capacity in EE and RE finance and investment opportunities. An electronic registry system has been designed and implementation continues at BICE to support sub-project evaluation and impact reporting. The enabling environment is being strengthened through, for example, policy dialogue activities that includes the creation and training of a new, cross-cutting sustainable finance team in the public sector led by the Ministry of Economy. In addition, various potential demand studies have been carried out, including a gender baseline study on financing female-led SMEs and participation of women in relevant engineering and operational activities in Argentina to promote greater market penetration.
In the long term, the cumulative results of the effective operation of the biomass, biogas, and energy efficiency sub-projects funded by our partners are expected to lead to more efficient and sustainable patterns of energy production and use in the Argentinean market.
The Government of Chile is promoting the development of strategies at the national scale to promote investments in Public-Private Partnerships and green private investments, through dialogue tables between the public and the private sector (the “Green Agreement”).
CORFO will be developing and implementing innovative financial instruments and technical assistance to be deployed through Chile’s first-tier, local, financial institutions to promote private investments in low-carbon projects including renewable energy, energy efficiency and sustainable transport measures.
Beginning of roof installation of 126 solar panels (500W each) at Zona Cero restaurant. In addition, the company is investing in 9 efficient air conditioners for the interior.
Remarks from IDB Representative in El Salvador, César Falconi, at the Event Launch of the Microsite for the Energy Efficiency Credit Line.
The goal of the program is to promote energy efficiency (EE) investments for small- and medium-sized enterprises (SMEs) and improve their access to EE finance in El Salvador. As these investments grow, they will increasingly contribute to the reduction of greenhouse gas ("GHG") emissions and to the country´s climate and energy goals.
The direct benefits of the EE financing line are targeted at SMEs who wish to finance equipment and technology modernization projects that will increase their productivity and overall competitiveness, while generating energy and cost savings, reducing the use of fossil fuels, and generating a positive impact on the environment.
The program financing and technical cooperation is executed by the Development Bank of the Republic of El Salvador (BANDESAL), with support from the Inter-American Development Bank (IDB) and the Green Climate Fund (GCF). GCF resources have been combined with co-financing from BANDESAL and IDB, to develop and offer an EE financing line including mechanisms designed specifically to meet the needs of SMEs and EE projects and investments.Read More
A total of USD 40 million is available to lend to SMEs in the country through BANDESAL’s network of Local Financial Institutions (LFIs).
Loans are offered through the EE financing line, which are available with medium- and long-term tenors and competitive interest rates. There are two financing modalities, carried out in collaboration with endorsed suppliers and other partners: the standard model and the Energy Savings Insurance (ESI) model. The standard model validates energy savings through an international company, ensuring that operational efficiencies and optimization are realized. The ESI model validates energy savings through an international company, and in addition, provides insurance to the SME/project developer that will compensate for any gap between the energy savings promised by the supplier and the actual savings obtained, thus providing secured savings.
This combination of financial and non-financial instruments and risk-sharing mechanisms reduces the perceived and real risks for SMEs/project developers and LFIs, thereby helping to remove investment barriers and increasing sustainable energy investments for businesses.
In addition to access to credit, market barriers are a constraint to the development of the sustainable investments and finance industry. Specifically, there is a lack of knowledge and understanding of how certain technologies work among LFIs and SMEs, along with the risks and returns of these projects. In addition, there is lack of confidence by investors and their financiers in the ability of EE service and technology providers to deliver on the agreed-upon energy savings. This Program is addressing these barriers and the real and perceived risks in order to build confidence in the market for these types of investments.
There are also sector-specific uncertainties and changes such as the evolving regulatory framework for EE. Therefore, the demonstration effect of public intervention becomes crucial to promote and attract private financing and thereby increase EE investments among SMEs.
An additional challenge is overcoming the macroeconomic and operating challenges in the COVID-19 environment. At the same time, this program represents a key opportunity to support El Salvador and its SMEs in a low-carbon, resilient economic recovery.
Through June 30, 2021, two sub-projects have been financed for investments in solar PV and efficient air conditioners. Taken together, the total expected estimated CO2e emissions reductions is 6,744 tCO2e per year.Read More
As a result of continuous business development and pipeline generation activities, including working with endorsed EE suppliers and other partners, BANDESAL has developed a strong pipeline of potential EE sub-loans to SMEs through its network of LFIs. This includes projects for which funds have already been committed (but not yet disbursed). The majority of pipeline projects are for solar PV investments.
BANDESAL launched its digital microsite for the EE credit line. The aim is to both publicize information on the characteristics, eligible technologies, benefits, and loan conditions as well as to provide a platform that brings together different stakeholders including SMEs, suppliers, and LFIs. It is also expected that the microsite will help increase the number of loans granted under the EE credit line.
An electronic registry system has also been designed at BANDESAL to support project evaluation and impact reporting. Implementation continues and more improvements and enhancements will be made to it based on the experience to date.
- The project aims to support the development of a business model for green finance, based in the identification of opportunity and actionable areas, and assisting BROU in being one of the key actors at the country and region in supporting sustainable finance.
- The Project focused in: i) providing environmental and risk management of the BROU’s portfolio; ii) seeking opportunities to improve efficiency; iii) analysing and ascertaining sectors, zones or structures that may be riskier, iv) exploring the development of potential financial instruments to address identified risks; v) promoting BROU’s Management Environmental and Social Risks System (ESMS) in order to reduce risks while increasing credit volume, so as to identify and mitigate those risks in the lending activities.
- CO-T1423 - Financing Mechanisms for Private Investments in Energy Efficient (EE) Public Lig
- Design and promotion of a pre-investment facility to scale up private investments in public-private partnerships to promote energy efficiency and renewable energy in municipal infrastructure (Mexico - BANOBRAS)
- Development of a Financial Strategy for Renewable Energy and Energy Efficiency (Colombia - FINAGRO)
- Development of a financing strategy utilizing the Energy Savings Insurance to scale-up energy efficiency investments in the tourism sector and the promotion of a pre-investment facility to scale up private green investments in public private partnerships (Mexico - BANCOMEXT)
- Development of a Green Strategy (Brazil - BANCO DE DESENVOLVIMENTO DE MINAS GERAIS)
- Development of financial instruments for energy efficiency and distributed renewable energy in small and medium-sized enterprises (Brazil - BNDES)
- Development of financial instruments for energy efficiency and distributed renewable energy in small and medium-sized enterprises (Brazil - FOMENTO PARANA)
- Development of initiatives that promote green financing, especially by promoting investments with Public-Private Partnerships in energy efficiency projects (Brazil - DESENVOLVE SP)
- Development of the Energy Savings Insurance Program and additional financial instruments for energy efficiency and distributed renewable energy in SMEs (Paraguay - AFD)
- Promotion of building energy efficiency in housing and cities (Mexico - SHF)
- Support the emission of green bonds (Brazil – BDMG)
- Support the emission of green bonds (Colombia - Bancoldex)
- Support the structuring of a green financing strategy (Brazil - BANCO DO BRASIL)
- Support to the Government of Brazil in the development of a framework of a Sustainability Laboratory (Brazil – ABDE & CVM)
- Supporting the positioning as a Green Bank (Mexico - FIRA)
Why Green Finance?GF scales up public and private investments that provide environmental benefits, through new policies, financial institutions and financial instruments, such as, inter alia, green banks, green bonds, carbon market instruments, innovative financial technologies, labelling, guarantees for PPPs.
Investment in the green economy needs to take place on a larger scale over coming decades in order to achieve the Sustainable Development Goals and the global objectives of the Paris Agreement.
Green Finance allows overcoming barriers to green investment such as:
3 years since the establishment of the LAB
Banco do Brasil is among the 10 most sustainable companies in the world
The bank was rated 1st in the ranking of financial institutions. Banco do Brasil (BB) was considered the most sustainable financial institution in the world, and ranks among the ten most sustainable corporations in the “Global 100 Most Sustainable Corporations in the World” index, produced annually by the Canadian publication Corporate Knights. The announcement was made this Tuesday (22) during the World Economic Forum, in Davos (Switzerland).
First Certified Agricultural Green Bond in Oaxaca
Partners on the GroundWho is supporting GFI
This Initiative is being promoted by the IDB with support from the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB).
Furthermore, the IDB has partnered with key determined ‘green’ stakeholders and National Development Banks to design and promote green financial instruments in the Latin America and the Caribbean region.
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