Transcript Rand Water Dialogue on Climate Change DBSA Presentation

“Dialogue on Climate Change” June 2016, Rand Water
GREEN CLIMATE FUND (GCF) Presentation
Olympus Manthata: DBSA
CONTENTS
• Green Climate Fund (GCF) – Background
• GCF Governance and how to access funding
• GCF approval process and procedure
• Investment Strategy and Funding Criteria
• Financial Terms
• Q&A
United Nations Framework Convention on Climate Change (UNFCCC) established two
main green financing mechanisms: the Global Environmental Facility (GEF) and the
Green Climate Fund (GCF)
What is Global Environment Fund (GCF)?
Other GCF accredited organisations
 The GCF in the newest and biggest
operating entity of the financial
mechanism of the United Nations
Framework Convention on Climate
Change (UNFCCC).
 The goal is to to promote the paradigm
shift towards low-emission and climateresilient development pathways.
 The current global pledge to GCF is $10.2
billion for next 3 years, with an
aspirational budget of $100 billion per
year by 2020.
 DBSA was accredited as regional entity
(covering Sub-Saharan Africa) during GCF
board meeting held in March 2016
3
How funding is accessed
4
Investment Strategy
• Allocation of resources; 50:50 balance between mitigation & adaptation with time.
Mitigation: intervention or action to reduce the long-term risk of the magnitude of
climate change through alternative strategies such as emissions reductions (dealing
with the problem at its very source) and Geo-engineering (offsetting the effects of
greenhouse gas emissions)
Adaptation: efforts to limit our vulnerability or adjust/cope with consequences of climate change
impacts through various measures, while not necessarily dealing with the underlying cause of those
impacts.
IPCC (2010) definitions
Climate resilient railroad
5
Investment Strategy (cont.)
• 50% allocation to vulnerable states, LDCs, SIDs and African states and seeks geographical
balance, maximizing scale and transformational impact of the Fund
• Finances projects and programmes that demonstrate the maximum potential for a paradigm
shift towards low-carbon and climate-resilient sustainable development
• Provides minimum concessional funding (i.e. a grant-equivalent subsidy element) necessary
to make a project or programme viable.
• Financing provided to intermediaries may be used by the latter to blend with their own
financial resources in order to increase the level of concessionality of the financing they
extend to projects and programmes
• Will not “crowd out” potential financing from other public and private sources
• Only revenue-generating activities that are intrinsically sound from a financial point of view
will be supported through loans by the Fund
• Provides Project Preparation Support for projects
6
Investment Criteria
• Impact potential- potential of the programme/project to contribute to the achievement of
the Fund's objectives
• Paradigm shift potential- degree to which the proposed activity can catalyse impact beyond
a once-off project or programme investment
• Sustainable development potential: wider benefits and priorities, including environmental,
social, and economic co-benefits as well as gender-sensitive development impact
• Responsive to recipients needs: vulnerability and financing needs of the beneficiary country
and population in the targeted group.
•
Promote country ownership: beneficiary country ownership of and capacity to implement a
funded project or programme (policies, climate strategies and institutions)
• Efficiency & effectiveness: economic and, if appropriate, financial soundness of the
programme/project, and for mitigation-specific programmes/projects, cost-effectiveness and
co-financing
7
Priority areas
• Fund’s Investment Framework, 5 investment priority areas:
 Transforming energy generation and access;
 Creating climate-compatible cities;
 Encouraging low-emission and climate-resilient agriculture;
 Scaling up finance for forests and climate change;
 Enhancing resilience in Small Island Developing States (SIDS)
8
Investment Products
• Private Sector Facility
 Enables Fund to directly and indirectly finance private sector mitigation and adaptation
 Addresses barriers to private sector investment e.g. market failures, insufficient capacity and lack
of awareness, in order to mobilize private capital and expertise at scale
 Promotes participation of private sector, in particular local actors, including small- and mediumsized enterprises and local financial intermediaries
•
Public Sector Facility
 Enables Fund to support public sector mitigation and adaptation initiatives
 Offer concessional terms to vulnerable countries and less concessional terms other countries
9
Investment Products
Project Preparation Facility (PPF):
The PPF will benefit Direct Access entities and would be targeting small-scale activities and, providing up to
10% of requested GCF funding with a maximum of USD 1.5 million for any single proposal.
• Indicative eligible activities
 Category 1: Technical project development: Due diligence, including detailed financial,
legal, engineering, environmental, social appraisals and gender assessment required to
develop reports that validate and develop concepts further completing project feasibility
assessment
 Category 2: Transaction advisory: Project structuring, including detailed financial and legal
structuring, and the preparation of financial models and legal documentation.
•
Indicative Deliverables
 Technical study, legal analysis, financial model, economic model, gender assessment and gender
action plan, environmental and social impact assessment, environmental and social management
framework, resettlement action plan, resettlement policy framework, and
1
Investment limits for DBSA
• Investment Limits – DBSA accredited to implement micro to large projects
 Micro – up to and including US$10 million
 Small – above US$10million and up to and including US$ 50 million
 Medium – above US$50million and up to and including US$ 250 million
 Large – above US$ 250 million
• Geographic coverage – DBSA accredited to implement project in Africa Sub-Saharan
countries
1
Potential Opportunities for DBSA
• DBSA sectors of focus supported by GCF (both mitigation & adaptation)
 Energy – renewable energy and energy efficiency
 Water – Opportunities to support water savings programmes e.g. i) revolving
facilities, programmatic approaches ii) Investment in the revitalisation of aging
water infrastructure
 Transport – mass transit, alternative fuels
 ICT – e.g. adaptation project opportunities in Africa sub-Saharan countries
 Social sector – housing, education, health
1
Financial Instruments
Public sector recipients:
•
Grants
 Grants without repayment contingency: no reimbursement required
 All grants repayable by the recipient in cases involving corruption or other non-compliance with
integrity or fiduciary standards
•
Concessional Loans (senior and subordinate)
 Deeply concessional terms will be offered to vulnerable countries, while less concessional terms
will be offered to other countries as follows
Maturity (Yrs.)
Grace period
Interest
Vulnerable
countries
40
10
0.25%
Other
recipients
20
5
0.75%
1
Financial Instruments
Private sector recipients:
•
Grants
 May be grants with repayment contingency
 All grants repayable by the recipient in cases involving corruption or other non-compliance with
integrity or fiduciary standards
•
Concessional Loans (senior and subordinate)
 GCF tailors its terms to cover the incremental cost or risk premium required to make the
investment viable
 Terms not be more concessional than those offered to the public sector
 Includes a credit risk premium that does not take into account sovereign risk, includes a
concessionality premium commensurate with the potential that the project/programme has in
advancing the Fund’s objectives
1
Financial Instruments and Terms (cont.)
•
Concessional Loans (senior and subordinate) – private sector recipients
 Concessionality of non-grant instruments to the private sector therefore decrease as credit risk
increases, but increase as the impact potential of the project increases.
 Since the terms that the Fund offers to the private sector will not be more concessional than those
offered to the public sector, the concessionality premium can never be greater than the credit risk
premium
To the
private
sector
Maturity
(Years)
Grace
Period
(Years)
Interest
Up to 20
Up to 5
0.75% + credit premium –
concessionality premium.
•
Other Instruments extended to private sector recipients: Equity and Guarantees
•
Other forms of support: Facility to support Accredited entities (e.g. DBSA) to set up Guarantee facility
and Green Bonds. (type of support could include technical assistance, cover issuance expenses, offer
partial guarantees and GCF could also be part bond holder at favorable terms)
1
Approval Process – Overview
NDA
No-objection
1
Generation
of funding
proposals
Secretariat
3 Submission of
funding
proposal
4
Analysis and
recommendation
Technical
Advisory
Panel
5
Board
Board
Decision
Legal arrangements
IE or
Intermediary
Concept
development
(voluntary)
Trustee
2
6
Initial Proposal Approval Process – Proposal Submission & Review
IE or
Intermediary
Secretariat
Submission
Second level due diligence
Check for
completeness
Analysis and
Recommendation
Submission
to the Board
TAP
Assessment
TAP
Board
2 weeks
Board
Decision
* In between meetings
or Board meeting
1-2 week
4-6 weeks
3 weeks