Fiscal and other Policies to Leverage Private Sector Finance

The Role of the Private Sector

1. Climate proof operations and supply chains

2. Delivery of goods and services that build people’s resilience

3. Engage with communities in which companies operate / resilient business practices

The private sector is already investing in building resilience.

Autonomous adaptation by private sector

Private sector actions:- Focus on sustainability- Assess impacts of climate change

on sector and society as a whole- Climate proof operations / supply

chains

Public sector role- Policy leadership and stability- Fill information gaps- Improve access to finance- Improve investment climate- Facilitate technology transfer

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Non-autonomous adaptation by private sector

Private sector actions:- Lead on policy engagement- Build partnerships- Engage in national and sectoral

consultations

Public sector actions:- Provide financial and risk

reduction incentives- Develop standards, criteria- Piloting / invest in innovation

Involvement of private sector in delivery of public services and investments

Public investments:- Infrastructure- Social safety nets- DRR

- Healthcare- Private sector as implementer- Public Private Partnerships

The Role of the Public Sector

Challenges

• Quantifying risks to improve investment decisions

• Short and different investment horizons

• ‘Private sector’ encompasses a broad spectrum of stakeholders

• Market development takes time

Example: Geothermal Power in Indonesia

• World’s largest source of geothermal power (27GW) – less than 5% developed to date

• Risks: Exploration, Regulatory (pricing framework), Governance

• History– 1970: first identification of geothermal resources– 1990: start of development– 2003: Geothermal Law

(setting 6000 MW goal for 2020)– 2011: $145mn geothermal fund for exploration

(de-risking investment)– 2012: Variable FiT

(correcting pricing distortions)

Development of market takes time: example from Mexico

Questions

• How to reach a diverse set of private sector actors?

• What role for the GCF, especially, what level of intervention?

Policies that can be used to promote private sector investments

• Improved production and dissemination of information on climate change and its impacts / technical assistance / awareness raising

• Adaptation of standards and regulations

• Investment in innovation / innovation funds / competitions

• Provide concessional / flexible loans and credit lines

• Improve financial climate – increase depth of financial market:– Currency and interest rate swaps and facilities– Political risk guarantees– Partial risk and credit guarantees

Regulations Participation+ Capacity+ Outreach+

Planning Participation Research Capacity Outreach

Prep studies Information Capacity Technology Financial reform

Support industry Capacity+ Finance+

Policy/Institutional

Industry/FinancialSource: WRI

Prioritization framework to enabling activities