Investment Climate for Climate Investments: Investment Climate for Climate Investments: Mobilizing Private Resources through Public Mobilizing Private Resources through Public

CommitmentsCommitments

Jan Kappen, Regional Coordinator - Climate ChangeUnited Nations Environment Programme

Regional Office for Latin America And the Caribbeanjan.kappen@unep.org

Latin American Carbon Forum 2011San Jose de Costa Rica, Sept 29, 2011

*

Average Actual Investment *(Annually, averaged 2007-2009)

2010-2020 2020-20302007-2009

$183.4 billion

$84.1 Billion

$31.8 billion

** Based on IEA WEO 2009 - annualised investment needed in power sector renewables to achieve 450 scenario * Based on BNEF data

Forecast Investment Requirement**(To Achieve 450 Climate Stabilisation Scenario )

Investment scale-up has begun, but mostly just in China, India and Brazil.Investment scale-up has begun, but mostly just in China, India and Brazil. Investment scale-up has begun, but mostly just in China, India and Brazil.Investment scale-up has begun, but mostly just in China, India and Brazil.

Developing Country Investment in Power Sector Developing Country Investment in Power Sector Renewables – “View from the Top”Renewables – “View from the Top”

Corporate & Compliance Investors

Sponsor / DeveloperPrivate Equity & Infrastructure Funds

Capital Markets

Mezzanine Capital

Carbon Finance

Early-stage Mid-stageDevelopment

ConstructionCommissioning

OperationLate-stageFinancing

Fina

ncia

l Clo

se Debt Finance (Project Finance)

Source: UNEP, Aequero (2010)

Private Finance for Clean Energy Ventures -Private Finance for Clean Energy Ventures -““View from the Ground”View from the Ground”

Early-stage funding gap = Lots of funds but lack of deal-flow…Early-stage funding gap = Lots of funds but lack of deal-flow… Early-stage funding gap = Lots of funds but lack of deal-flow…Early-stage funding gap = Lots of funds but lack of deal-flow…

Theory suggests we should be “crowding-in” investors from the very early stage of Theory suggests we should be “crowding-in” investors from the very early stage of the project development cycle…the project development cycle…

Theory suggests we should be “crowding-in” investors from the very early stage of Theory suggests we should be “crowding-in” investors from the very early stage of the project development cycle…the project development cycle…

Leveraging Private Climate Finance in TheoryLeveraging Private Climate Finance in Theory

Developing Country Investment in Power Sector Renewables – Public vs. Private Share of Financing*

* annually, averaged 2007-2009, based on BNEF data

……while actual data suggests we might be “crowding-out” late-stage investors while actual data suggests we might be “crowding-out” late-stage investors instead.instead.

……while actual data suggests we might be “crowding-out” late-stage investors while actual data suggests we might be “crowding-out” late-stage investors instead.instead.

Leveraging Private Climate Finance in PracticeLeveraging Private Climate Finance in Practice

Part 1: Private Funding for Climate Investment - Experience throughout the LAC Region.Part 2: Multilateral Mechanisms for Climate Finance – The CIF's approach in leveraging private investment.Part 3: Climate Investments in the LAC Region – Entrepreneur’s & Private Equity Perspective.Finale: Scaling up Private Climate Finance – “Wish list” of innovative approaches and mechanisms.

Game Plan for Panel Discussion:Game Plan for Panel Discussion:

Key questions for discussion:Key questions for discussion:

Question 1: How to bridge the early-stage funding gap and create greater deal flow?

Question 2: How to complement Carbon Finance to cover incremental costs?

Question 3: How to make sure capacity building efforts are more demand/business driven?

Bonus question: How to better measure and track leverage of private capital?

Backup SlidesBackup Slides

Source: Project Catalyst Sept. 2009, Finance Briefing Paper

Everyone is obsessed with this

part…

…when we should also be looking at this part!

Need to look beyond abatement cost …Need to look beyond abatement cost … Need to look beyond abatement cost …Need to look beyond abatement cost …

Funding Needs for CC Mitigation – Funding Needs for CC Mitigation – Estimates 2010-2020Estimates 2010-2020

Estimated funding needs [bn EUR 2010-2020]Estimated funding needs [bn EUR 2010-2020]

Additional Capital Costsincremental cost

of low carbon infrastructure

Business as Usual Capital Costs

cost ofconventional infrastructure

Read

ines

s/Tr

ansa

ction

Cos

ts

BarriersBarriers

Unattractive financial returns

Lacking Access

to finance

Lack of experience Learning-by-doing

SolutionsSolutions

Carbon markets and NAMA- linked subsidies

Mobilization of Local/Domestic finance, FDI and ODA

Very significant additional costs that need to be addressed individually. Very significant additional costs that need to be addressed individually. Very significant additional costs that need to be addressed individually. Very significant additional costs that need to be addressed individually.

Funding Needs for CC Mitigation – Funding Needs for CC Mitigation – Looking beyond Abatement CostLooking beyond Abatement Cost