the experience of kfw development bank · the experience of kfw development bank the role of...
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Climate finance for developmentThe experience of KfW Development Bank
The Role of National Development Banks in Mobilizing International
Climate Finance
Day 2, Session II
Washington D.C. – April 18 & 19, 2012
Christoph Sigrist / Pablo Obrador
KfW
Contents
1. Climate finance at KfW: overview
2. Opportunities and challenges for national and regional development banks
3. Project examples
22
A Bank With a Wide Array of Functions
Promotion of
developing and
transition countries
International Business
Promotion
construction
of new housing
and modernization
as well as education
Promotion SMEs,
business founders,
start-ups
Financing municipal
infrastructure
projects and
global loans
Germany/Europe
agency business for
Federal Government
Domestic promotion
We promote Germany
International
project and
export finance
We ensure
internationalisation
We promote
development
Promotion of environmental and climate protection
Business Area
Mittelstandsbank
Business Area
Privatkundenbank
Business Area
Kommunalbank
Business Area
Export and Project
Finance
Business Area
Promotion of
Developing and
Transition Countries
Focal Activity of KfW Group: Environment and
Climate Finance
Instruments
Grants
Technical Assistance
Equity - Mezzanine Finance
Concessional and Commercial Loans
Worldwide Environment Finance Commitments 2010: EUR 25.3 bln (32% of total)
55
Financing mechanisms with KfW support
Funds
Bilateral Funds-
-Global Climate Partnership Fund
-Green for Growth Fund (GGF)
-International Climate Initiative of
the GG (IKI)
-Initiative for Climate and
Environment Protection (IKLU)
-German Climate Technology
Initiative (DKTI)
-Regional initiatives e.g.
„EU Blending Mechanism“
Multilateral Funds-
-Clean Technology Fund (CTF)
Carbon Fund / Kyoto
Mechanisms
-New Market Mechanisms
-Program of Activities (PoA)
-Financing CDM and JI
projects
-Sales and auctioning EUS on
behalf of the German
Government
Facilities, Initiatives
KfW Development BankSource of financing / Mechanisms
66
KfW Development BankKey topics and areas of activity
● Energy efficiency and small-scale renewable energy: Promotional
programs for households, SMEs and municipalities through credit line
by partner institutions.
● Large scale renewable energy: project financing a.o. geothermal, wind,
solar thermal, CSP, building sustainable energy systems
● Protection natural resources / biodiversity / forest management through
subsidies, loans, foundations and equity funds, REDD
● Financing waste management and & recycling, environmental friendly
transport systems
● Adaptation, focus on high risk regions
Environmental, social and climate assessment of all projects
New Commitments in 2011:
2,75 bn EUR (Total: 4,5 bn EUR)
KfW Development BankCommitments: Climate and Environment Financing
Minderung
Anpassung
Umwelt(nicht Klima)
Andere
million €
1.784
522
451
1.775
61%
...Regions
Asia / Oceania
Europe / Caucasus
Latin America
Sub-Saharan Africa
Nord Africa / Middle East
Regional
...Sectors
Energy
Multi-sectoral
Water & Waste
Finance Sector
Forest & Agriculture
Social infrastructure & transport
Sonstige
Adaptation
Environment
Mitigation
Others
Climate and Environment
Financing:
Mitigation projects account for 65 %
of the commitments in 2011 in the
fields of climate and environment.
About 50% of them were marked as
KLM 2, meaning that mitigation is
the main goal of the project.
Adaptation projects account for 16%
of the commitments in 2011 in the
fields of climate and environment.
Approx. 90% of them was marked as
KLA1, being adaptation just a
secondary objective.
KfW Development BankCommitments: Climate and Environment Financing
1,77 1,78
0,45 0,52
Riomarker
Minderung (KLM)
Weitere Vorhaben ohne
Klima-/Umweltkennung
Riomarker
Anpassung (KLA)Umweltkennung (UR)
(nicht Klima)
1,77 1,78
0,45 0,52
Riomarker
Minderung (KLM)
Weitere Vorhaben ohne
Klima-/Umweltkennung
Riomarker
Anpassung (KLA)Umweltkennung (UR)
(nicht Klima)
Non climate-
related projects
Rio marker
Adaptation (KLA)
Rio marker
Mitigation (KLM)
Environment projects (no
climate-related) (UR)
Commitments: Total / Climate and Environment Financing
2011 4,5 bn. EUR / 2,75 bn. EUR
Expected CO2 savings from commitments 2011
KfW Development BankCommitments: Climate and Environment Financing
t CO2eq p.a.
7.2 million
...Regions
Asia / Oceania
Latin America
Europe / Caucasus
Sub-Sahara Africa
Regional
North Africa / Middle East
...Sectors
Forest & Agriculture
RE-Projects
Multi-sectorall
Waste & Water
EE-Projects
RE/EE-Credit lines
Contents
Opportunities and Challenges for national and regional development banks
2. Opportunities and challenges for regional and
national development banks
Opportunities and Challenges for national and regional development banks Opportunities and Challenges for national and regional development banks
Commer-
cial bank
Promoters
EE/ ER
German
Government
Capital
Market
Subsidized
interest rate
Financing
Cooperation model for promotional programs:
KfW – National & Regional Development Banks
refinancing loan
& technical assistance
Development
bank
Opportunites and challenges for national and regional
development banks
refinancing loan
& technical assistancerefinancing loan
& technical assistance
Interest rate +
risk margin and
transaction
costs
Interest rate +
risk margin and
transaction
costs
Interest rate +
risk margin and
transaction
costs
12
Supporting the overall environment
KfW’s experience
Evaluating the market
Supporting the sub-borrowers and project developers
Grants for feasability studies
Energy audits
Events and marketing to generate awareness of the benefits, market opportunities
Supporting the development banks
Development and introduction of environmental and social management systems (ESMS)
Support in designing, marketing and monitoring climate and environmental finance
Introducing risk mitigation mechanisms
Supporting the financial intermediaries
Training for the financial intermediaries in developing products and evaluating project risks
Development of guides for investments in RE in specific countries
Cofinancing and exchange of experiences
ALIDE, BID, IBRD, EIB, and others
Key issues in designing green credit lines for GHG
mitigation
Green
Credit
Lines
1. Regulatory environment
2. Environmental impact, MRV
3. Eligible investments
5. Financial incentives, risk
mitigation
6. Technical assistance
4. Distribution channels
3. Some project examples – KfW
Development Bank
Ukraine: Energy Efficiency Credit Lines in Housing P
rob
lem
Ap
pro
ach
Eff
ects
• Increasing demand for energy
• High energy intensity:
- Out-dated production technology
- Low energy-efficiency of houses
• Economic performance of the Ukraine heavily
depends on energy prices
• KfW Credit Line for the local ProCredit Bank
• ProCredit provides low interest financing to
households and small and medium enterprises
for energy efficiency measures
• KfW also provides consultancy services
• Increased competitiveness of firms
• Generation of know-how in the financial sector
• Decreasing wastage of energy has positive
effect on climate
India: Concentrated Solar Power (CSP) P
rob
lem
Ap
pro
ach
Eff
ects
• Increasing demand for energy due to
economic development and population growth
• Barriers to the exploitation of solar energy
- Higher investment costs
- Lack of financial resources and know-how
• Installation of the first CSP plant in Asia
• Additional revenue via CDM certification
• Transfer of knowledge from implementation of
CSP technology in Spain and USA (IPEX)
• Supply of clean energy for 50,000 people
• CO2 savings of more than 25,000 tons p.a.
• First experiences with this innovative
technology
Status of the portfolio in 2011:
> 2 billion USD 16 countries
> 40 programmes
Subsidies: ODA, OOF (other official funds)
New programmes : ~ 250 million USD p.a.
Mexico: Energy Efficiency Program for HouseholdsP
rob
lem
An
satz
Wir
ku
ng
• High energy consuming old appliances in
households.
• None incentives for energy efficiency
investments
• KfW concessional loan energy efficiency fund
FIDE via national development bank NAFIN
• FIDE provides attractive financing conditions for
end consumers when acquiring appliances.
• Repayment though electricity bill.
• Obligatory removal of old appliances
(scrapping)
• Energy saving of households
• Raising awareness for energy efficiency
• Improving distribution and commercialization of
energy efficient appliances.
• Fast growing energy demand in Brazilian emerging
market
• High untapped potential for wind energy
• KfW concessional loan to national development
bank BNDES for financing wind farms.
• Favorable financing conditions (low interest rate,
longer lifetime) for 4 wind farms, respectively 120
MW
• Ambitious social and environment guidelines by
the project selection
• Efficient and environmental friendly electricity
generation
• Mitigation of CO2 emissions
• Improving supply guarantee through diversification
of energy mix.
Brasil: Promoting Wind Energy P
rob
lem
An
satz
Wir
ku
ng
Peru: Protecting the Forest P
rob
lem
Ap
pro
ach
Eff
ects
• Destructive exploitation of the rain forest
- Lack of incentives for sustainable use of
forests
- Insufficient protection of nature reserves
• Loss of biodiversity and CO2 storage
• Investments in infrastructure of nature
reserves to improve protection and
administration
• Support for the forest management
• Integration of the local population into the
project
• Improved protection of biodiversity
• Preservation of CO2 storage
• Long term support for the local economy
through sustainable exploitation plan
13
The role of national and regional developement banks (NRDBs) in
promoting climate friendly development
KfW’s experience and issues for discussion
1. In practice, what role do NRDBs play in:
Channelling resources for climate friendly investments
Acting as policy advisor for their respective governments/shareholders for shaping
national climate policies and NAMAs.
Acting as a broker for bringing together public and private investors at national and
subnational levels
2. What adequate mix of financial and non-financial instruments may NRDBs offer to promote
climate friendly growth?
3. What potential do NRDBs have to leverage and blend:
Bilateral and multilateral public finance including global climate funds (e.g. CTF, GCF)
Private capital (recommendation B20 taskforce)
4. Do NRDBs need improve coordination mechanisms to follow up international climate
negotiations? If so, what kind of plattforms offer best value added? (e.g. ALIDE, IDFC,
Durban Plattform, this conference, Rio +20)
Contact:
Christoph Sigrist
Pablo Obrador
Energy and Economic Development Division
Latin America and the Caribbean
KfW Development Bank
Palmengartenstrasse 5-9
60325 Frankfurt/Main
Germany
E-Mail:
KfW Office Building “Westarkade”,
Electricity Consumption: 98 kWh/p.sqm/p.a.
Thank you for your attention!