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Climate Financing: Sources and Strategies for NDC Funding

Explore the global context of financing for sustainable development and learn about new approaches and tools for financing Nationally Determined Contributions (NDCs) in this informative session.

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Climate Financing: Sources and Strategies for NDC Funding

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  1. El financiamiento climático Fuentes y estrategias de financiación para las NDC Quito, 30 August 2017 Massimiliano Riva, Policy Specialist, Innovative Finance Contexto global del financiamiento para el desarrollo sostenible

  2. 1 New development finance landscape • 2 Approach: financing solutions for the NDCs • 3 Tools and resources [for reference]

  3. 1 New development finance landscape

  4. MANAGING COMPLEXITY in a NEW LANDSCAPE Financing strategies, instruments, tools are more diversified and sophisticated Unprecedented Accumulation of Wealth Credit Swiss Development Initiatives

  5. MANAGING COMPLEXITY in a NEW LANDSCAPE Source: Deutsche Bank

  6. $23T $200-300T $114B Impact investors Traditional investors Responsible investors $200M Social impact bonds ESG compliant funds Green & blue bonds RETURN ON Investment T=trillion B=billion M=million Venture philanthropists $10T $180B labelled $696B INTENT FOR IMPACT Source: various

  7. 2 Approach: financing solutions for NDCs

  8. Understand the context Assessments:policy, institutions, development finance • 1 Understand where the money goes • 2 Public/privateexpenditure reviews, inv. flow analysis Formulate needs as “investment proposals” • 3 Costing of strategies, gap analysis, project pipeline Match opportunities with needs • 4 Financing frameworks, solutions, budgeting etc. Devise smart financing strategies

  9. Finance gap (unknown) • 1 • Avoid expenditures • Climate insurance, green taxes Finance gap (known) • Realign expenditures • Reforming fuel subsidies Domestic/int. finance (public and private-known) • 2 FINANCING ($) Domestic/int. finance (public and private-unknown) • Deliverbetter • National climate fund, cost-effectiveness measures • 3 • Generate revenues • Impact investment, green bonds, budget allocation • 4 • IMPLEMENTATION OF NDC FINANCING STRATEGIES

  10. DEBT AND EQUITY INSTRUMENTS • Green Bonds NBFIs = Non-banking financial institutions P2P = Peer-to-Peer Source: Credit Swiss Size of financing • Impact • Investment Stage of firm-sector

  11. GREEN BONDS Costa Rica: Banco Nacional issued a green bond for US$500m IFC suggests Latin America could host more than US$1 trillion in climate-focused projects by 2040 Colombia: Bancolombia issued a US$118m green bond to local investors. Davivienda issued a 433 US$146m bond Source: CBI Mexico: 57 inst. Investors (+US$213.8bn) released a statement in favor of financing green bonds. Mexico City issued the 1st LATAM Muni Green Bond: US$50m in Dec. 2016 ABS=Asset Backed Security www.undp.org/content/sdfinance/en/home/solutions/green-bonds.html

  12. IMPACT INVESTMENT: ALTHELIA CLIMATE FUND Tambopata-BahuajaProject Revenues: sustainable agriculture, carbon offsetting, aid Financing: Althelia invested US$7m, the Fondode las Americas contributed US$2m in co-financing Area: Peru - National Reserve of Tambopata and National Park of Bahuaja-Sonene and 4,000h in the buffer zone Project: restoration of buffer zone; 4,000h of fine and aromatic cocoa for 3,200t of certified deforestation-free organic and Fairtrade cocoa a year Climate Benefits: 4m ton of carbon avoided over 7 year Development Benefits: improved agricultural practices for 1,100 farmers ECONOMIC AND SOCIAL RETURN www.undp.org/content/sdfinance/en/home/solutions/impact-investment.html

  13. IMPACT INVESTMENT: CROWD-INVESTING for CLEAN ENERGY 3. Investors provide upfront capital (loan) Impact Investors UNDP partners with TRINE-crowd investment planform-to scale-up private investment in high-impact energy access projects • Capital: By 2019, the project will raise up to US$7 million for 45 fully funded projects in Kenya, Nigeria, Rwanda, Zambia and Sierra Leone • Beneficiary reach: During the first phase of the project, it is expected that the project will lift 540,000 people out of energy poverty. • Expansion: To additional crowd-investment platforms and angel investment networks 1. The platforms conduct due diligence, including financial viability 2. UNDP conducts pre assessment of impact 4. UNDP monitors the impact and provides technical support to investees on monitoring and reporting Reporting Investment Guarantee Fund Clean Energy Projects Service delivery * Current contributors include UKAID, TelgeEnegy, Fortum and GP Batteries Households

  14. REFORMING ENERGY SUBSIDIES Source: IMF, IEA (2015) Venezuela and Ecuador, in the Top 5 Low-ranked & Producers (LR-OIL) Venezuela, Ecuador, Bolivia, Argentina, Belize, Suriname Low-ranked & Importers (LR-NOIL) Guyana, Haiti, El Salvador, Nicaragua, Dominican Republic, Honduras, Grenada, Guatemala, Jamaica, Paraguay High-ranked & Producers (HR-OIL) Trinidad and Tobago, Mexico, Brazil, Colombia, Peru High-ranked & Importers (HR-NOIL) Antigua and Barbuda, Bahamas, Panama, Barbados, St. Kitts and Nevis St. Lucia, Dominica, Uruguay, Chile, Costa Rica St. Vincent and Grenadines

  15. 3 Tools and resources

  16. FINANCING SOLUTIONS FOR SUSTAINABLE DEVELOPMENT 1. Expand knowledge over financing solutions available to implement the NDCs 2. Assess potential, advantages, disadvantages, risks and characteristics of financing solutions 3. Inform brainstorming and writing workshops in national/sub-national design and planning processes 4. Identify additional sources and learning material PURPOSE AUDIENCE Mid-level planners, consultants, facilitators (primary) academia and students (secondary) To prepare awareness sessions on financing, drafting reports or facilitate stakeholders’ engagement AWARNESS EXAMPLES BIOFIN-active in 30 countries-uses the platform’s approach and data to draft biodiversity finance plan. PROGRAMMING 3. Detailed guidance for selected solutions 1. Expansion of solutions reviewed NEXT STEPS 4. SDG specific pages 2. Primer on solutions’ identification

  17. Financing Solutions for Sustainable Development www.undp.org/content/sdfinance

  18. UNDP PROGRAMMES-FINANCING THE SDGs

  19. El financiamiento climático Fuentes y estrategias de financiación para las NDC Quito, 30 August 2017 Massimiliano Riva, Policy Specialist, Innovative Finance

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