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Practical approach to climate finance View from the donors: CIFF´s experience Side event, Carbon Expo Sonia Medina, Director, Climate Change, The Children’s Investment Fund Foundation 28th May 2015 1

Total levels climate investment is not enough to limit temperature increase to 2°C

2 Sources: Climate Policy Initiative, 2014; World Economic Forum, 2013; OECD DAC, 2013; Joint Report on MDB Climate Finance, 2014

Domestic development

banks, 69

Bilateral flows; 14

Others; 11 Other multilateral

flows; 24

Multilateral development

banks; 19

25%

23% 15%

22%

4% 1% 10%

Renewable energy

Energy efficiency

Other energy

Transport

Land Use

Waste and water

Cross cutting

17%

12%

14% 17%

11%

26%

3%

EU

Latin America

Africa andMiddle EastEast Asia andPacificSouth Asia

Non EU Europeand Central AsiaRegional

Public climate finance has better data available. Bilateral and multilateral finance is concentrated in renewable energy and energy efficiency. Africa and South and Central Asia receive most bilateral climate finance, while Eastern Europe and Central Asia receive most multilateral climate finance.

by region

by sector

6% 19%

29% 15%

31%

Europe

Latin America

Africa andMiddle EastEast Asia andPacificSouth andCentral Asia

30%

25% 13%

9%

23%

Transport andstorage

Energy generationand supply

GeneralenvironmentalprotectionLand use

Other

Public: $137bn

Private: $193bn

PUBLIC CLIMATE FINANCE: $137bn

Bilateral climate

finance: $14bn

by region

by sector

Multilateral DB climate

finance: $19bn

• Bilateral figures from OECD DAC include the full value of interventions tagged with climate change mitigation both as a ‘principal’ and as a ‘significant’ objective.

• Multilateral Development Banks – a group comprising AfDB, ADB, EBRD, EIB, IDB, WB fand IFC – figures identify the climate component of projects only.

• Other multilateral flows include other regional development banks and the EIB financing for ‘old ‘EU member states. • Other public climate finance sources comprise direct public contributions from government agencies and ministries and

national and multilateral climate funds. • CPI estimate that an additional $60bn of domestic climate finance is provided by government budgets (not included here).

Private climate finance is poorly understood – the figures here include renewable energy investment only.

$331billion

Global climate finance in 2013 $5-6 trillion Needed for energy sector alone through 2020.

Capital is available, it just needs to be unlocked

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There a number of key barriers to private sector investment: • Viability / cost gap: Green technologies cost more and have lower

returns

• Knowledge gap: Developers, investors and users do not understand the opportunities

• Risk gap: Investors perceive a range of risks in green investments, and not all risks are covered by existing risk coverage

CIFF’s Climate Change Strategy aims to accelerate high value decarbonisation by supporting and replicating large-scale leadership efforts

Mission: • Recognising that children living in poverty in developing countries have the greatest vulnerability to climate

change, CIFF aims to accelerate high value decarbonisation by supporting and replicating large-scale leadership efforts.

Purpose: • Demonstrate that ambition in tackling climate change is politically and economically feasible and desirable. Approach: CIFF’s focus on ambition implies the following: • We are not seeking incremental improvements, we are seeking systems change • We start by backcasting from where we need to be in 2050, not by forecasting from where we are today,

so that we can escape inertia and change trajectory • We have a high appetite risk where we think we can deliver transformational impact

Large-scale

leadership efforts

Accelerate action

High value decarbonis

ation

CIFF’s climate strategy emphasises an ambitious, high-risk, cutting edge approach to achieving systemic change 4

Climate philanthropy is only <0.1% of total climate finance: At $0.3bn, the large climate philanthropies comprising the Funders Table are a rounding error!

However, philanthropy is uniquely positioned to help address the climate finance gap by pulling powerful finance levers that other stakeholders cannot.

Philanthropy can therefore use its relatively small resources to play a catalytic role to create transformational change by: • Opening pools of capital • Being a catalyst to climate policy • Helping to speed up innovation • Motivating finance ministers

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Philanthropy is a tiny fraction of climate finance, so why can CIFF and other funders help to overcome these barriers and unlock vital climate finance?

Public finance: is addressing some gaps but lacks innovation, appropriate tools, speed, and sometimes “crowds out” private capital. Philanthropy: can test innovative approaches, take risks, be nimble and react quickly to windows of opportunity, and is an honest broker that is not politically driven.

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Transformational change requires interventions throughout the value chain:

Enforcement

Transformational change requires interventions throughout the policy-making process:

Enforcement

Leverage

Research-based advocacy

16%

Technical Assistance

17%

Advocacy 7% Collaborative

research and technical

assistance 27%

Global leverage 6%

Litigation 5%

Research >1%

Regranting 22%

CIFF’s climate programme ($155m) has primarily funded technical assistance and research- based advocacy with NGOs

NGO 80%

NGO - private sector

partnership 12%

Government partnership

8%

Government >1%

Approved funds by grantee category

Approved funds by primary

intervention type

European Climate Foundation 2008-15; $44m

Latin American Regional Climate Initiative 2012-15; $4.1m

Client Earth 2014-17; $11.5m

C40 Cities Climate Leadership Group 2011-16; $12.6m

HFCs Campaign 2009-17; $13.9m

2015 Strategy: Climate Briefing Service &

Climate Justice 2014-15; $1.4m

China Air Quality 2014-17; $9.2m China Carbon

Pricing 2012-18; $20.3m

China Grids 2014-19; $12.8m

Mobility Brazil 2015-18; $9.8m

Reconciling food production and

forest protection in Brazil

2015-18; $9.9m

China Sustainable Cities Program

2012-20; $33.2m 21CPP Mexico

2014-17; $4.4m 2015 Strategy: UNSG

2014-15; $0.6m

21CPP Mexico 2014-17; $4.4m

China Grids 2014-19; $12.8m 2015 Strategy: UNSG

2014-15; $0.6m China Carbon Pricing (Phase 2)

2015-18; $17.4m Reconciling food production

and forest protection in Brazil 2015-18; $9.9m

All other grants 2008-19; $179.6m

Recent investments have increasingly emphasised ‘actionist’ interventions and partnerships with

government and the private sector

2015 Strategy: Deep

Decarbonisation & Evaluating

National Offers 2014-15; $3.7m

CDP

2014-17; 6.8m China Coal Cap 2013-16; $8.8m

Mitigation Action Plans &

Scenarios 2010-16; $17.0m

China Coal Finance 2014-15; $0.3m

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Case study Climate finance for Cities: CIFF’s role

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Philanthropy can help to create an enabling environment that encourages private sector investment in urban infrastructure Intervention opportunities for philanthropy:

Support for cities to prepare projects for investment, including the development of a pipeline of low carbon infrastructure and climate smart investment plans

Helping to secure access to capital, including international climate finance and power to raise capital at the city-level (e.g. take on debt and issue bonds)

Increasing cities credit worthiness: improving access to private capital by demonstrating that cities are unlikely to default on their debts

Development of innovative financing mechanisms: to attract large sale institutional investors to finance city climate investments

Existing CIFF programme

Credit worthiness in cities with C40 Aim: to tackle barriers relating to investor confidence in cities, lack of bankable projects, and investor bias to least cost projects. Approach: • training for 20 cities on climate –smart capital investment planning • technical assistance to 8 cities to gain a credit rating • Encourage sharing of best practice • re-shape city investment projects to make them bankable • promote assessment of co-benefits in investment decisions, not just low

cost • Research to develop infrastructure finance exchanges that provide

better product offerings for cities The world bank estimates that ʺevery dollar invested in creditworthiness of a developing county is likely to mobilise more than US $100 in private sector financing for low-carbon and climate resilient infrastructure”

Programme-Related Investments (in pipeline) Example: seed-fund or guarantee first loss in a green infrastructure fund dedicated to cities