Ministry of Finance, Paris
One Planet event
I am absolutely delighted to be here today with friends and partners from the Green Climate Fund, development institutions and the private sector.
- The urgency
All of us agree that sustainable infrastructure is critical and we all know that huge investments are required: US$ 60 trillion plus over the next 15 years for the growing Global South.
It will be a challenge to finance it.
But it will be an even bigger challenge to finance it in the right way.
According to projections, 70 per cent of the increase in future emissions of greenhouse gases will originate in infrastructure which is still to be constructed.
If we want to achieve the Paris climate targets, we must make sure that such future infrastructure is sustainable.
And as we heard at the UN Climate Action Summit in September, we have only a decade to turn things around.
- The role of MDBs and partnership with GCF
At the Summit in New York, we also heard confirmation that the world expects development institutions to join forces and take a lead to address this challenge.
In a letter to MDB Presidents, the Ministers of Finance of France, Jamaica and Qatar, who lead the climate finance track, praised the significant increase in climate finance achieved by the MDBs since COP21. They also called on us to do much more – to provide more climate finance and more support to our countries of operations in developing their nationally defined contributions (NDCs).
We responded to the Ministers’ call at the UN Secretary General’s Climate Action Summit with our joint MDB Statement committing the MDB to five specific actions:
- More climate finance from the MDBs;
- Higher finance mobilisation from the private sector;
- More transparent reporting;
- Helping our clients to deliver on the Paris Agreement goals; and
- Supporting them in shifting away from fossil fuels.
All of these actions require working in partnerships. And one of these partnerships is especially important: the partnership with the Green Climate Fund (GCF).
The Ministers urged us to strengthen our partnership with the GCF.
In fact, the EBRD has already established a very strong operational relationship with the GCF. We have demonstrated how the GCF can be a catalyst for transformational investment in sustainable infrastructure.
The GCF, of course, has very productive partnerships with very many institutions. Congratulations on allocating 5.2 billion dollars of climate finance – 830 million dollars of which has been allocated to the EBRD, which we are actively disbursing. In fact EBRD has disbursed half of all GCF funds disbursed thus far.
We have already had great successes together: for example, a major solar park in Egypt, which will be the largest in the world when completed, supported by 64 million dollars of GCF concessional finance; a framework for renewables in Kazakhstan; and a climate-resilient hydropower plant in Tajikistan.
And now, the GCF is actively supporting our trademark Green Cities programme.
- One condition, one opportunity, one challenge
So, how do we, together, achieve this great boost in financing, which we, the MDBs, have committed to?
I will highlight one condition, one opportunity and one challenge.
First, the condition: policy reform.
The title of the next panel mentions frameworks. MDBs are in a favourable position to engage on policy and back it up with investment, so we must help governments create such frameworks on the ground.
Several countries from Egypt and Jordan to Kazakhstan and Mongolia now have viable renewables markets, a direct result of policy engagement by the EBRD and other IFIs. We also helped design the PPP law in Kazakhstan.
These new investment opportunities are opened up through policy engagement.
Second, the opportunity: capital.
There is a massive amount of capital – up to 100 trillion dollars - which is held by pension funds and insurance companies in mature markets.
This capital is seeking high returns, which emerging markets are best placed to deliver.
But PPPs in emerging markets can be risky. So, in order to provide appropriate risk-return profiles, de-risking instruments are very important.
We have already created successful de-risking products, including the Standby Liquidity Facility, in partnership with MIGA for the Turkish PPP market. Other partners, including the IFC, SIDA, AfDB, IADB and the EU, have created their own targeted facilities.
Building on this, we are now working together under the MDB Infrastructure Cooperation Platform – chaired currently by the EBRD – to create an effective risk mitigation (or credit enhancement) product, which can be scaled up and replicated.
And just before the UN Climate Summit, EBRD issued the world’s first ever climate resilience bond.
With these new products, we can seize the opportunity and attract the capital required.
And third, a challenge: actual projects.
The shortage of bankable projects and lack of institutional capacity in emerging markets are well known problems.
Our collective MDB response has been to roll out a series of Project Preparation Facilities over the last five years. The largest is the World Bank’s Global Infrastructure Facility; the EBRD, EIB, and regional development banks are all working on this too, and together we have allocated 800 million US dollars to project preparation.
Under our facility, the EBRD has already prepared 12 PPPs and more than 50 sub-sovereign projects.
I have only mentioned one condition, one opportunity and one challenge which require us to work together. There are many more, of course. I can only praise the hundreds of local private banks, our partners, which distribute billions to SMEs in nearly 30 countries for energy efficiency upgrades.
It’s also important to reconfirm that the G20 has been a catalyst in the wider global debate on infrastructure, and has worked collaboratively with the MDBs on an agenda to promote infrastructure as an asset class and the role of quality aspects within that agenda.
But not all partnerships need to be global: we have also found partnership opportunities internally. As of last year, we have a Sustainable Infrastructure Group, which now delivers nearly half of our investment.
It unites all banking teams for energy, transport and municipal policy and investments. We hope to see great innovation as a result of this synergy, such as public utilities powered with renewables. That is why this year our green economy financing is just under 50 of the total so far.
And I am sure that even greater innovation will come from our existing and new partnerships – including, of course, a strong and well replenished GCF.
Thank you very much.