Jul 13, 2022
Climate Investment Funds (CIF) is uniquely placed to design and deliver climate-smart investment programs and to mobilize finance for low-carbon, climate-resilient development at scale in low-income and developing countries.
But while this all sounds straightforward, climate investment in many of the countries in which CIF works can be a multi-sectoral, multi-partner, and multi-dimensional endeavor at various levels of society.
Chris Head, CIF’s Senior Private Sector Specialist, recently shed some light on how CIF works on the ground to help countries deliver on their climate objectives. Speaking at a recent CIF webinar on creating climate investment for transformational change, Head highlighted a few examples of very practical actions CIF has taken that required flexibility and agility to bring projects into being.
CIF works through multilateral banks to deliver these projects with governments and the private sector, and it requires more than just delivering physical structures or installations. Having policies to drive these large-scale investments on the ground can often be critical.
A good example, says Head, is CIF’s Clean Technology Fund (CTF) and its role in supporting the development of Kazakhstan’s clean energy policies. Between 2010 and 2015, CTF provided about US$1 million through a technical assistance grant in partnership with European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation, (IFC). By helping the country devise clear and transparent rules for investors, the grant contributed to creating a more favorable environment for the use of renewable energy. As Head explains, pairing enabling policies with concessional finance at scale has had a major impact on Kazakhstan’s clean energy markets.
“It was not just a broad renewable energy policy, but it looked at things like power purchase agreements, how you standardize those, how do you get the feed-in tariff system set up. There are cost clearing and settlement centers, so all the different mechanics and pieces set up at a policy level with the government, with the regulator, etcetera.
“We set that foundation and then right after that we came in with about US$50 million for the first solar plant, one of the first wind farms and built it up like that. And some additional follow-on investment came to take it to the next level. It took time. There are a lot of stakeholders there and to get it right we had to go back and tweak the policy. But to put it on that pathway, on the policy side and then following up with the first investments to demonstrate the sustainability was a pretty interesting example.”
Another example of how enabling policies can bolster concessional finance delivery, is an energy efficiency program in Turkey that brought about transformational results to the country’s energy sector. The idea, says Head, is to not only focus on the large-scale change that CIF financing makes possible, but also policy support at a more human or smaller company level. Bringing multiple stakeholders like the government, companies, end-use beneficiaries, and customers together can be an effective, long-term investment strategy, he says.
“One way that we have been able to do that in some sectors has been through local banks [and] local financial intermediaries. So, we’ll provide a loan to a local bank and, critically, not just the money but the TA [technical assistance], and the skills training and development within those banks.”
It’s more than building capacity and creating processes for climate investments. CIF aims to help countries create sustainable procedures that support climate programs in the long-term and become part of business practices. Using the banking sector as an example, Head explains:
“How do they [local banks] train … credit officers all over the country … to assess an energy efficiency project or a climate resilience project? How do you bake that into normal business operations and how do you market and sell it as a new business opportunity, a growth opportunity that gives you a competitive advantage? Those things put together: you provide the sweetener which is the concessional finance but also the skills development, the training, and technical assistance whether from the credit officer level but also to the broader bank itself.”
As these examples illustrate CIF’s work at various levels of government or the private sector can change the trajectory of a climate project and contribute to the adaptation and resilience of local communities. As one of the largest multilateral climate funds in the world, CIF continues to provide climate finance to low- and middle-income countries and support their ambitious climate objectives, whether they are large-scale, national programs or smaller, grassroots interventions.
Please note: Chris Head shared these insights during the CIF webinar held on May 12, 2022, called “Transformational Climate Finance: How Can Multi-Stakeholder Finance Models Drive Rapid and Just Responses to the Climate Crisis?” A video of the webinar is available here
