Finance


lending and other support to governments. Others, like the IFC and the EBRD, are wholly or mainly concerned with private sector development in emerging markets, and invest on commercial terms. DFIs deploy a range of instruments including debt financing, equity investment, guarantees, and trade finance programmes. Multilateral development banks also leverage grant funding from donor governments or entities such as the GEF and provide technical assistance and advisory services.


The DFI community also includes long-term investors, such as the French CDC, the Italian CdP, Germany’s KfW, and the Moroccan CDG, characterised by a low reliance on short-term market liquidity thanks to stable


resources, often comprised of regulated or


guaranteed deposits, long-term savings products or long-term borrowing. These institutions typically have a robust capital base, stemming mainly from reserve accumulation, which enables them to absorb short-term fluctuations in financial markets. As such they can invest in – often illiquid – capital or debt instruments that yield a profitable return in the long run, such as those issued by companies operating in sectors such as general interest utilities, infrastructures or renewable energies (see Box 12).


The World Bank’s operations range from the integration of climate change issues into sectoral strategies to the management of specialised investment funds and raising capital for project finance through green bonds. In the private sector arena, the IFC provides a suite of finance and advisory services ranging from energy efficiency financing facilities for intermediation by local


The EBRD’s Sustainable Energy Initiative (SEI) has an investment target of € 3 billion to € 5 billion from 2009 to 2011, with a corresponding carbon reduction target of 25 to 35 million tonnes of CO2


equivalent per


annum. Amongst other activities, EBRD has emerged as the dominant investor in renewable energy in its region of operations – Central and Eastern Europe, and Central Asia – concentrating primarily on wind power. Like the World Bank Group, the EBRD has also begun to increase its focus on climate change adaptation by developing new tools to integrate adaptation risk into project due diligence and structuring, as well as financing infrastructure projects such as flood defence schemes. IFC, EBRD and other DFIs are also collaborating on protocols for GHG assessment and several of them report publicly on the annual emission reductions and emission increases associated with new projects signed each year.


Box 13: The Global Environment Facility (GEF)


The Global Environment Facility (GEF), the world’s largest public environmental fund, provides grants to developing countries and countries with economies in transition for projects related to biodiversity, climate change, international waters, land degradation, the ozone layer, and persistent organic pollutants. The GEF serves as a financial mechanism for the UN conventions on Biological Diversity, Climate Change, Persistent Organic Pollutants and Desertification. The GEF partners with ten intergovernmental agencies, including UNEP, UNDP and the World Bank as implementing agencies. The latter has also served as the Trustee of the GEF Trust Fund since 1994. Established in 1991, the GEF is today the largest funder of projects to improve the global environment. The GEF has


allocated US$ 9.2 billion, supplemented by more than US$ 40 billion in co- financing, for more than 2,700 projects in more than 165 developing countries and countries with economies in transition. Through its Small Grants Programme (SGP), the GEF has also made more than


12,000 small grants directly to nongovernmental and community organisations, totalling US$ 495 million. Grants can be awarded up to a US$ 50,000 ceiling with an average grant typically about US$ 25,000 per project. The small grants network which has been designed to empower local communities make investment choices that have the multiple benefit of generating green jobs at home while protecting the global environment.


banks, to support for low carbon investment indices and the issuance of green bonds. As a global fund dedicated to the environment, the GEF (see Box 13) provides funding to cover the incremental or additional costs associated with transforming a project with national benefits into one with global environmental benefits. Its Earth Fund targets private sector engagement through public private partnerships. Up to 2009, the GEF has invested US$ 2.7 billion to support climate change mitigation projects in developing countries and economies in transition, and leveraged another US$ 17.2 billion in project co-financing. With its longer term focus, it can provide critical support in scaling up green economy projects in areas such as climate, water, land, forest and chemicals management.


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