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EIB financing of climate action outside the EU

  1. EIB financing of climate action outside the EU Bert Teuwen Senior Banker 02/06/2017 European Investment Bank Group 1 Brussels, 18 May 2017 Business opportunities in the framework of Europe's climate actions outside the EU Seminar
  2. The EIB: the EU bank 02/06/2017 European Investment Bank Group 2 Investing in Europe’s growth • Created in1958 • Shareholders: 28 EU Member States • Driven by EU policy • Around 90% of lending is within the EU • Operates outside EU through specific Mandates
  3. EIB Group financing in 2016: EUR 83.8bn 02/06/2017European Investment Bank Group 3 Signatures EFTA & Enlargement Countries EUR 3.35bn Eastern Neighbours EUR 1.65bn Africa, Caribbean, Pacific, South Africa EUR 0.77bn Asia and Latin America EUR 0.98bnSouthern Neighbours EUR 1.63bn European Union 75. 4bn Outside EU 8.38bn EUR EUR Total EUR 83.8bn
  4. EIB Priorities EIB financing supports EU policy priorities and objectives  Climate action is a horizontal objective, i.e. it is integrated in the other priority objectives. 02/06/2017European Investment Bank Group 4
  5. The Paris Agreement & EIB Climate Action 02/06/2017 European Investment Bank Group 5 The Paris Agreement • Ambitious mitigation goal • Country-led NDCs • Explicit call for climate finance • (Alignment with EU climate policies) EIB’s traditional approach based on volume (25% target) Increased focus outside the EU (35% target) EIB’s 2015 Climate Strategy Impact + Resilience + Mainstreaming EIB Climate Action
  6. EIB Response: Volume (1) • EIB has a 25% target towards climate action relative to its overall financing volume. • EIB provided >EUR 90bn in climate finance over the last 5 years. • In 2016, EIB delivered EUR 19.6 bn to specific climate action projects:  Exceeded the 25% financing target towards climate action.  Remained the largest MDB in terms of support to climate action.  EUR 1.9 bn were channeled to developing countries. 02/06/2017 European Investment Bank Group 6
  7. 02/06/2017 European Investment Bank Group 7 Total: EUR 19.6bn EIB Climate Action Lending 2016 EIB Response: Volume (2)
  8. EIB Response: Increased Focus outside EU In the lead up to COP-21, the EIB committed to increase its climate finance for developing countries to 35% by 2020. 02/06/2017 European Investment Bank Group 8
  9. EIB Response: Climate Strategy Complementing EIB’s volume-driven approach, EIB’s 2015 Climate Strategy will help implement the Paris Agreement inside and outside the EU by focussing on three key-areas: 02/06/2017 European Investment Bank Group 9 EIB Climate Strategy Reinforcing the impact of climate financing Building resilience to climate change Further integrating climate change considerations across EIB standards, methods and processes centre/publications/all/ eib-climate- strategy.htm
  10. Engaging the Private Sector is Key  There is no doubt that the bulk of the investment needed to address climate change will have to come from the private sector  As part of its Climate Strategy, EIB will identify operation types with a particularly high financial impact and/or high mitigation or adaptation gains, focusing on: 02/06/2017 European Investment Bank Group 10  Financial innovation and mobilisation of private resources.  Capital markets investors.  Blending with public funds.  Increased pipeline of climate action projects centre/publications/all/ eib-climate- strategy.htm
  11. 02/06/2017 European Investment Bank Group 11 EIB lending instrument For Investment Grade operations Project Public Sector Financing Project Finance Direct Loans Intermediated Loans Project Finance with direct project risk Risk Sharing Equity through Funds Banks EIB special activities For Low and Sub Investment Grade operations What can the EIB do? – Financing Instruments The EIB has an extensive range of instruments to finance public and private sectors at investment and sub-investment grades of risk to its disposal.
  12. What can the EIB do? – Innovative Products 02/06/2017 European Investment Bank Group 12 Encouraging private and public sector commitment of investment, project implementation and management experience Enhancing the investment market complements other initiatives and additional sources of funding (including institutional investors) In addition to the more traditional financing products, EIB offers a number of innovative climate finance products coupled with technical and financial advice to engage the private sector to achieve: Flexibility Leverage Effect Catalytic Effect Expertise & Creativity Broader eligibility of expenditure and in the use of funds for equity, debt and guarantee investment Encouraging private and public sector commitment of investment, project implementation and management experience Enhancing the investment market complements other initiatives and additional sources of funding (including institutional investors) EIB expertise and rigorous due diligence help meet the highest standards
  13. How to best engage the private sector? 02/06/2017 European Investment Bank Group 13 1 2 3 4 Do not crowd out other sources of funding (public and private!) Enable the private sector to do things that it otherwise would not be able to do Focus on leveraging public funds to engage the private sector BUT: do not re-invent the wheel → many mechanisms already exist!
  14. Project example: Lake Turkana Wind Project - Kenya  The site, covering 40,000 acres, is located in in northern Kenya.  The wind farm will have an installed capacity of 310MW and includes 365 turbines, a 33 kV electricity grid system, and a 33/200 kV substation and related utility services including civil works, housing and buildings.  The project is on course with full capacity expected to be achieved in June 2017.  With EUR 625 million project costs this makes it the single largest wind power project to be constructed in Africa and is, to date, the largest private investment in the history of Kenya.  EIB loan of EUR 200 million and EUR 25 million contribution from EU-ITF (EU-Infrastructure Trust Fund) under Sustainable Energy for All Window (SE4All).  This is an example of blending: EIB lending combined with EU funding. 14 European Investment Bank
  15. 15 European Investment Bank Project location
  16. 16 European Investment Bank Wind Turbines and OHL Lines Installation WTG erection in progress
  17. 02/06/2017European Investment Bank 17 Project example: Vientiane Sustainable Urban Transport- Laos • Construction of a Bus Rapid Transit (BRT) system in Vientiane:  11.5 km of dedicated bus lanes  21 enclosed stations  acquisition of 96 new BRT buses,  which should meet a minimum EURO IV emissions standard (clean technology). • The project will also set up a city transport agency and improve pedestrian facilities near bus stations. • The project will benefit from an EUR 20 m EIB loan and from TA provided by the EIB and funded through a EUR 5m grant provided by the EU Asian Investment Facility. • As a result of the project, it is expected that bus passengers will save 1.5 million hours per year and local pollutants will be significantly reduced.
  18. 02/06/2017European Investment Bank 18 Project example: IIFCL Energy Sustainability & Climate Action Framework Loan - India • Framework loan to support renewable energy and energy efficiency investment projects that contribute to climate change mitigation. • RE projects eligible for financing include grid connected wind parks, solar PV, biomass, hydroelectricity and may include transmission lines that evacuate renewable electricity production. EE projects include electricity transmission and distribution investments that meet the EIB’s energy efficiency criteria. • Borrower: India Infrastructure Finance Company Limited (IIFCL), a wholly government owned entity mandated to provide long term finance to viable infrastructure projects by extending long-term subordinated and senior loans as a junior partner of financing consortia led by commercial banks. • EIB loan = EUR 200 m • A second phase of this facility is expected to be approved later this year.
  19. •02/06/2017 •19•European Investment Bank Example fund of funds: GEEREF The Global Energy Efficiency and Renewable Energy Fund is sponsored by the European Union, Germany and Norway and advised by the European Investment Bank Group GEEREF is a fund of funds that invests in private equity funds which invest on renewable energy and energy efficiency projects in emerging markets, thereby further enhancing the leveraging effect of GEEREF's investments. Launched in 2008 with an initial capital of EUR 112 million The Fund currently manages € 222 million, which could mobilised over € 10 billion through the funds in which GEEREF participates and the final projects in which these funds invest. GEEREF had invested in 13 funds across Africa, Asia, Latin America and the Caribbean as of May 2017.
  20. •20•European Investment Bank MGM Sustainable Energy Fund  GEEREF has committed € 10.0 million to the MGM Sustainable Energy Fund, managed by MGM Innova Capital LLC  MSEF is a private equity fund providing equity and mezzanine financing to projects in the demand-side energy efficiency and renewable energy sectors in Colombia, Mexico, Central America and the Caribbean region.  The fund will seek to invest 70% of its committed capital in energy efficiency projects (residential sector: consumer financing for green appliances; commercial sector: hotels, hospitals, other large buildings; municipal sector: street lighting); and 30% in renewable energy projects (proven technologies including hydro expansion/rehabilitation, solar and wind). Example of GEEREF portfolio
  21. 02/06/2017European Investment Bank 21 Project example: FEMIP Sustainable Energy Facility  FEMIP Sustainable Energy facility aims at providing credit lines to local Financial Intermediaries (FIs) in Jordan and Morocco to finance energy efficiency and small renewable energy investments in the industrial, SMEs, agribusiness, commercial services and residential sectors.  The project, which is co-financed by the EBRD (Lead IFI), AFD and KfW, will contribute to the reduction of greenhouse gas emissions and the enhancement of security of supply.  EIB loan = EUR 35 m  So far two intermediary banks: • Banque Centrale Populaire (Morocco) • Banque Marocaine du Commerce Exterieur
  22. Thank You! 02/06/2017 European Investment Bank Group 22

Notas do Editor

  1. EUR 1.9 bn to developing countries represents 27% of total lending to those countries.
  2. The EIB will finance USD 20 billion a year globally for the next five years (2016-2020) under its recently announced climate strategy commitments, equal to at least 25% of its overall lending for the period. The EIB aims to increase its lending for climate action in developing countries to 35% of total lending (in developing countries) by 2020.
  3. The EIB will only finance up to 50% of any project: however, since IIFCL exposure to the total project cost is limited to 20%, EIB could finance IIFCL whole exposure to the individual allocations/projects. Total project cost = EUR 1 bn
  4. Total project cost = EUR 137 m