What is Green Finance? How to structure a market to attrach green investments? Which are the instruments and mechanism to make it succesfull operative and monitorable?

1. Green Finance
Financing Green Economy
Luisa Nenci
SUB-REGIONAL Training «GREEN FINANCE: Investment
Tools and Policies to promote Eco-innovation, Clean
Industry and Green Economy» Amman, 28 January 2014

2. Index
1 Definition(s) of: Sustainable Development, Green Growth and Green Economy
2 Financing the Green Economy: Impacts, Diagnostic, Indicators, Strategy
3 Funding:
3.1 Environmental protection:
‒ Climate Change
‒ Biodiversity
3.2 Infrastructures for:
‒ Water
‒ Energy
‒ Waste
3.3 Technologies for
‒ Eco-innovation
‒ Clean Production
‒ Energy Efficiency
Conclusions
2

3. Definitions
What is
Sustainable
Development?
Green Growth?
Green Economy?
3

4. Definition
Sustainable Development
the goal of Sustainable Development is ”to meet
the needs of the present without compromising the
ability of future generations to meet their own needs”.
Bruntland Definition,
World Commission on Environment and Development Our
Common Future , 1987
Triple Bottom Line:
Balanced approach to economic
development, environmental protection
and social well being.
John Elkington founder of SustainAbility 1987
4

5. Definition
Green Growth
GG aims to foster economic growth and development,
while ensuring that natural assets are used
sustainably, and continue to provide the resources
and environmental services on which the growth and well-
being rely. OECD (2011), “Towards Green Growth:
Monitoring Progress - OECD Indicators”,
OECD, Paris
GG is growth that is efficient in its use of natural resources,
that it minimises pollution and environmental impacts,
resilient because it accounts for natural hazards
World Bank (2012), Inclusive Green Growth:
The Pathway to Sustainable Development, 2012,
World Bank, Washington, DC.

6. Definition
Green Economy
Towards a Green Economy
A system of economic activities related to
the production, distribution and consumption
of goods and services that improve the well-
being in the long term, while not exposing
future generations to social risks and
ecological scarcities
Source: UNEP, 2011, Towards a Green Economy: Pathways to Sustainable Development
and Poverty Eradication,p.2 www.unep.org/greeneconomy
5

7. Impacts
Human Activities
7
Source: Scott Brennan & Jay Withgott, Environment: The Science Behind the
Stories, 2004

8. Impacts
Planetary boundaries
Source: OECD (2011) Toward Green Growth p. 30
AAVV (2009) Planetary Boundaries: Exploring the safe operating space for humanity, Ecology
and Society p.9 8

9. Impacts
9
Source: UNEP, 2011, Towards a Green Economy: Pathways to Sustainable Development
and Poverty Eradication, www.unep.org/greeneconomy

10. Impacts: Ecological Footprint and Human Development
Source: The Ecological Wealth of Nations: Earth’s Biocapacity as a New Framework for
International Cooperation. Global Footprint Network (2010), p. 13; Human Development
Index data from Human Development Report 2009 − Overcoming Barriers: Human
Mobility and Development. UNDP (2009).

11. Diagnostic
Green Economy Report UNEP 2011
the transition to a green economy by 2050 is possible with
the investment 2% of global annual GDP through the
transformation of key sectors :
- Agriculture - Manufacture
- Construction - Tourism
- Energy - Transport
- Fishery - Water Management
- Forestry - Waste Management
11
Source: UNEP, 2011, Towards a Green Economy: Pathways to Sustainable Development
and Poverty Eradication, Financing the Green Economy Transition p.35

12. Source: OECD (2011) Tools for delivering Green Growth p.6
OECD (2011) Toward Green Growth concept based on Hausmann, Velasco and Rodrik
(2008), “Growth Diagnostics” in J. Stiglitz and N. Serra, (eds), The Washington Consensus Reconsidered:
Towards a New Global Governance.
Diagnostic
Toward Green Growth
12

13. Source: OECD framework for environmental indicators. Using the pressure-
state-response model to develop indicators of sustainability
Indicators
Pressure-State-Response Framework

14. Indicators
Pressure
14

15. 15
Indicators: State

16. Indicators : Response GG/GE indicators
Source: Green Growth Knowledge Platform (2013) Moving towards a Common Approach on
Green Growth Indicators p.6

17. Strategy
Response: Design, reform and implement policies for green growth
17
Source: OECD (2013) What have we learned from attempts to introduce green growth policies p.7
OECD-EU Support for Improvement in Governance and Management (SIGMA)

18. Strategy: Response: Reforming Subsidies
Budgetary (Government benefit)
Fiscal savings
More investments
Form regressive to progressive expenditure
Economic(Firms’ benefit)
Prize liberalization
Improved competition
Incentives to domestic production
Social(Household benefit)
Increase in social assistance program
Establishment/improvement in targeting mechanisms
Conditional programs
Source: ICTSD Tackling Perverse Subsidies in Agriculture, Fisheries and Energy
OECD (2011) Outils pour la mise en place d’une croissance verte p.13

19. Strategy: Response: Reform of Energy Subsudies
Source: UNEP (2008) Reforming Energy Subsidies. Opportunities to Contribute to the
Climate Change Agenda p.9

20. Source: FAO (2013) Regional Initiative on Water Scarcity in the Near East Preliminary
Regional Review and Gap Analysis – DRAFT p.16
Strategy: Response: Not just a Reform of Water Subsudies

21. Strategy: Response: Agriculture Reform Egypt
Source: Booz & Company (2010) elaboration of Data from The World Bank, “World
Development Report 2008.” and “OECD-FAO Agricultural Outlook 2009–2018,”2009.

22. Strategy
Response: Taxes on pollution and other fiscal instruments
Welfare Effects of Environmental Taxes
in the Pigouvian Framework

23. Strategy
Response: Taxes on pollution - Light Fuel Oil -
Source: IMF Working paper (2012) Environmental Tax
Reform: Principles from Theory and Practice to Date p.8

24. 24
Payments for ecosystem services (PES) compensate individuals or
communities whose land use or other management decisions that
affect resources on providing the ecosystem services for the additional
costs of providing these services.
Strategy
Response: Payments for ecosystem services (PES)
Rangelands in Jordan: Seek possible additional sources of funding
for local communities for range management through:
•global PES with respect to carbon capture (or “sequestration”) –
either through the “Kyoto Protocol” or through voluntary, pilot
markets – and other global common goods.
•national PES by rationalizing assistance and
payments to land users (mainly Bedouin
communities) under various public programs.
•considering payments part of the Climate
Change agenda.
IFAD Jordan National Program for Rangeland Rehabilitation and Development -
Phase I

25. Strategy
Response: Standards and certification on sustainable production
21
Global Eco-labelling Network
International Social and Environmental Accreditation and Labeling Alliance
European Eco-Management and Audit Scheme (EMAS)
International Standards Organization (ISO)
Environmental Management System
ECO-Label

26. Source: OECD, Government at a Glance 2013: Procurement Data, OECD Meeting of Leading
Practitioners on Public Procurement, GOV/PGC/ETH(2013)2, 23-Jan-2013 p.7
22
Public authorities in the EU actually spends more than 16%
of EU GDP – equal to almost 1.8 billion Euros
Source: European Environmental Bureau
Strategy
Response: Public Procurement

27. Strategy
Response: Sustainable Public Procurement
"A sustainable purchasing policy ... take the life cycle into
account with profit, social and environmental costs ..."
Procuring the Future (2006)
UK Sustainable Procurement Task Force
Source: UNEP Capacity Building for Sustainable Public Procurement
22
Source: Republic of Lebanon Ministry of Finance (2013) Professionalizing Public
Procurement in Lebanon: Diagnostic Review and a vision forward

28. Strategy
Response: Land tenure rules
IFAD Land Tenure Security: Rights for natural resources utilisation:
Rangeland projects may need to clarify the land-tenure system and rights
to resources.
• recognizing and documenting group rights to rangelands and
grazing lands, forests, artisanal and fishing waters
• recognizing and documenting smallholder farmers’ land and water
rights in irrigation schemes
• strengthening women’s secure access to land
• using geographic information systems to map land and natural
resource rights, use and management
• identifying best practices in securing these rights through
business partnerships between smallholder farmers and investors
To improve access to land for the poor (especially women,
minorities and other disadvantaged groups) who wish to
practice agriculture.
23
Framework & Guidelines on Land Policy in Africa
Source: OECD Green Growth Toolkit p.55

30. 3.1 Environmental protection:
‒Climate Change
‒Biodiversity
3.2 Infrastructures for:
‒Water
‒Energy
‒Waste
3.3 Technologies for
‒Eco-innovation
‒Cleaner Production
‒Energy Efficiency
Funding
26

31. Funding
Environmental Protection: EU Definition
«Support to biodiversity water and energy
and the fight against climate change are key
areas of cooperation development, as
expressed in the European Consensus on
Development
Sustainable management of the environment
is also one of the Millennium Development
Goals.»
31
Source: From Policy to Action: An outline of EU external aid for Sustainable Development

32. Environmental Protection
Climate Change
32
Sources: EU (2012) European Union fast start funding for developing countries
EU (2012)Supporting a Climate for Change p.35,
Commissioners Piebalgs announce "Climate Change Windows“
ECDPM (2012) EU Regional Blending Facilities
GCF (2013) Financial Instruments , Documents
EU-Climate Change Windows
GCF the new operating entity of the financial
mechanism of the UNFCCC.
EU-Fast Start Finance

33. 33
Climate Change Policy of the Hashemite Kingdom of Jordan launched
on 14 May 2013 “Enabling Activities for the Preparation of Jordan’s Third
National Communication Report to the UNFCCC (TNC)” project, “Adaptation
to Climate Change to Sustain Jordan’s MDG Achievements” Project, “Water
Governance Programme for the Arab States” and “Developing policy-relevant
capacity for implementation of the Global Environmental Conventions (CB2)”
Environmental Protection Climate Change
Lebanon electricity generation mix 2010-2030
Source: EUROMED (2012) Climate change and
economic growth: an inter temporal general
equilibrium analysis for Egypt
Egypt Impacts on Sectoral
Capital Stocks 2050
Source: MOE, GEF,
UNEP(2011) Lebanon
Technology Needs
Assessment-
ClimateChange p.71

34. Environmental protection
Biodiversity
38
Biodiversity through the
financing of Climate Change:
funded 2009/2010 with USD 70-
120 billion each year while
biodiversity with only 8 billion
USD.
A further loss of
10% of the world's
biodiversity is
expected between
2010 and 2050.
Source: Scaling up Finance Mechanisms For Biodiversity p.16
Source: OECD (2011) Toward Green
Growth p. 21

35. 39
PES Offset of an area of ​​30
hectares: 10 hectares of cultivable
field and 20 of degraded limestone
grasslands. The proposal aims to
restore arable field limestone and
improve the condition of the existing
meadow.
Source: DEFRA (2012) Biodiversity Offsetting Pilots. Guidance for offset providers p.19
Environmental protection
Biodiversity

36. Funding
Infrastructures: Grants European Commission
Mainly European Countries
Agriculture, fisheries and foods
Animal welfare
Aquaculture
CAP
CFP
Plant health
Rural development
Business
Climate action
Competitiveness
Enterprise and Industry
Free movement
Internal market
SMEs
Energy and natural resources
Climate action
Energy
Intelligent Energy Europe
Environment, consumers and
health
Consumers
Environment
Health
Maritime policy
Sustainable development
Employment and social rights
Employment, Social Affairs and
Inclusion
Regions and local development
EU solidarity fund
Regional Development Fund
Regional policy
Science and technology
Research
36

37. NIF promotes investment particularly in the sectors of Transport
projects, Energy, Environment and Social sector.
The Facility also supports the private sector, including through risk
capital operations for Small and Medium Enterprises (SMEs).
Funding
Infrastructures: Neighbourhood Investment Facility (NIF)
41
Source: AAVV (2012) Analysis for
European Neighborhood Policy (ENP)
and the Russian Federation on the
Social and Economic Benefits from
Enhanced Environmental Protection.
(2011) Regional Report: ENPI South.
A Synthesis Report on Algeria, Egypt,
Israel, Jordan, Lebanon, Morocco,
occupied Palestinian Territories, Syria
and Tunisia. P.54

38. Infrastructures
Water
Monetary benefits of meeting water quality
improvement targets – South ENPI countries,
2020

39. Source: UNEP (2011) Green Economy Report Synthesis p.16
Business as usual approaches will not meet demand for raw water
Infrastructures
Water

40. Infrastructures:
Waste: Carbon Finance WB
40
Egypt, Aerobic Composting Egyptian solid
waste recycling (ECARU) provides treatment
and service land filling of municipal waste
collected in the south of the city.
ECARU processes of
recyclables,
composes organic
biomass (food, non-
recyclable paper,
wood) and manages
residual waste.

41. Infrastructures
Energy
EU financial instruments specifically support the
achievement of policy objectives in the energy sector
with:
market-based instruments (mainly taxes, subsidies and
trading system for CO2 emissions rights):
41
Source:
Greenhouse gas
emission allowance
trading scheme
Community
framework for the
taxation of energy
products and electricity
-
Current minimum excise
rates
Petrol (€/1000 l.) 421
Unleaded petrol (€/1000 l.) 359
Diesel (€/1000 l.) 330
Kerosene (€/1000 l.) 330
LPG (€/1000 l.) 125
Natural gas (€/gigajoule) 2.6
The minimum levels of taxation applicable to motor fuels in EU

42. Infrastructures
41
Tentative typology of green growth sectoral policy objectives in
Mediterranean countries: job creation and risk of irreversibility
Source: FEMIPE (2012) Toward
Green Growth in Mediterranean
Countries P.90
ICZM = Integrated Coastal
Zone Management

43. FP7 projects are at an early stage of research or
development, or with a high technological risk.
H2020 is the financial instrument to be implemented between
2014-2020 with a budget of just over € 70 billion Euros.
This new EU program for research and innovation, combine
the Framework Programs for research and Technical
Development, the Competitiveness and innovation Framework
Program (CIP) and the European Institute of innovation and
Technology (EIT).
Six main areas:
1.Depollution 2.Maritime and land highways 3.Civil protection
4. Alternative energy 5. Research 6. SMEs Development.
43
Technologies
Innovation: FP7- Horizon 2020

44. Technologies
Eco-Innovation: EU
Source: Eco-Innovation: When business meets the environemnt
•has an innovative character;
•shows clear and substantial advantages for environmental
policy objectives;
•achieves significant environmental improvements;
•provides an important replication;
•demonstrates a European added value;
•sounds technical at a project management perspective;
• is 'cost-effective'
50

45. Source: Oxford Research (2011) EU Financing Eco-innovation p.16
45
Eco-Innovation
Types & Economic Sectors

46. access to finance is a major
constraint to innovation in
business, which is inherently risky
A venture capital market operating
effectively is:
-facilitating the access to debt financing
(which is the main source of innovation)
and issue of shares;
-planning risk sharing with the private
sector
Eco-Innovation
Funding
52
Source: The OECD Innovation Strategy

47. 47
Eco-Innovation
Instrument of Financing and Financed sectors
Source: Oxford Research (2011) EU Financing Eco-innovation p.56

48. Source: Oxford Research (2011) EU Financing Eco-innovation
p.71 48
Eco-Innovation
Incentives to finance innovative SMEs

49. EUROPEAN FUNDS focused on clean technologies
such as: WHEB Ventures, Environmental Technologies
Fund (ETF), Capricorn Venture Partners, Demeter
Partners, Emerald Technology Ventures, Carbon Trust
Investment Partners, Low Carbon Accelerator, Ludgate
Investment GIMV and Set Venture Partners.
ERBD Sustainable Resource Initiative favourises:
efficiency and innovation and increases
competitiveness in three areas:
•energy,
•water
•materials.
49
Eco-Innovation
Specialised Financing Instruments

50. Eco-Innovation
Intermediary Financing Institutions: State Promotional Banks
The KfW Mittelstandsbank
•risks fifty-fifty with the intermediary banks.
•not specifically targets eco-innovation, but innovation in general.
•the share of loans to eco-innovative SMEs is very low (≈ 5%)
•insolvency of new innovative companies is ≈ 30%.
Source: Oxford Research, EU Financing Eco-innovation p.114
GIZ (2013) Promoting Eco Innovation p.37
ALMI, Innovation Loan (Sweden)
AWS, Eco- Bonus (Austria)
ERP, Capital for startups/ERP, Innovation
Programme/BMU, Environmental Innovation
Programme (Germany)
ICO, Sustainable Economy Facility (Spain)
56
KfW Promoting green innovation and sustainable responsible
entrepreneurship: the ZERO Award in Egypt and Ethiopia

51. Local investors (max
38%) in startup
companies taking an
advisory role without
financial compensation.
With co-investment
funds: investment
mechanism resulting
from a public-private
partnership for
investment in start-ups.
57
Eco-Innovation
Business Angels Venture Capitals
Professionally managed fund
with requirements of
financial performance.
There is not an integrated
market, the regulatory
framework varies greatly from
one country to another.
The European Union seeks to
unify the venture capital
market to facilitate access to
finance for innovative small
businesses.
Source: EBAN (2009) Compendium of
Co-investment for Business angels and
Early stage funds in Europe

52. Technologies: Eco-Innovation
52
Eco Innovation
European VC Investment on cleanear tecnologies for sector

53. Eco-Innovation
Banks and other private financing
Institutions utilized by SMEs to be financed
Source: Oxford Research, EU Financing Eco-innovation p.42
PRIVATE CLIMATE FINANCE Tracking measurement of total
private climate finance to and in developing countries
59

54. Technologies
Energy
Eu financial instruments are specifically supporting
the achievement of policy objectives in the energy
sector with the development of energy technologies
for:
energy efficiency,
low carbon technologies
and renewable energy
54

55. 55
Technologies
Energy Efficiency
Source: Plan Bleu (UNEP/MAP) 2011 Energy Efficiency, building and Climate Change in the
Mediterranean. p.3
Investment needs for EE measures by 2030 (billion €)

56. Technologies:
Technologies propres: Cleaner Energy Production
Source: ERBD Cleaner Energy Production
BERD Sustainable Energy Financing Facilities
56
Cleaner Energy Production Program included in the Sustainable
Energy Initiative (SEI) and covers the need to strengthen
economic development in carbon limited conditions of:
thermal power generation and cogeneration;
hydropower;
transmission and distribution, including SCADA systems and
smart grids;
grid connected renewable energy, including wind, small hydro
and biomass

57. Source: FEMIPE (2012) Toward Green
Growth in Mediterranean Countries p.20
Employment potential associated with renovation of buildings in 2030

58. Summary
Source: OECD (2012) A Toolkit of Policy Options to Support Inclusive Green Growth p.17

59. Summary suite

60. Conclusions
Countries should continue their efforts to manage natural
resources in a sustainable manner.
Price instruments (pricing et
al.), supplemented by
regulations or subsidies have
encouraged green growth.
The main challenge to foster GE is to coordinate policies and
to develop indicators and tools for monitoring the progress of
implementation.
Innovation is essential
to foster green growth
64

61. ‫شكرا‬
Luisa Nenci
Email lnenci@sustainvalues.net
Website www.sustainvalues.net