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Operationalizing the Private Sector Facility of the Green Climate Fund

2014-02-19

Brief – Operationalizing the Private Sector Facility: Addressing Investor Concerns

This study summarizes the findings from a project that CPI carried out on behalf of and in close partnership with the Netherlands’ Ministry of Infrastructure and Environment aimed to support the design and operationalization of an innovative and effective Private Sector Facility.
Download the brief here

Overview

Global investment in climate mitigation and adaptation has reached $359 billion each year. While this is a start, funds still fall far short of what is needed. According to the International Energy Agency, to transition to a low-emissions economy, the world requires $1 trillion a year from 2012 to 2050 for the energy sector alone. The world is facing a major green financing gap.

The world has high hopes that the Green Climate Fund (GCF) can help to fill this gap through its own funds and by unlocking additional large pools of capital. In light of the need to scale up low-emissions investments and the dominant role the private sector already plays in green investments, incentivizing private investors to encourage investment in low-carbon, climate-resilient development at scale through the Private Sector Facility (PSF) represents a critical element of the GCF’s work.
A wide range of lessons and experiences from existing funding practices can inform the emerging design of the PSF. To support its operationalization, this project, implemented by CPI on behalf of and in close partnership with the Netherlands’ Ministry of Infrastructure and Environment, aims to learn from cases across geographies and technologies how private sector involvement has helped to successfully finance projects and programmes. The objective is to understand how public money can be used most effectively to mobilize private finance, to ensure that the financing of green and low-emission development becomes more than just a marginal phenomenon through the design of an innovative and effective PSF.

Events
Danish-Dutch Dinner on the Private Sector Facility (PSF)
of the Green Climate Fund (GCF)

Songdo, Korea – June 26, 2013

Summary Brief

On behalf of the governments of the Netherlands and Denmark, CPI organized a Danish-Dutch dinner on the Private Sector Facility (PSF) of the Green Climate Fund (GCF) at the margins of the Third GCF Board Meeting in Songdo. The dinner brought together Board members and alternates, with a few selected additional participants from the private sector, international finance institutions and think tanks.

The PSF is an important element of the GCF design, and could help the Fund to deliver expectations that it add value and achieves transformational change. Thinking on PSF issues has advanced in many circles, and this dinner aimed to link this to concrete key design issues related to the PSF. The dinner resulted in a lively and focused debate, which was stimulated by short presentations of recent research on the PSF and opening remarks from Per Callesen, GCF Board Member from Denmark.

Workshop: Operationalizing the Private Sector Facility (PSF) of the Green Climate Fund (GCF)
Island of San Giorgio Maggiore, Venice, October 4, 2013

Agenda
Background Slides
PSF Workshop – Participant List

The Songdo GCF Board meeting has resulted in a first decision on the PSF. It provided clarity on a number of pieces of the PSF puzzle that would enable the PSF to add value, both to the Green Climate Fund and to the existing international architecture. While an important step, the remaining pieces do not yet provide a full operational picture of the PSF, or a clear illustration of its tangible deliverables and services. A number of key issues need further specification and iteration, including the PSF’s interaction with the two GCF windows and external intermediaries, relationships between the various instruments and the three committees/groups within the GCF, and implications for risk appetite.
The workshop aims to address these issues and concretely think through PSF design options, benefitting from hands-on experience of the private sector and International Finance Institutions.