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Second Annual San Giorgio Group Meeting: Expanding Green, Low-Emissions Finance

Island of San Giorgio Maggiore, Venice, Italy, 2012-09-20

Organized by Climate Policy Initiative in collaboration with the World Bank Group, CLP  and the Organisation for Economic Co-operation and Development, the Second Annual meeting of the San Giorgio Group took place over one and a half days, on the Island of San Giorgio Maggiore, Venice. In October 2011,  Climate Policy Initiative, together with the World Bank Group, CLP, & the Organisation for Economic Co-operation and Development, established a new working group of key financial intermediaries and institutions engaged in green, low-emissions finance: the San Giorgio Group. Since the inaugural meeting, the San Giorgio Group has made substantial progress. We have conducted concerted outreach to share and test our analytical work, gathering substantial interest and support along the way. The second annual San Giorgio Group meeting reviewed the lessons learned from the first year of analytical work and identified the next set of questions for the Group going forward in the quest to scale up effective green finance. The meeting started with an overview of the current landscape of climate finance; different pathways, processes, and portfolio decisions were identified on a global, national, and regional level. A series of sessions allowed the Group to learn lessons from detailed case studies, following the life cycle of existing green investment projects and experiences, both in terms of process and design. In particular, sessions focused on significant portfolios and projects in offshore wind, concentrated solar power, energy efficiency, and agriculture and land use, involving all forms of 1) equity or debt investment, 2) investment guarantees or insurance products, or 3) other diversification strategies, options, and derivatives related to project risk management or portfolio risk distribution. Workshop sessions explored the following aspects:

  1. a small set of specific proposed instruments to manage regulatory risk and
  2. the evolving practice of national (development) banks in energy and renewable energy finance.

For further information on the San Giorgio Group, please contact info@cpivenice.org.

Agenda and Presentations

Thursday, 20 September 2012

Welcome
  • Thomas Heller, Executive Director, Climate Policy Initiative
  • Rachel Kyte, Vice President, Sustainable Development Network, World Bank (Video)

Introductory Panel: The Global Context for Scaling Up Green, Low-Emissions Finance

This session revisited the purpose and objectives of the San Giorgio Group and introduced focal themes and questions to guide our discussions. we considered developments over the past year affecting the current climate finance landscape, including new information about the emerging importance of different actors, and particularly, National Development Banks. Panelists presented views on the role of public and private finance in scaling up green, low-emissions finance. Chair: Jan Corfee-Morlot, Team Leader for Environment, Climate Change and Development, OECD Development Co-operation Directorate Panelists:

  • Barbara Buchner, Director, Climate Policy Initiative Venice
  • Jochen Harnisch, Head of Division Competence Center Environment & Climate Coordinator Climate Change Policy, KfW Development Bank
  • Mette Keofoed Quinn, Team Coordinator of Climate Finance, DG Climate Action, European Commission
  • Paul Bodnar, Foreign Affairs Officer, Office of Global Change, U.S. Department of State
Focus 1: The Challenges of Financing Energy Efficiency & Small-Scale Projects

Energy efficiency and other small-scale projects face particular difficulties attracting private capital, where the local banking sector plays a pivotal role. We considered how the Program Solaire (Prosol) initiative in Tunisia used a combination of international and domestic support and a suite of cleverly designed programs and mechanisms to lower capital and credit costs, build awareness, and almost eliminate the credit default risk of banks. We discussed the potential of more efficient ‘clean energy subsidies’ to deliver environmental and economic dividends and whether this could be a sweet-spot for economic reform in developing countries. Panelists exploreed the requirements that need to be in place to scale up investments in energy efficiency. Chair: Christian Pilgaard Zinglersen, Head of Department, Ministry of Climate, Energy and Building, Denmark Presenter:

Commentators:

  • Philippe Benoit, Division Head, International Energy Agency
  • Andreas Biermann, Senior Manager, Energy Efficiency and Climate Change, European Bank for Reconstruction and Development
  • Murray Birt, Assistant Vice President, Deutsche Bank
Focus 2: Financing Large-scale Offshore Wind

Despite strong market penetration of wind technology, offshore wind projects carry aggregated risk factors and face challenges attracting sufficient investment to support large-scale installation. We considered the case of Walney Offshore Windfarms, the largest offshore windfarm in the world, which despite its investment risk profile and a poor lending environment, managed to attract GBP 1.3 billion in private investment. We discussed the role of well-articulated United Kingdom government incentives in attracting a project developer and how these provided the scope to bring on board non-traditional pension fund investors. Panelists will explore the role of institutional investors in scaling up investments in offshore windfarms and other nonconventional technologies. Chair: Peter Betts, Director, International Climate Change, Department of Energy & Climate Change, UK Government Presenter:

Commentators:

  • Torben Möger Pedersen, Chief Executive Officer, PensionDanmark
  • Christopher Kaminker, Economist, Office of the Director, OECD Environment Directorate
Focus 3: Financing Immature Technology at Scale

Energy demand is growing very fast in many developing countries. As development quickens there are opportunities to ‘leap-frog’ dirtier technologies and simultaneously attain development, growth, and environmental goals. However, the high cost of some renewable energy technologies impedes their installation at speeds or scales sufficient to achieve base-load. Where this is the case, transitioning to a portfolio approach may be the best way to achieve economies of scale, reduce costs, and close the competitiveness gap. We considered Ouarzazate I, a 160MW Concentrated Solar Power (CSP) plant in Morocco, and the Eskom project, a 100MW CSP plant in South Africa, highlighting the critical importance of early international concessional finance and strong domestic government support to make these kinds of investments viable. Panelists explored what is needed in order to scale up projects like these, both in terms of design factors and political support. Chair: Dean Cooper, Head, Energy Finance Unit, UNEP Presenters:

Commentator:

  • Nabil Saimi, Director of International Cooperation, Moroccan Agency for Solar Energy
Focus 4: Financing Agricultural and Land Use Projects

For many developing countries, there is a perceived tension between the need to achieve economic development targets and protecting high value ecosystem services. Transforming inefficient systems of agricultural and land use patterns can help to align the public and private interests in achieving economic growth and avoiding or reducing emissions. We considered how Resolution 3545, introduced by the Brazilian Central Bank in 2008, has encouraged more efficient land use in the Amazon Biome by making farmers’ access to credit contingent on compliance with environmental laws and land title provisions. Panelists explored the particular barriers to scaling up investments in agricultural and land use projects, and how financing approaches may differ from renewable energy financing. Chair: Kevin Hogan, Advisor to the Former President of the Republic of Guyana Presenter:

  • Juliano Assunção, Director, Climate Policy Initiative Rio de Janeiro and Professor, Pontifícia Universidade Católica do Rio de Janeiro

Commentators:

  • Marcelo Vieira, Director, Sugar and Ethanol Operations, Adecoagro S.A.
  • Per Fredrik IIsaas Pharo, Special Advisor, Director NICFI, Ministry of the Environment, Norway
  • Jeremy Oppenheim, Director, Sustainability and Resource Productivity Initiative, McKinsey & Company
Stocktaking Session

This session gathered the key lessons observed by the San Giorgio Group in its first year and considered where gaps remain, and where we might focus our analytical efforts going forward. Moderated by: Mary Barton-Dock, Director, Environment Department, World Bank Presenters:

  • Jane Wilkinson, Associate Director, Climate Policy Initiative Venice
  • Nick Johnstone, Head, Empirical Policy Analysis Unit, National Policies Division, OECD and Virginie Marchal, Policy Analyst- Green Finance, Environment Directorate, OECD

Social Dinner Dinner remarks on ‘‘The state of play in international climate policy’

  • Karsten Sach, Deputy Director General “International Cooperation”, German Federal Ministry for Environment, Nature Conservation and Nuclear Safety
Friday, 21 September 2012
Workshop Session: Instruments for Managing Regulatory Risks

There are gaps between the demand for risk coverage expressed by green project developers and financial investors, and the  risk coverage instruments that both private and public entities currently supply. This session outlined facts about real and perceived risks associated with green capital investments and considered new and existing risk mitigation instruments to explore whether these instruments are effective or not. Panelists explored the latest developments on policy risk insurance mechanisms (such as the OPIC Feed-in Tariff insurance) and first loss guarantee instruments (including the European Union-European Investment Bank Project Bond Initiative and a proposal for a Sustainable Development Bond Assurance Corporation), and considered whether further improvements are needed. Chair: Steven Gray, Vice President, International Policy, Climate Change Capital Presenter:

Commentators:

  • Nicholas Silver, Director, Climate Bonds Initiative
  • Mike Eckhart, Managing Director, Citigroup Inc.
  • Jeffrey Sirr, Head of Client Management, Corporate Insurance Partner and Munich Re
Panel: The Role of National (Development) Banks

National (Development) Banks hold deep knowledge about specific sectors and local economic and long-term investment environments in which investments are structured and made. Their long-standing relationships with the local private sector and their access to a range of financial instruments give them a special advantage to tap and pool private capital. Evolving discussions in the G24, and in the Indian context specifically, have raised important questions about the role of national banks. In this panel, we considered how the Brazilian Development Bank (BNDES), Inter-American Development Bank, and the UK Green Investment Bank succeeded in ‘greening’ their portfolios and internal practices. Panelists will consider how to leverage the role of national (development) banks to help scale up green, low-emissions investments. Chair: David Nelson, Senior Director, Climate Policy Initiative Presenters:

  • Giulio Boccaletti , Partner, McKinsey & Company and Mattia Romani, Senior Visiting Fellow at the London School of Economics and Director of Country Analytics, Global Green Growth Institute

Panelists:

  • João Carlos Ferraz, Vice President, BNDES Brazilian Development Bank
  • Pierre Forestier, Head of Climate Change Division, AFD (French Development Agency)
  • Gloria Visconti, Senior Specialist on Climate Change, Inter-American Development Bank
  • Ian Nolan, Executive Director, UK Green Investment Bank
Concluding Panel: The Dynamics of Going Forward

The concluding panel brought together experts from the policy and finance communities to explore our strategy and highlight our priorities going forward. Based on the previous sessions and the San Giorgio Group’s emphasis on learning lessons from evolving practices, panelists highlighted key issues that require attention to render green, low-emissions finance effective in order to:

  • identify the working agenda and main questions for the San Giorgio Group in 2012, based on direction from the Group members;
  • discuss implications of the San Giorgio Group work for the design of the Green Climate Fund and how to share these more effectively; and
  • share thoughts on how the Green Growth Action Alliance (G2A2) and the San Giorgio Group work will advance with proof points/pilots on the ground, in key countries.

Chair: Thomas C. Heller, Executive Director, Climate Policy Initiative Panelists:

  • Andrew Brandler, Chief Executive Officer, CLP Holding Limited
  • Thomas Kerr, Head of Climate Change Initiatives, World Economic Forum
  • Gilbert Metcalf, Deputy Assistant Secretary for Environment and Energy, U.S. Department of the Treasury
  • Karsten Sach, Deputy Director General “International Cooperation”, German Federal Ministry for Environment, Nature Conservation and Nuclear Safety
  • Vikram Widge, Head, Climate Finance & Policy, Climate Business Group, IFC

Closing of the meeting by Thomas C. Heller, Executive Director, Climate Policy Initiative