Resource Guide for NDC Finance

Resource Guide
for NDC Finance

Selecting effective financial instruments to support action on climate change

This guide presents a curated selection of resources on finance for Nationally Determined Contributions (NDCs) and Long-term Strategies (LTS). It is designed to help Global Climate Action Partnership practitioners find high-quality resources that meet their specific needs, avoiding time-consuming searches on the internet. It will be useful to individuals working on, or interested in, NDC and LTS finance in both developed and developing countries.

5.2 Sources of private finance

Across debt and equity there is a diverse ecosystem of sources of capital for financing renewable energy and other low carbon options. This includes investors from across the finance sector with different appetites for risk and different return expectations. Policymakers looking to increase the levels of green investment in their country and to finance their NDCs should have a good understanding of the sources of capital available, and which are most appropriate for different project types. These resources provide an introduction to different types of finance and to which might be most appropriate for particular investment opportunities, based on their characteristics. (Adapted from Finance guide for policy-makers: Renewable energy, green infrastructure, BNEF/Chatham House/FS-UNEP, 2016.)

Global climate finance: An updated view on 2013 and 2014 flows

Organizations: CPI
International climate finance, Sources of private finance

Climate Policy Initiative’s Gobal Landscape of Climate Finance publications track global flows of climate finance. In addition to commentary about the nature of recent flows, the summary graphic presented in Annex B of this update report clearly shows relative size of the main types of finance (balance sheet financing, market rate debt, low cost project debt, equity) that make up climate finance flows in recent years, as well as what kinds of institutions these flows come from.

Finance guide for policy-makers: Renewable energy, green infrastructure

Organizations: BNEF/Chatham House/FS-UNEP
Sources of private finance

This guide provides an introductory and factual overview of the landscape of finance as it relates to renewable energy and green infrastructure investment (including energy efficiency), and outlines how transactions work. Section 1, on finance basics and sources of capital, introduces the different financial institutions (banks, institutional investors, different types of funds, impact investors), explains the roles of the debt and equity markets, and introduces the concepts of yieldcos and green bonds. A brief exploration of cost of capital is provided in Section 1.4. Section 2.4, on completing a transaction, shows how the types of finance are brought together to finance individual projects.

Demystifying private climate finance

Organizations: UNEP Finance Initiative
Identifying and overcoming barriers, Sources of private finance, Making projects financeable

Part B of this report highlights the fact that the effective design and implementation of public interventions needs to be guided by a more nuanced understanding of current barriers to the flows of private finance in developing countries. These barriers, in turn, depend on the type of private finance required, as well as the location of the activity. The report considers three case studies (grid scale renewables; energy efficiency; climate resilient infrastructure) and for each one identifies the major barriers that currently prevent private capital from flowing into these project types, and what interventions can overcome them.

Catalyzing climate finance: A guidebook on policy and financing options to support green, low-emission and climate-resilient development

Organizations: UNDP
Introductory resources, Creating an enabling environment, Sources of private finance

This is a useful general resource covering many aspects of financing LEDS, and is relevant across several of the sections covered by this guide. The principal audience for this publication is public development practitioners at national and subnational levels, as well as domestic and international experts involved in assisting governments in catalyzing finance for climate investment and sustainable development. The guide outlines a four-step methodology to assist developing countries in selecting and deploying an optimal mix of public policies and financing instruments to catalyze climate finance in line with national development priorities:

  • Step 1: Identify priority mitigation and adaptation technologies
  • Step 2: Define and assess key barriers to technology diffusion
  • Step 3: Determine appropriate policy mix to catalyze climate capital
  • Step 4: Select financing options to create an enabling policy environment

    Aligning Kenya’s financial system with inclusive green investment

    Organizations: UNEP Inquiry / IFC
    Sources of private finance

    This report explores Kenya’s financial system from a green investment perspective. It focuses on policy, structural, and investment innovations across the economy and financial sector that would increase capital flows that support sustainable development. Chapter 3 describes the different sources of capital in the Kenyan financial sector, covering the banking sector, retirement/pension funds, insurance funds, capital markets, private equity, savings and credit cooperatives, and foreign direct investment. For each source covered, the chapter explores market composition, policy and regulation, and barriers and potential solutions relating to green investment.