Challenges and Opportunities in Green Financing and Public Sector Support

Financial institutions are exploring guarantees to promote green financing amidst macroeconomic uncertainties like Brexit. The public sector plays a pivotal role in supporting infrastructure projects with various guarantees and subsidies, especially in the transport and energy sectors. These efforts aim to drive sustainable development and address climate change needs.

• Green Financing
• Public Sector Support
• Infrastructure Projects
• Macro Uncertainties
• Sustainable Development

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1. Development Financial Institutions Guarantees for Green Financing 1

2. New Macro financial context Uncertainties to: Monetary policy normalization Brexit and other political uncertainties Highly leveraged banking, corporate and public sector balance sheets. New Financial Regulation (Basel III) Capital Markets underdevelopment Large infrastructure (and climate change) needs 2

3. Supplies of Capital to Infraestructure Projects 2011 2015 in LAC Countries 3

4. The Role of Public Sector is key I The role of the Public Sector is relevant in sharing risks is relevant. 25000 50 Figure 6: Total Investment in Projects with Direct Govt Support 45 20000 40 35 In-kind 15000 30 Revenue Subsidy USD million 25 Capital subsidy 10000 20 % Direct Gov Support (RHS) 15 5000 10 5 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

5. The Role of Public Sector is key II The role of the Public Sector is relevant specially in Payment and Revenue Guarantees 70000 70 Total Investment in Projects with Indirect Govt Support Payment Guarantee Revenue Guarantee 60000 60 Tariff Rate Guarantee Tax Deduction/Government Credit 50000 50 40000 USD million 40 Interest Rate Guarantee Exchange Rate Guarantee 30000 30 Debt Guarantee Payment Guarantee, Revenue Guarantee 20000 20 Construction Cost Guarantee Payment Guarantee, Debt Guarantee 10000 10 Debt Guarantee, Revenue Guarantee, Exchange Rate Guarantee, Interest Rate Guarantee % Indirect Gov Support 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

6. The role of the Public Sector is relevant specially the Transport and Energy Sectors Total Investment in Projects with Direct Govt Support by sector 25000 Total Investment in Projects with Indirect Govt Support by sector 70000 60000 20000 50000 15000 40000 10000 30000 20000 5000 10000 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Water and sewerage Energy Transport Information and communication technology (ICT)

7. Multilateral Guarantees are an important Development Guarantees are a key element in risk management and to mobilize private sector financing in Green Markets: Credit and Contract Enhancements Induces more and better financing through rating enhancement Risk Missing Markets Development disagregation Manage risk according to each participant capacity or control. New players enter into markets that would not be interested otherwise 7

8. Multilaterals Guarantees are not mainstream 4.5% of total operational approval (2001 y 2013) Volumen hist rico de aprobaci n y ejecuci n de garant as (excluye comercio) IBRD/IDA IFC MIGA ADB IDB AfDB Only 0.6% has been called (IFC excluded) Fuente: Humphrey and Prizzon (2014) 8

9. Guarantees improve the quantity and quality of financing Each dollar of guarantee leveraged 4 dollars of financing Spread Tenor 5 6.5% Colombia (PCG) 5% 10 Filipinas (PCG) 7 3% 15 2.5% Uganda (PRG) 0 8% 16 3.1% 1 Bangladesh (PRG) 3% 14 2% With Guarantee Without Guarantee Costa de Marfil (PRG) 1 3% 12 2.75% 9 Fuente: Banco Mundial

10. Guarantees are effective 10 Fuente: OECD DEVELOPMENT CO-OPERATION WORKING PAPER 26 `

11. 1. Project Guarantees Example: Covering a Public Enterprise PPA Gobierno/Public Enterprise/Private Contragarant a Credit Guarantee PPA Payment Pagos del PA Debt Comercial Bank Project Company Debt Repaymet 11

12. 2. Guarantee Fund Contragarant a Gobierno Garant a Parcial de Cr dito Fondo de Garant as Si el soberano lo fondea directamente, su calificaci n de riesgo se traspasa a la calificaci n del Fondo Una garant a AAA del BID logra mayor eficiencia Proyecto 3 Proyecto 4 Proyecto 1 Proyecto 2 Ventaja adicional: Apoyo la estructuraci n y debida diligencia 12

13. 3. Guarantees for Credit Enhancement Investment Grade Guarantee Bond Perdida esperada que el garante absorbe para aumentar la calificaci n a Baa Monoline industry does not longer exists 13

14. Non financial Benefits of Multilateral Guarantees Measuring, reporting, accounting and management Contingent Liabilities Sector oriented dialogue Legal framework strengthening Sovereign and Non Sovereign Financing Technical Dialogue Efecto demostrativo / expansivo Learning effects Capital markets expansion 14

15. Muchas gracias. 15