Innovative Climate Finance Mechanisms for Financial Institutions in Fiji, Pakistan, Indonesia and Sri Lanka Multistakeholder Consultative Forum on Green Finance 1st August 2017 Manila, Philippines Aneta Nikolova Environment and Development, ESCAP
Convening power: The Asia-Pacific Forum on Sustainable Development and related regional dialogues on trade, STT, finance for development Partnerships & stakeholder engagement: Asia-Pacific SDGs Partnership (with ADB and UNDP); AP-Regional CSO Engagement Mechanism Analytical work: Focusing on integration of three dimensions of sustainable development; means of implementation Capacity development: Becoming fit for purpose - internal capacity building ; stronger UN system coordination
Project Overview Funding: UN Development Account Duration: 3 years Target countries: Fiji, Indonesia, Pakistan, Philippines, Sri Lanka B Objectives Identify the gaps and needs for investments in low carbon development activities in support of NDC implementation Empower the national Central Banks to enhance their role as the regulators of the national financial system Provide capacity development and technical advisory services to Central Banks to develop policies and guidelines to stimulate investments in climate mitigation and adaptation projects
Project Elements and Timeline
Inception Phase Jakarta, Indonesia Regional and National Scoping Studies 1 st round of National Workshops Regional Seminar Manila, Philippines Colombo, Sri Lanka Islamabad, Pakistan
Capacity Development Support Menu and a Toolkit of Policy Options Online platform for Climate Finance Champions-Regional and National Component- National Factsheets and Case Studies, reports of workshops Online/onsite courses-1 st August with provided by RENAC, Germany Tailored technical advisory services to the needs of the target countries: Fiji, Sri Lanka, Pakistan, Philippines Support the Bali Center for Sustainable Finance, Indonesia 2 nd round of National Workshops
Scoping Study Content Institutional arrangements and mapping of key stakeholders: role of relevant ministries, financial institutions, and the role private sector in mobilizing climate finance Domestic schemes/incentives for mobilizing climate finance: including best practice and impacts from financial institutions in the region Current policy frameworks to support national climate finance flows (especially links to national financial institutions) and their impacts (where available) State of development of the national finance/banking sector incl consultative process with major stakeholders Levels of ambition proposed as part of Nationally Determined Contributions (NDCs) submitted to the UNFCCC Mapping of other similar capacity building initiatives Assessment of Technical Assistance required by the Central and National Banks Identification of key stakeholders and national champions for promoting and advocating climate finance initiatives and policies
Short List of Tools Disclosure requirements of climate-related financial risks Green Finance Guidelines and Frameworks Green Macroprudential Regulation and Climate-related stress testing Directed Green Credit Policy Instruments Green Differentiated Reserve Requirements Accepting Carbon Certificates as part of Commercial Banks Legal Reserves Green Quantification Easing and Reserve Management
Indonesia Nationally Determined Contributions Sri Lanka 26% by 2020 29% by 2030 based on a 2010 projected BAU scenario Pakistan 7% between 2021-2030 based on a 2010 projected BAU scenario Philippines 20% by 2030 based on business as usual scenario 70% by 2030 based on a 2000-2030 projected BAU scenario
Financial Institutions and NDC Inter-linkages Sri Lanka Pakistan Indonesia Philippines Little Good Inter-linkages between the key financial institutions and the NDC implementing agencies
Contributions by Financial Institutions Indonesia Sri Lanka Pakistan OJK BEI, BRI State Bank of Pakistan Zarai Taraqiati Bank Philippines DFCC Land Bank Philippines Development Bank Bank of the Philippine Islands Banco de Oro Unibank
Key Instruments for Mobilising Domestic Private Climate Finance Indonesia Sri Lanka Sustainable Financing Roadmap Sustainable Financing Roadmap Pakistan Green Banking Guidelines Philippines Legislative
Policy Frameworks to Support National Finance Flows Indonesia Indonesia Climate Change Trust Fund Sri Lanka Sri Lanka Climate Change Trust Fund Pakistan Climate Change Financing Framework Philippines People s Survival Fund
National Champions Identified Indonesia Pakistan Indonesia Financial Services Authority OJK State Bank of Pakistan Sri Lanka Central Bank of Sri Lanka Philippines Climate Change Commission Central Bank of the Philippines BSP
Regional Seminar: June 19-20, 2017
Needs for further capacity development support: Fiji The Reserve Bank identified the needs for further capacity development support in the following areas: Assessment of bankable taking into consideration environmental risks; Developing financing requirements that encourage implementation of mitigating environmental damage or adaptive initiatives in the proposal. Issuance of policies and guidelines promoting best practices towards green financial system. Develop innovative mechanisms for leveraging private sector funds for green/ climate finance. Issuance of green bonds
Needs for further capacity development support: Indonesia Strengthen the capacities for developing and assessment of bankable projects Monitoring of their implementation Better illustrate the overall financial flows in the climate resilient development Identify how different sectors relate to climate finance and how funding can stimulate further economic development Provide advice to decision makers and to support the communications of cross-sectoral coordination committees with Ministry of Finance Provide further support for the capacity development activities that OJK plans to roll on in the Bali Centre for Sustainable Finance Further technical advisory services for the development of concrete financial instruments
Needs for further capacity development support: Pakistan The financial sector need to support the NDC targets aiming at reducing carbon emissions and these should be adopted as key criteria for financing national development projects and activities by the national banks; New procedures and guidelines for the commercial banks need to be issued by the Central Bank to guide the implementation of the above; A priority list of sectors for low carbon climate resilient investments to guide the national banks should be developed based on their contributions to the total country carbon emissions; When financing mechanisms are being developed the existing institutional architecture needs to be considered; Need for capacity development and technical advisory support for development and assessment of bankable projects, including for funding from the Global Climate Fund Additional awareness raising activities are also needed (national workshops)
Needs for further capacity development support: Philippines Need for a signal/instructions/guideline from public authorities with regulatory functions, including from the Central Bank on the need to prioritize investments in low carbon climate resilient development; These guidelines need to be more general and less prescriptive to allow flexibility in choosing technologies and approaches for investments in low carbon climate resilient development projects according to the most recent developments; Further awareness raising and training of representatives of the financial and banking sector in understanding of the risk in a global context and the rationale behind green banking; Additional capacity building support for developing financial framework and strategic approaches for partnership; Strengthening the monitoring and evaluation procedures, and overall financial governance and financial institutions through developing of a green banking law.
Needs for further capacity development support: Sri Lanka Provide technical assistance for the development of a national sustainable/green financing roadmap and the supporting regulatory tools and mechanisms. Support the establishment of an Integrated Committee between the Sustainable Development Council, Climate Change Council, Central Bank, and in close collaboration with the Ministry of Sustainable Development and Wildlife, the Mahaweli Development and Environment and the Ministry of Finance and Policy Planning. Such measure will enhance the communications and institutional capacities of the main institutions involved in climate finance governance in the country. Enhance general awareness raising and technical training seminars for promotion and development of specific financing instruments Develop a training course/module on green banking/climate finance to train staff of the Central Bank and other banks.
Main outputs of the Regional Seminar Central Banks must guide and shape new financial paradigms by forming an enabling regulatory framework Green bonds emerged as a highvalue driver of sustainable financial change The fastest way to change any industry sector is to influence the regulatory mechanisms which govern it and the role of sustainable financing roadmaps ESCAP can play a key role in quickly matching the capacity development needs of the national climate experts with the agencies and partners providing such support though the SDG help Desk Key national champions were identified as critical drivers for CF Enhanced commitments towards concrete climateresponsive actions The need for national coordination and institutional coherence was identified
Recommendations for Banking Sector Integrate climate risk into risk management strategies Incentivize adaptation and climate-proof financial instruments to support climate change adaptation or minimise mal-adaptation along agro-value chains Explore opportunities to develop new products and services in collaboration with other actors Proactively support climate change adaptation by calling for greater financial inclusion (e.g. services that target women with a framework to monitor and evaluate progress.
Needs for Capacity Development The participants agreed on four broad areas where the project activities can make a difference and benefit the climate finance practitioners the most: Empower Central Banks: as the primary regulator of the national financial markets to develop green finance guidelines and advisory frameworks that will create national financial environment conductive to investments in low carbon climate resilient development, as well as linking to the broader financing for sustainable development. Awareness Raising: on financial instruments and technological developments for low carbon climate resilient development for financial institutions, including banks, insurance and securitization companies, capital markets institution, etc. on the climate risks on their investments, increase the attractiveness of sustainable/green banking. Information-Sharing & Coordination Mechanisms: Between ministries and government institutions, governmental and private financial institutions, private sector associations and bilateral and international development for coherent climate finance interventions. Empower SMEs and Financial Institutions: Develop bankable projects by building the technical capacity of writing fundable proposals to source budget from national and international origins.
Summary and Opportunities Central Banks are all members of the Sustainability Banking Initiative of IFC Domestic financial institutions are already playing a role through various initiatives Better links are needed between DFIs with NDC Implementing Agencies and targets Contributes to improved development and implementation of national climate change financing frameworks Create the policy environment to stimulate domestic financial institutions and private sector contributions to GHG Emissions Reductions
Climate Finance Team Aneta Nikolova Environment Affairs Officer nikolova@un.org THANK YOU Kai Kim Chiang Senior Consultant chiang2@un.org Nina Schneider Data and Policy Analyst schneidern@un.org Environment and Development Division United Nations Economic & Social Commission of Asia-Pacific www.unescap.org