INTERMEDIATE OUTCOME 2
Increased green investment flows
In 2016, GGGI made significant progress in developing and mainstreaming green growth in the plans and policies of its partner countries, which laid the foundation for their transformational change to green growth. In 2017, GGGI advanced its work further along the ‘right side’ of its value chain, focusing on scaling up the mobilization of green investment flows to fund the implementation of green growth projects.
GGGI’s 2017 priority was to mobilize green investments from both the public and private sector by improving the enabling environment for investors. To that end, GGGI developed de-risking tools and helped implement regulatory reforms. GGGI also directly mobilized investments for partner countries by developing investment proposals, bankable projects and National Financing Vehicles (NFVs).
One of the most important challenges for GGGI is turning its partner government’s commitments to promote green growth into funded projects that tangibly help partner countries transition to sustainable green growth. This involves identifying interventions to create the necessary financial and market conditions to make green growth investments attractive to investors.
In 2017, such interventions included: removing barriers to investment; attracting domestic and international finance; developing risk reducing financial instruments. These interventions have assisted to rapidly develop markets for green growth projects and products.
In 2017, GGGI delivered 10 outputs that aim to improve the enabling environment for green growth investments, against the planned target of 6.
Some examples of enabling outputs delivered in 2017 included:
- Ethiopia: GGGI produced an important de-risking instrument for the Ministry of Finance and Economic Cooperation by developing an investment profile for the Mekele City Water Supply Project. GGGI helped draft the project concept and business case and assisted with a fundraising effort that has developed an investment profile valued at approximately USD
337 million. As a result of GGGI’s support, financing commitments have been obtained from private financiers for the entire project.
- Indonesia: GGGI supported the development of a large photovoltaic (PV) project, demonstrating the commercial viability of solar power development for remote islands, with an estimated value of USD 17.45 million. GGGI also executed a feasibility study for the connection of existing Dieselpowered grids to PV plants. The study nominated 6 financially viable locations, with an estimated capital expenditure of USD 15-32 million. The projects have since received Letters of Intent and it is likely that this demonstration project provides evidence of the feasibility of similar projects and improves the enabling environment for investment around sustainable energy in Indonesia.
In 2017, GGGI delivered 9 advisory outputs that informed decisions on green growth investment against a planned target of 12.
In 2017, the development of NFVs to help countries unlock green growth investments was a key priority. GGGI worked with five member countries, Colombia, Costa Rica, Mongolia, Rwanda and Vanuatu to develop NFVs to receive and manage climate finance. GGGI also began initial assessments for NFVs in five other partner countries, Bhutan, Burkina Faso, Mozambique, Lao PDR and Uganda.
Two of the NFVs completed in 2017 are described below:
- Mongolia: GGGI led the design of the Mongolian Green Credit Fund (MGCF), the country’s first and only dedicated financial vehicle for climate finance. The fund aims to address air pollution in Ulaanbaatar, which was among the world’s worst during last winter. GGGI helped in producing the MGCF Business Plan and commencement of a pipeline development project.
- Vanuatu: GGGI helped establish the National Green Energy Fund (NGEF), for Vanuatu. The NGEF aims to provide increased financing for energy access and green energy projects in Vanuatu. It was set up on May 29, 2017, and the government contributed a seed fund of USD 68,000 with a planned allocation of USD 0.6 million annually from 2018.
The NGEF incorporates Safeguards Poverty Reductions and Social Inclusion best practices, including gender-sensitive project design and implementation.
In 2017, the increased focus on moving to the ‘right-hand side’ of GGGI’s Value Chain resulted in identification and preparation of bankable projects and NFVs.
GGGI’s support in Costa Rica, Ethiopia, Fiji, India, Indonesia, Rwanda and Vanuatu mobilized finance from governments and donors to fund green growth activities.
GGGI, in 2017, supported the mobilization of USD 524.6 million in investment, a record that significantly exceeded the year’s target of USD 64 million.
Of this amount, USD 337 million of investment in Ethiopia, USD 60 million of investment in Rwanda, and USD 15 million of investment in Indonesia was mobilized from the private sector.
Private sector financing accounted for 78.5% of the investments mobilized for 2017 with the balance contributed by governments and donors.
In 2017, GGGI contributed to the mobilization of USD 524.6 million towards green growth investments, against a target of USD 64.0 million.
The high level of investment mobilized, particularly from the private sector, is an important step forward for GGGI in broadening the opportunities for raising investment capital to implement green growth development projects in Member and partner countries.
While the total private investment mobilized in 2017 is concentrated in only 3 countries - Ethiopia, Rwanda, and Indonesia - this achievement overall provides strong evidence that partner countries can aggressively pursue opportunities with the private sector to co-fund their green growth ambitions.