By Temitope Ponle
A study has shown that a combination of green banks working alongside National Climate Change Funds (NCCFs)have the potential to increase private investment in support of climate and sustainable development goals.
The scoping report is written by the African Development Bank (AfDB)and the Climate Investment Funds (CIF) titled “Potential for Green Banks and National Climate Change Funds in Africa”.
The report, released in March, is expected to support the development of a multinational climate finance initiative in Africa.
A green bank is a financial institution, usually public or quasi-public, that uses innovative financing techniques and market development tools in partnership with the private sector to accelerate the deployment of clean energy technologies.
The executive summary of the report showed that green banks, structured either as new institutions or as adaptations of existing institutions, were designed to fill market gaps and strengthen national ownership of climate finance.
Green banks, the summary noted, are moving problem solving to the national level, allowing developing countries better access to international financial resources.
“As catalysts, they are designed to ‘attract’ and increase private investment in low carbon and climate resilient projects.
Green banks typically use a blended finance approach, with capitalization coming from a variety of public and private sources, including bilateral donors, climate funds, and national treasuries.
“In developing economies, green banks can be more effective when combined with national green funds to provide integrated access to an effective mix of grants and finance, tailored to local market conditions.
“This approach is being developed in Rwanda through the integration of their existing green fund with a new green bank.”
The report also showed the role of green banks and national climate change funds in mobilizing finance to support low-carbon and climate-resilient development in Africa.
According to the report, a combination of green grant programs and catalytic climate finance facilities focused on how low-carbon and sustainable development sectors could help boost private sector participation and mobilize the support from partner institutions in global development.
The report found that renewable energy and climate-smart agriculture were the two sectors that stood out as priorities in the countries studied.
It also showed that green city infrastructure was another potential priority sector in several of the countries participating in the study.
In addition, the report states that for countries to have better access to and mobilize private investment, the climate finance system must shift towards national financial capacity that can channel capital to projects and markets where it is needed. no longer needed.
He also noted that local green banks were powerful tools in responding to market needs, understanding local risks and stimulating private investment when paired with effective grant programs through the NCCF and environments. and strong supportive policies.
“By creating and capitalizing on these vehicles from a mix of national and international sources, countries can mobilize funds from the diaspora, development finance institutions, national financial institutions, private investors, managers of assets, sovereign wealth funds, etc.
According to the report, the methodology and approach used for this study is designed to raise public awareness of NCCF and Green Banks and explore initial market conditions and high-level recommendations for the formation of Green Bank and NCCF in six study countries, located in Africa.
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