ADFIAP, in cooperation with its host member-institutions in India and its project partners, held a workshop on “Scaling Cleantech Innovation and Financing” on February 19, 2018 at the ITC Maurya Hotel in New Delhi, India. The event was conducted during the 41st ADFIAP Annual Meeting and was attended by 29 ADFIAP member-delegates.
Summary of Discussions
Cleantech Innovation & Financing and the role of ACMFN
Mr. Octavio B. Peralta, Secretary General, ADFIAP and Executive Director, ACMFN
- A brief overview of the EU-funded ACMFN Project was introduced in terms of its overall objectives, organizational structure and activities on establishing a sustainable business case for clean technology financing and MSMEs in the 3 target areas in general and India in particular.
- Key economic and climate financing statistics and the business opportunities that abound under the ACMFN project were discussed. MSMEs can exploit sustainable business operations and expanded market reach by shifting operations to cleantech or by being cleantech service providers. Financial institutions can enhance their competitiveness by creating innovative cleantech financial products that would allow SMEs easy access to finance.
- Objective is to build and leverage a cleantech financing eco-system to spark improved access to finance for Asian cleantech MSMEs in order to enhance sustainable consumption and production patterns in Asia and establish a low carbon climate resilient economy.
Global Perspectives on Cleantech Financing – Best Practice Insights
Ms. Corazon D. Conde, ACMFN Sr.Project Manager and Country Manager –India/ Group Head ADFIAP Consulting, Philippines
Mr. Mirko Zuerker, Senior Project Manager, adelphi Research gGmbh
- Cleantech financing models being implemented in the Philippines which include debt financing and bond flotation were discussed by Ms. Conde. For debt financing, examples of green lending programs and case studies of two government banks, (Land Bank of the Philippines and Development Bank of the Philippines) and two private banks (Bank of the Philippine Islands and Banco de Oro) were shared, highlighting the success factors adopted by said banks.
- Another cleantech financing model that was discussed was Bond Flotation triggered by the development of the ASEAN Green Bond Standards for issuers and projects in the region. Aboitiz Power Corporation issued the First Green Bond in Asia and the Pacific for its Tiwi-MakBan geothermal energy facilities financed with $225 M local currency bond and $37.7M ADB loan with ADG guarantee of 75% of principal and interest on the bond. BPI Capital Corporation was lead arranger. Banco de Oro raised $150 M from a pioneering offshore green bond issuance boosting private sector funding for climate change mitigating initiatives with IFC as sole investor in the bond.
- Best practices adopted by the aforementioned banks include: (1) building partnerships; (2) out of box solutions; (3) credit enhancement schemes; and (4) use of ESCOs
- Mr. Zuerker discussed growing the cleantech market in the EU. On one side of the equation you have the Cleantech market consisting of cleantech providers and MSMEs for energy efficiency and renewable energy projects and on the other side, the Financiers consisting of private equity/venture capital, debt financing, subsidies, commercial banks, IOs, public institutions, investors and government. Interventions to match the two players include green financing mechanisms, capacity building, engagement, matchmaking, technical support, pipeline development, monitoring, reporting and verification.
- Statistics on the cleantech finance landscape in Europe were also presented as well as the SME reaction to cleantech/green finance in Europe
- Cleantech finance products in Europe were presented such as the KFW Energy Efficiency Program-Production Plants/Processes, the Green Initiative that support energy efficiency projects by SMEs in EU new member states and pre-accession countries through EIB loans b at attractive rates and the Pret-Eco-Energie or eco-energy loan that supports SMEs to implement programmes improving their energy efficiency
- Also discussed was the Private Finance for Energy Efficiency Instrument or the PF4EE Scheme wherein EIB grants loans to financial intermediaries with a risk-sharing coverage of up to 80% of expected losses on a loan basis, for relending to EE investments by companies. adelphi provides expert support in developing EE loan portfolio.
- The PF4EE eligibility criteria and how to develop a PF4EE loan portfolio from start-up, romp-up and full speed were also discussed.
- Lessons learned are the following: (1) FI commitment to understanding the basic difference of the EE market relative to other markets is key for client ID/pipeline development; (2) Even though all partner banks laid out the potential target market in their application, the actual “sweet spot“ (where many loans can be made) in each market only develops with experience and some trial and error; (3) EE credit lines go along with the need for technical capacity/expertise that is not generic to most Fis. Support through easy and efficient tools and local technical expertise is important
Prototyping for Joint Actions
Mr. Mirko Zuerker explained the prototyping methodology that would allow a structured advancement of best practice instruments and programmes through peer discussion in parallel focus groups of key challenges and solutions and how to scale existing financing solutions.
Please refer to the ACMFN Cleantech Finance Lab presentation.
Cleantech Finance Lab I: Define and present key challenges in cleantech financing for SMEs and solutions to overcome these challenges.
|Challenges||Solutions||Selected Prototype Solution|
|1 (Cases from Indonesia)||
||Blended finance composed of grants and loans|
|2 (Cases from the Philippines and Sri Lanka)||
||Sourcing of cheap money for cleantech investments for FIs in the Philippines|
|3 (Cases from India)||
||Clustering/pooling and collaboration of technology suppliers and banks for Indian FIs|
|4 (Cases from different country banks)||
|Rethinking of the role of bankers – evangelist partners/catalysts/incubators|