Designing Green Banks for emerging economies: supporting private lending for technology scaling

During the 2019 Madrid Climate Conference (COP 25) , we and our partner ImplementaSur shared the results of our work on building-up and designing green banks in emerging economies, which is a key ingredient of a future climate finance architecture in these countries.

Target sectors should be, strategic ones for emissions reduction or climate change adaptation for the country, where additional financing can drive long-term growth in a sector, lower the cost of the technology being deployed, and/or leverage other financings.

On this basis, Green Banks in emerging economies notably provide their own financing e.g. where existing public national development banks may not have relevant retail lending windows. For instance, 98% of the companies in Chile are Micro/Small/Medium Enterprises (MSMEs). However, there are few financial institutions willing to take the risk of engaging with them due to high due diligence costs relative to the size of the operation or the limited acceptability of the collaterals and guarantees MSMEs can provide.

In addition, Green Banks in emerging economies catalyze additional private finance through risk management for e.g. policy or currency risk. 

Our presentation at the COP was based on the conceptual work done by the ImplementaSur team on the build-up of a Green Bank in Chile, where the team helped design aspects of the National Green Bank; and specific lending programs.  

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