In this addition to the growing body of thinking on Green [Investment] Banks (GIBs), Angela Whitney and Paul Bodnar of the Rocky Mountain Institute look at where GIBs might be an appropriate solution for countries seeking to take “ownership” of their climate finance in support of achieving their NDCs. Noting that “the current climate finance system is not fit for its purpose from a practical perspective,” being “[h]eavy on international structures and funds but light on national capacity and agency,” they argue that “[l]ocal institutions are always going to be better at assessing and pricing local risk, and more effective at pushing regulators to improve enabling environments” than foreign investors, although the latter are of course also essential.
In an interesting analysis looking at how the mix of foreign investment changes as countries progress up the income and capacity ladders, they identify a set of countries that “have growing domestic resources to transition away from foreign assistance and channel local savings into low-carbon investments … An evolved climate finance system should enable these low- and middle-income countries and large emerging markets to move away from dependence on international foreign assistance and on competing for allocations from global climate funds. It should support the overall development of local institutions and financial and technical abilities rather than funding discrete projects.”
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Arguing that in such countries GIBs “may be the most advanced form of national ownership for climate finance,” they then list the six ways such banks (“nationally capitalized and owned [but] commercially operated”) could add value and build capacity in their local capital market ecosystems. These include not just the provision of capital for low-carbon projects, but also promoting innovative technologies and accelerating changes in the enabling environment.