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Last published on 27 July 2021.
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GREEN INVESTMENT BANKS

 

To leverage the impact of relatively limited public resources, over a dozen
national and sub-national governments have created public green investment banks
(GIBs) and GIB-like entities. GIBs are using innovative transaction structures,
risk-reduction and transaction-enabling techniques, and local and market
expertise to channel private investment, including from institutional investors,
into domestic low-carbon, climate-resilient infrastructure.



POLICY PERSPECTIVES: Green investment banks: Leveraging innovative public
finance to scale up low-carbon investment

Investment is growing in renewable energy and energy efficiency, but not quickly
enough to get the world on track to achieve zero net greenhouse gas emissions
globally by the end of this century. Mobilising investment from the private
sector will be essential to meet climate change goals. Governments can find ways
to make efficient use of available public funding to mobilise much larger pools
of private capital.



The OECD report Green Investment Banks: Scaling up Private Investment in
Low-carbon, Climate Resilient Infrastructure aims to provide policy makers with
the first comprehensive study of publicly capitalised green investment banks
(GIBs), examining the rationales, mandates and financing activities of this
relatively new category of public financial  institution.

It provides a non-prescriptive stock-taking of the diverse ways in which these
public institutions are helping to leverage and catalyse private investment in
domestic green infrastructure, with a spotlight on energy efficiency projects.
Highlighting the role of GIBs within a broader policy framework to mobilise
investment, the report also provides practical information to policy makers on
how green investment banks are being set up, capitalised and staffed.

A GIB is a public entity established specifically to facilitate private
investment into domestic low-carbon, climate-resilient (LCR) infrastructure.
Using innovative transaction structures, risk-reduction and transaction-enabling
techniques, and local and market expertise, GIBs are channelling private
investment into low-carbon projects. GIBs are facilitating investment in such
areas as commercial and residential energy efficiency retrofits, rooftop solar
photovoltaic systems and municipal-level, energy-efficient street lighting.



Download the PDF version

Many of the investments GIBs mobilise are undertaken in urban areas where 54% of
the world’s population lived in 2014, and where 66% is projected to live by
2050.

Governments tailor their GIBs based on their unique national and local contexts.
GIBs and GIB-like entities have diverse rationales and goals including meeting
ambitious emissions targets, supporting local community development, lowering
energy costs, developing green technology markets, creating jobs and lowering
the cost of capital. Using a range of metrics, GIBs are measuring and tracking
their performance. These metrics generally focus on emissions saved, job
creation, leverage ratios (i.e. private investment mobilised per unit of GIB
public spending), and – for those GIBs that are required to be profitable – rate
of return.

GIBs are typically established in countries that do not have national
development banks or other entities that are actively promoting private
investment in domestic LCR infrastructure. They are relevant for both developed
countries and emerging economies as a tool to help meet emissions, technology
and infrastructure deployment and green investment targets. The creation of a
GIB can send a signal to the marketplace and other countries that a country or
region is seeking to become a leader in scaling up private low-carbon
investments. To mount a serious effort to mobilise low-carbon investment and get
on a path toward zero net emissions by the end of this century, governments need
to consider how institutions like green investment banks can help them pick up
the pace.



FURTHER READING

 * OECD work on green finance and investment
 * Policy Perspectives: Green Bonds

 

Contact

 * For more information, please contact: robert.youngman@oecd.org.
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