The National Defense Resource Council’s Bettina Begroo takes a look at the purpose of green banks and how they help tackle climate change.
The way UN Secretary-General Antonio Guterres put it last month upon appointing former New York Mayor Mike Bloomberg as the Special Envoy for Climate Action, mobilizing capital resources from public and private sectors is “critical to tackling the issue of climate change.” While it’s increasingly well known that green banks are a way to mobilize that capital, there hasn’t been a resource for understanding exactly how they do it on the transaction level — until now.
The Green Bank Network (GBN) has launched a new tool, the GBN Member Transaction Database, to give government officials, green finance advocates, investors and others a way to better understand the work of green banks by exploring their closed transactions.
The focus of Bloomberg’s role will be leading a one-year Climate Finance Leadership Initiative that will convene leaders from international financial institutions and corporations to accelerate private investment in low carbon, climate-resilient projects.
“The market’s allocation of capital is a powerful weapon in our fight against climate change,” he said in accepting the appointment. “As climate risks and opportunities become more transparent, investors and businesses are increasing financing for climate solutions.”
Bloomberg makes two important points.
First, allocating huge volumes of capital from private financial markets is critical to building the low carbon, climate-resilient infrastructure we need to adapt to and mitigate further consequences from climate change. Second, investors globally see this global transition as an opportunity to reduce their exposure to risk and capitalize upon wealth-creation opportunity—as the risks and opportunities become more transparent.
Governments around the world have realized that this process of demonstrating the value proposition of green infrastructure to private financiers necessitates using public capital in a new, catalytic way. Public capital, used strategically in a way that is informed by market participants, can de-risk and thus attract capital to transactions that otherwise would not be financed.
Across the world, dedicated green banks—publicly capitalized entities established specifically to facilitate private investment into domestic low-carbon, climate-resilient infrastructure—are leveraging public capital in this way. They work alongside private capital providers to facilitate transactions, building the private market’s awareness of and comfort with those transactions, and over time these targeted investments help shift the entire financial system.
Governments around the world have realized that this process of demonstrating the value proposition of green infrastructure to private financiers necessitates using public capital in a new, catalytic way.
Because of their success to date in the U.S., U.K, Australia, Japan, Malaysia and elsewhere, the green bank model is garnering attention from climate and sustainable development advocates. Reports from the OECD and others highlight green banks’ structures, capitalization sources, and the types of activities they tend to undertake. But the best way to understand how green banks engage the private sector and move markets is to explore their individual transactions, which are described in detail across an array of websites and other resources. Now, exploring them all in one place is possible through this new tool. Using the Green Bank Network (GBN) Member Transaction Database, anyone interested in learning more about green banks can search transactions by geography, target market, technology, and even the risk mitigation strategies used in the transaction.
The database links to further transaction details on each green bank’s website as well as to Transaction Takeaways, another set of GBN resources that dives deep into notable deals. Many more resources related to green banks and green banking can be found in the GBN Knowledge Center.
The Green Bank Network is a membership organization managed by NRDC and the Coalition for Green Capital. It was founded in December 2015 to foster collaboration and knowledge exchange among existing Green Banks, enabling them to share best practices and lessons learned. Now with the launch of the transaction database, anyone interested in scaling green finance can learn from the specific strategies green banks have used to commit over $10 Billion and facilitate over $33 Billion in total investments in low carbon, climate-resilient infrastructure.
This blog originated on the Natural Resource Defense Council’s (NRDC) expert blog. It was written by Bettina Bergoo, a finance fellow for the Center for Market Innovation at the NRDC.
