DEVELOPMENT FINANCE IN THE GREEN SECTOR |
DBSA Driven green initiatives Some of the DBSA green economy initiatives: Implementation of SA Renewable Energy Independent Power Producer Programme (REIPPP) Implementation of the National Green Fund GEF and GCF accreditation
Green Fund The Green Fund is resource mechanism to contribute to a wide range of goals of transitioning to a greener economy Managed by the DBSA, established in 2012 R1.2 billion has been allocated to the fund to date through the Department of Environmental Affairs Aimed at facilitating investment in green initiatives; To transition SA to a greener economy To support socio-economic development Key Objectives Promoting innovative and high impact green programmes and projects Reinforcing climate policy objectives and sustainable economic development through green interventions Building an evidence base for the expansion of the green economy Attracting additional resources to support South Africa’s green economy development
Green Fund Financing Offering • Funding in the form of Non-Recoverable Grants Recoverable Grants , Loans , and Equity across the thematic windows supports project development , capacity building in green initiatives and research and development initiatives that feeds into policy and regulatory environment for the green economy • The Fund allocation for the three products is as follows: Product Offering Allocation Project development 75% Capacity building 20% 5% Research and development | 4
Value Chain Participation Green Fund’s Role: Catalyst for Green Economy Transition Investment principles: Private High Impact: Must fall Addition Sector Environmental, Sharing within funding ality Particip Social and of Risks windows ation Economic Catalytic participation, unlocking barriers and investment stretching across the entire innovation value chain Typical types of value chain participation Project Prep (Tech & Implementation and Research & Dev Product Expansion (Scale Up) Launch Development) Equity Grants Equity Grants Recoverable Loans Technical and Business Technical and Business Loans Grants Recoverable Support Guarantees Support Technical and Technical and Business Business Support Support 5
Initial Funding Focus Based on research and extensive consultation the following three thematic windows were identified for the initial focus of the Green Fund • The focus areas and eligibility criteria for each window is different and informed by key national policies Three funding windows – not mutually exclusive Green Cities and Towns Environmental & Natural Low Carbon Resource Economy Management
Green Cities and Towns Vision: well run, compact and efficient cities and towns that deliver essential services to their residents without depleting natural resources • Greening core municipal engineering services, especially where cost savings can be realised – Waste management and recycling, water demand management, public transport, RE and EE on municipal buildings and infrastructure, urban greening e.t.c • Applicants from public and private sector, with support from relevant municipality • Strong emphasis on project preparation, with appropriate finance to take to scale
Low Carbon Economy Vision: a low carbon economy that is aligned with the targets for a peak, plateau and decline trajectory for greenhouse gas emissions • Focused on climate mitigation, renewable energy, energy efficiency, cleaner production, sustainable transport and bio- fuels • Interventions include innovative structuring of EE and RE rollout, vehicle fleet conversions, clean production programmes • Typical applicants include private companies, research organisations, SMEs, NGOs • Regulatory support for development of standards, SEAs
Environmental and Natural Resource Management Vision: resilient eco-system services supporting the long term development path • Focused on biodiversity and ecosystem management, sustainable agriculture, fisheries, rainwater harvesting • Demonstrate PES, convert conventional to sustainable agriculture and replicate success • Primary beneficiaries are farmer and community based organisations, research organisations, private sector, NGOs • Targeting community based enterprises as well as project preparation for PES projects, supported by appropriate finance • Regulatory support on adaptation planning, biodiversity offsets, PES, standards and eco-labelling
Green Fund Portfolio | 10
SUPPLY CHAIN FINANCE: GREEN FUND PARTNERSHIP WITH SEFA AND
Why SMEs struggle to get commercial bank funding Factors Considerations SMMEs (new businesses) Established businesses The need for an effective Cost to serve Over the counter service, Relationship managed, higher service model Skill level lower skilled service, non- skilled, more tailored solutions Product tailoring tailored solutions Credit assessment methods Repayability Subjective assessment of Leverage and gearing ratio business plan projections assessments based on history and projections Equity contribution Many SMME do not have Can cover this from retained profits Security (Suretyship and Many SMMEs do not have May have already created assets as collateral ) assets Capital costs and Risk worthiness of client High capital costs, less Lower capital requirement, profitability (probability that they can profitable more profitable default)
What is Supply Chain Financing (SCF) Financing of commercial purchase and sale transactions, especially where supplier is an SME and buyer is a large company The lender finances the underlying commercial transaction, instead of the business SCF shifts lender risk from SME supplier to either the financing structure or the large corporate buyer SCF has been used successfully in Europe, US and Asia to Provide access to finance working capital of small suppliers Reduce borrowing costs of small suppliers Stabilize supply chains of large multinational companies by ensuring their suppliers have access to working capital
How does it work? Accelerate cash flows Buyers issues contract to SME to provide service 1. Supplier1 1 or do an installation etc… Corporate Supplier 2 SME supplier delivers on the contract 2 2. Buyer Supplier 3 SME suppliers invoices the Corporate Buyer, but 3 3. as is usually the case, payment will be made in Supplier n 30, 60 or 90 days. 4 SME supplier submits invoices to SCF Capital 7 4. Solutions to accelerate payment SCF Capital Solutions structures the financing 5. SCF Capital pays SME Supplier early 6. SCF IT SCF 5 SCF Capital get paid by Corporate Buyer in 30, 7. platform 60 or 90 days 6
How does it work? Purchase of equipment Buyer issues contract to SME Supplier 1. to provide service or do an 1 Supplier1 installation etc… Corporate 2 Supplier 2 SME Supplier gets purchase order 6 2. Supplier Buyer from Buyer 7 Supplier 3 SME Supplier applies for financing 3. Supplier n 8 to purchase required equipment from SCF Capital Solutions 3 8 SCF Capital Solutions structured the 4. financing SCF Capital solutions pays the 5. supplier of equipment SCF IT SCF 4 Supplier of equipment delivers platform 6. equipment to SME Supplier SME Supplier completes the project 7. 5 Corporate Buyer makes payment 8.
DBSA’s Role in Climate Finance: GCF What is Green Climate Fund (GCF)? • An operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC). • Objective: to promote the paradigm shift towards low-emission and climate-resilient development pathways. • Current global pledge: $10.2 billion for next 3 years • Aims for a 50:50 balance between mitigation and adaptation over time. • Aims to allocate 50% adaptation funds to vulnerable countries, least developed countries (LDCs), small island developing states (SIDS) and African states | 16
DBSA’s Role in Climate Finance: GCF Fund’s Investment Criteria: • Impact potential- potential of the programme/project to contribute to the achievement of the Fund's objectives • Paradigm shift potential- degree to which the proposed activity can catalyze impact beyond a once-off project or programme investment • Sustainable development potential: wider benefits and priorities, including environmental, social, and economic co-benefits as well as gender-sensitive development impact • Responsive to recipients needs: vulnerability and financing needs of the beneficiary country and population in the targeted group. • Promote country ownership: beneficiary country ownership of and capacity to implement a funded project or programme (policies, climate strategies and institutions) • Efficiency & effectiveness: economic and, if appropriate, financial soundness of the programme/project, and for mitigation-specific programmes/projects, cost-effectiveness and co-financing | 17
THANK YOU Email: MuhammedS@dbsa.org
Recommend
More recommend
