THE GREEN SECTOR | DBSA Driven green initiatives Some of the DBSA - - PowerPoint PPT Presentation

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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
• f 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

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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:

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Product Offering Allocation Project development 75% Capacity building 20% Research and development 5%

Value Chain Participation

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Investment principles: Catalytic participation, unlocking barriers and investment stretching across the entire innovation value chain

Project Prep (Tech & Product Development) Research & Dev Implementation and Launch Expansion (Scale Up)

Typical types of value chain participation

• Equity
• Loans
• Grants Recoverable
• Technical and

Business Support

• Equity
• Loans
• Guarantees
• Technical and Business

Support

• Grants
• Technical and Business

Support

• Grants Recoverable
• Technical and Business

Support

High Impact: Environmental, Social and Economic Must fall within funding windows Addition ality Private Sector Particip ation Sharing

• f Risks

Green Fund’s Role: Catalyst for Green Economy Transition

Initial Funding Focus

Based on research and extensive consultation the following three thematic windows were identified for the initial focus

• f the Green Fund
• The focus areas and eligibility criteria for each window is different and

informed by key national policies

Green Cities and Towns Low Carbon Economy Environmental & Natural Resource Management

Three funding windows – not mutually exclusive

Green Cities and Towns

• 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

Vision: well run, compact and efficient cities and towns that deliver essential services to their residents without depleting natural resources

Low Carbon Economy

• Focused on climate mitigation, renewable

energy, energy efficiency, cleaner production, sustainable transport and bio- fuels

• Interventions include innovative structuring
• f 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

Vision: a low carbon economy that is aligned with the targets for a peak, plateau and decline trajectory for greenhouse gas emissions

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
• rganisations, 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
• ffsets, PES, standards and eco-labelling

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Green Fund Portfolio

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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 service model Cost to serve Skill level Product tailoring Over the counter service, lower skilled service, non- tailored solutions Relationship managed, higher skilled, more tailored solutions Credit assessment methods Repayability Subjective assessment of business plan projections Leverage and gearing ratio assessments based on history and projections Equity contribution Many SMME do not have Can cover this from retained profits Security (Suretyship and assets as collateral ) Many SMMEs do not have May have already created assets Capital costs and profitability Risk worthiness of client (probability that they can default) High capital costs, less profitable Lower capital requirement, more profitable

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

1.

Buyers issues contract to SME to provide service

• r do an installation etc…

2.

SME supplier delivers on the contract

3.

SME suppliers invoices the Corporate Buyer, but as is usually the case, payment will be made in 30, 60 or 90 days.

4.

SME supplier submits invoices to SCF Capital Solutions to accelerate payment

5.

SCF Capital Solutions structures the financing

6.

SCF Capital pays SME Supplier early

7.

SCF Capital get paid by Corporate Buyer in 30, 60 or 90 days

Supplier1 Supplier 2 Supplier 3 Supplier n

Corporate Buyer

SCF IT platform

2 1 4 SCF 5 6 3 7

How does it work?

Purchase of equipment

1.

Buyer issues contract to SME Supplier to provide service or do an installation etc…

2.

SME Supplier gets purchase order from Buyer

3.

SME Supplier applies for financing to purchase required equipment from SCF Capital Solutions

4.

SCF Capital Solutions structured the financing

5.

SCF Capital solutions pays the supplier of equipment

6.

Supplier of equipment delivers equipment to SME Supplier

7.

SME Supplier completes the project

8.

Corporate Buyer makes payment

Supplier1 Supplier 2 Supplier 3 Supplier n

Corporate Buyer

SCF IT platform

2 1 3 SCF

Supplier

4 5 7 8 6 8

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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
• ver time.
• Aims to allocate 50% adaptation funds to vulnerable countries,

least developed countries (LDCs), small island developing states (SIDS) and African states

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DBSA’s Role in Climate Finance: GCF

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Fund’s Investment Criteria:

• Impact potential- potential of the programme/project to contribute to the achievement
• f 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

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DBSA’s Role in Climate Finance: GCF

THANK YOU Email:

MuhammedS@dbsa.org