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ORIGINAL PAPER
DOI: 10.26794/2587-5671-2020-25-4-6-23 UDC 334.02(045) JEL 052, 056
(CO ]
International Financial Institutions Ask to Contribute to Climate Protection
G. Ahamer
Institute for Economic and Social History, Graz, Austria https://orcid.org/0000-0003-2140-7654
ABSTRACT
The aim of this article is to show in which way international financial institutions (IFIs) can contribute to climate protection projects. The principles of IFIs' project cycles are explained in the context of the new blending tool. The cooperation with other donors stands in the centre of EU project funding and the notion of leveraging allows to quantify the cooperative effect among different donors. The bulk of this article describes the most relevant IFIs and national development banks with an international focus: Green Climate Fund (GCF), European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), French Development Agency (AFD), German Development Bank (KfW), World Bank (WB), Asian Development Bank (ADB), and the Asian Infrastructure Investment Bank (AIIB). For all these IFIs, descriptions are provided and their main fields of actions identified. The procedure of application (the "project cycle") is illustrated and an overview of their strategies is given. Thus, this article seeks to provide practical guidance on how to cooperate with IFIs and to direct funds into substantially valid and responsible climate projects. Keywords: global warming; mitigation; project funding; International Financial Organisations; IFIs; infrastructure projects; environmental quality criteria; project cycle; application procedures; blended financing
BY 4.0
For citation: Ahamer G. International financial institutions ask to contribute to climate protection. Finance: Theory and Practice. 2021;25(4):6-23. DOI: 10.26794/2587-5671-2021-25-4-6-23
ОРИГИНАЛЬНАЯ СТАТЬЯ
Международные финансовые организации и их вклад в защиту климата
Г. Ахамер
Институт экономической и социальной истории, Грац, Австрия http://orcid.org/0000-0003-2140-7654
АННОТАЦИЯ
Цель настоящей статьи заключается в том, чтобы показать, каким образом международные финансовые организации (МФО) могут вносить вклад в проекты по защите климата. Принципы проектных циклов МФО разъясняются в контексте нового комбинирования инструментов финансирования. Сотрудничество с другими донорами занимает центральное место в финансировании проектов ЕС, а понятие «леверидж» позволяет количественно оценить эффект сотрудничества между различными донорами. Большая часть статьи посвящена описанию наиболее важных МФО и национальных банков развития, имеющих международную направленность: Зеленый климатический фонд (ЗКФ), Европейский инвестиционный банк (ЕИБ), Европейский банк реконструкции и развития (ЕБРР), Французское агентство развития (ФАР), Германский банк развития (KfW), Всемирный банк (ВБ), Азиатский банк развития (АБР) и Азиатский банк инфраструктурных инвестиций (АИИБ). Для данных МФО даны описания и определены их основные направления деятельности. Проиллюстрирована процедура подачи заявки («проектный цикл») и дан обзор их стратегий. Таким образом, в настоящей статье предпринята попытка дать практические рекомендации о том, как сотрудничать с МФО и направлять средства на осуществление значимых и ответственных климатических проектов. Ключевые слова: глобальное потепление; смягчение последствий; проектное финансирование; международные финансовые организации; МФО; инфраструктурные проекты; критерии качества окружающей среды; проектный цикл; процедуры подачи заявок; смешанное финансирование
Для цитирования: Ahamer G. International financial institutions ask to contribute to climate protection. Финансы: теория и практика. 2021;25(4):6-23. DOI: 10.26794/2587-5671-2021-25-4-6-23
© Ahamer G., 2021
introduction:
setting the scene
An evolutionary world view is valuable when following the ideas of both Teilhard de Chardin [1] and Vladimir Vernadsky [2] (compare [3]), hence by Western and Russian authors. Within this concept, the notion of transition is a valuable tool to describe present-day structural changes [4-13].
As mentioned, the EU preferably finances sustainable projects [14-20] and had set targets to no more promote fossil-fuel projects, and this mindset is even stronger than ever after the successful start of the "European Green Deal",1 including the "European Energy Union"2 as a tool towards this climate protection target. In this frame, a vast number of international and European projects3 assessed and keeps assessing the states and
1 EU (2020). The European Green Deal. URL: https://ec.europa. eu/info/strategy/priorities-2019-2024/european-green-deal_ en (accessed on 22.06.2021). EC President (2020). Political Guidelines of the next European Union Commission. URL: https://ec.europa.eu/commission/sites/beta-political/files/ political-guidelines-next-commission_en.pdf. (accessed on 22.06.2021).
2 EnU (2020), The European Energy Union with its five dimensions. URL: https://ec.europa.eu/energy/en/topics/energy-strategy/energy-union (accessed on 22.06.2021).
3 EBRD (European Bank for Reconstruction and Development) (2014). Innovation in Transition. London.
EBRD (European Bank for Reconstruction and Development)
(2018). Transition Report 2018-19 — Work in Transition. London. EBRD (European Bank for Reconstruction and Development)
(2019). Transition Report 2019-20 — Better Governance, Better Economies. London.
EC (European Commission) (2014). East Horizon EECA Cluster — ICT Environment, Innovation Policies and International Cooperation Report. Brussels.
EY (Ernst and Young) (2017). The IT Industry in Belarus: 2017 and Beyond. London.
German Agency for International Cooperation (GIZ) (2011). Current Situation of the Diaspora-Connected FDIs in Armenia. Yerevan: GIZ Private Sector Development Program South Caucasus. OECD (Organization for Economic Cooperation and Development) and others (2020). Eastern Partner Countries 2020: Assessing the Implementation of the Small Business Act for Europe. SME Policy Index. Brussels, Paris: European Union, OECD Publishing. UNECE (United Nations Economic Commission for Europe) (2005). Economic Survey of Europe, No. 2. Geneva. UNCTAD (United Nations Conference on Trade and Development) (1998). World Investment Report — Trends and Determinants. New York, Geneva.
UNCTAD (United Nations Conference on Trade and Development) (2019). Investment Policy Review: Armenia. Geneva. UNCTAD (United Nations Conference on Trade and Development) (2020). World Investment Report 2020 — Country Fact Sheet: Transition Economies. Geneva.
UNCTADstat (United Nations Conference on Trade and Development Statistics) (2020). International Trade in Goods and Services (database). URL: https://unctadstat.unctad.org/wds/ ReportFolders/reportFolders.aspx?sCS_ChosenLang=en (accessed on 22.06.2021).
stages of economic (and thus financial) transition [2130] in countries that decades ago still were part of a much more secluded economic sphere [31-40], and thus had thrived less, economically and financially, despite their mostly healthy base of human capital. One of the most recent and most comprehensive reports is by UNECE [41]; thus, providing a cutting-edge and neutral set of assessments and recommendations for countries with a similar structure as Russia.
In recent years, one of the strongest promoters for socio-economic evolution is climate change (CC), which already caused a number of positive effects on redirecting huge financial volumes towards sustainable projects. The present article provides concrete information on how to tap this considerable financial potential.
Moderation among differing standpoints is here achieved by dialogue and discourse, not by advocating military strategies of "strength".
sustainable financing -the example of ifca
Such a blending instrument can be illustrated for the Central Asian (CA) region4: the IFCA (Investment Facility for Central Asia) pools resources and improves coherence or coordination of donors' actions supporting partners in their work in true partnership towards SDGs, i.e., sustainable development goals — which are popularised worldwide by "Global Studies" curricula: [43]. Also, it targets cross-cutting requirements, including adaptation to and mitigation of climate change results. Establishment of IFCA in 2010 promoted investments in CA through blending.
(Remark: as evident, IFCA is not an IFI in itself, but an EU instrument to include IFIs.)
Regarding the goals of leveraging, an additional core concept is "leverage"5 [44] echoing a strategic inquiry: what amount of marginal (i.e., additional, in the sense of economics) funding triggers what quantity of overall funds being invested? Such
World Bank (2020a). World Development Indicators (database). URL: https://data.worldbank.org/indicator (accessed on 22.06.2021).
World Bank (2020b). WITS (World Integrated Trade Solution) (database). URL: https://wits.worldbank.org/CountryProfile/en (accessed on 22.06.2021).
4 EuropeAid (2015), Activities in Central Asia. IFCA. URL: https://ec.europa.eu/europeaid/2015-operational-report-2015-asia-investment-facility-aif-investment-facility-central-asia-ifca-and_en (accessed on 22.06.2021).
5 EU (2019), Innovative financial instruments (blending). Brochure and information. URL: https://ec.europa.eu/ europeaid/policies/innovative-financial-instruments-blending_en (accessed on 22.06.2021).
IDENTIFICATION PREPARATION 4NNM ASSESSMENT BOARD OPINION CONTRACTING
Generating the pipeline, ideally so there is a chance to select from multiple projects Ensuring the project meets criteria and information ™ Testing the project to make sure it meets all standards Board makes recommendations on grant approval/ conditions, followed by formal Commission decision Setting up and implementing project in compliance with Obtaining the right information to steer and manage the project [■ Checking if objectives were met and feeding findings in to future project iesi'"5
Fig. 1. Stages of a project cycle in blending operations
Source: DEVCO (2015), Guidelines on EU blending operations, Vol. 1 "General", Brussels & Luxembourg, DG for developmental cooperation DEVCO. URL: https://europa.eu/capacity4dev/t-and-m-series/document/guidelines-eu-blending-operations (accessed on 22.06.2021) plus 3 more special reports.
quotient is called the leverage factor and proud officers boast achieving leverage factors by their programmes of five to ten.
We expect these sub-effects when appropriately leveraging:
• The meaning of financial leverage is to mobilise private or public resources with an intention of enhancing the developmental impact while effectively using funds;
• The meaning of non-financial leverage is improving projects' sustainability and impacting development while enabling earlier starting projects;
• The meaning of policy leverage is supporting reforms towards EU policies or those of partner countries;
• The targets of aid effectiveness are improving cooperation among EU and non-EU actors for aid;
• The meaning of visibility is providing better public visibility for EU's developmental funding.
Blending constitutes opportunities for engagement towards dialogues between regional governments and EU regarding specific multi-governmental sector policies.
This subsection deals with EU financial institutions' procedures. For blending operations, what are procedures practically?
This "EU blending project cycle" (Fig. 1) encompasses seven specific stages while crucial stakeholders share responsibilities, namely the EU Delegations in beneficiary countries, DG NEAR and DG DEVCO (at Brussels HQ = Headquarters), other partner countries, regional organisations, and financial institutions.
The single stages are in detail6:
6 DEVCO (2015), Guidelines on EU blending operations, Volume
1 "General", Brussels & Luxembourg, DG for developmental
1. Identification: IFIs and EU Delegations identify suitable projects, jointly with partner countries or relevant regional organisations [42]. Coherence of these projects with EU's policy objectives and sector priorities is ensured by EU Delegations. Here occurs the generating of a so-called project "pipeline".
2. Preparation: A leading IFI (or financial institution, FI) is responsible for submitting the project proposal or IFIs, EU DGs and FIs hold trilateral consultation to secure matching criteria.
3. Assessment: Responsible EU's services evaluate (a) alignment with objectives of their policies, (b) justifying added value or need, (c) environmental, social and climate change aspects of a project, (d) financial structure, given political barriers & similar actions (see detailed project criteria in the annex of [45]).
4. Board opinion: Decisions on grant requests to EU are made in consensus by a pertinent "Blending Framework Board" (voting are: EEAS, Commission and the EU MS = Member States); and only afterwards the Commission (Com) takes a decision.
5. Contracting: When Com decides to proceed with a project, this allows them to formally contract and to sign a Del agreement with the FI leading.
6. Monitoring: Responsibility for implementing a project (procurement & tendering) and reporting/monitoring (financially & operationally), founded on indicators mentioned, lies with the leading FI.
cooperation DEVCO. URL: https://europa.eu/capacity4dev/t-and-m-series/document/guidelines-eu-blending-operations (accessed on 22.06.2021) plus 3 more special reports.
Green Climate Fund Contributions by Country
$4,000.00 — $4,000.00
I
V» $1,000.00 i
| $2.000.00 3 1 z
$u>00.00 $000
3
UJ
Fig. 2. Overview over funds in the GCF pledged contributions to the GCF by country
Source: GCF (2019), The Green Climate Fund. URL: https://en.wikipedia.org/wiki/Green_Qimate_Fund#Sources_of_finance (accessed on 21.12.2019).
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7. Evaluation: This responsibility is delegated to the FI leading.
At least two donors are required for blending: one from the EU plus at least one IFI.
the single ifis and their
POTENTIAL CONTRIBUTIONs
THE GREEN CLIMATE FUND (GCF)
The institution of the "Green Climate Fund"7 was established within the UNFCCC framework meant to assist developing countries for mitigating and adapting CC. Geographically, it is located in the new Songdo district of Incheon in South Korea, and governed by a Board of 24 members while initially supported by a Secretariat.
The core objective of GCF is to "support projects, programmes, policies or other activities in developing country Parties using thematic funding windows" 8 [3]. The year 2020 was a record year, in which GCF funding amounted to 4900 M€.9 Already,
7 GCF (2017a), The Green Climate Fund. URL: http://www. greenclimate.fund/what-we-do/portfolio-dashboard (accessed on 21.05.2018).
8 GCF (2017a), The Green Climate Fund. URL: http://www. greenclimate.fund/what-we-do/portfolio-dashboard (accessed on 21.05.2018).
9 GCF (2017a), GCF Annual Report 2020. URL: https://www.
greenclimate.fund/sites/default/files/document/gcf-annual-results-report-2020.pdf (accessed on 21.05.2018).
disbursement of GCF financing is accelerating, as the Fund follows its major focus to implement approved projects.
During Cancun's COP-16, the matter of GCF governing was allocated to a freshly founded "Green Climate Fund Board", while World Bank was chosen as a temporary trustee.
Advanced economies did formally agree to mobilising jointly 100 billion $ per year by 2020 (Fig. 2 and10) from several sources, in order to address both pressing mitigating and adapting needs for developing countries. Also, governments declared to channel a share of new multilateral funding through this newly established GCF.
sustainable Financing
and bankable Projects
To decide if or not a project is deemed bankable depends on procedures and criteria required from each single FI or source. A good project proposal best secures financing when fulfilling all criteria. Criteria for CC adaptation projects include: providing the most benefits to a large number of people; providing effective implementation while being sustainable for long time. Such durable quality is documented by a national government's
10 GCF (2017a), The Green Climate Fund. URL: http://www. greendimate.fund/what-we-do/portfolio-dashboard (accessed on 21.05.2018).
Fig. 3. The GCF project cycle
Source: GCF (2020), GCF Programming Manual. An introduction to the Green Climate Fund project cycle and project development tools for full-size projects. URL: https://www.greenclimate.fund/document/programming-manual (accessed on 26.10.2020).
willingness or ability to carry through projects beyond the period of initial investment or finance. A recent GCF Regional Workshop focused on Central Asia and Eastern Europe in Tbilisi.11
GCF project cycle
GCF utilises various financial instruments such as concessional debt financing; grants; equities or guarantees. The Global Climate Fund's private sector support also assists actors in tapping finance markets. GCF's invests via grants, loans, equity or guarantees.12
The Global Climate Fund develops its initial strategic planning as guidance for ongoing work. One such plan was endorsed by its Board in March 2016 at its twelfth
11 GCF (2017a), The Green Climate Fund. URL: http://www. greenclimate.fund/what-we-do/portfolio-dashboard (accessed on 21.05.2018).
12 GCF (2017a), The Green Climate Fund. URL: http://www. greenclimate.fund/what-we-do/portfolio-dashboard (accessed on 21.05.2018).
meeting,1314 and its 2017 plan is available here,15 as confirmed recently.16
The main steps of the GCF project cycle are (Fig. 3): "I. Country, regional and/or accredited entity programmes, II. Generation of programme or project funding proposals, III. Concept note (Voluntary), IV. Funding proposals, V. Secretariat analysis and independent technical assessment and recommendations to the Board, VI. Board
13 GCF (2016), The Green Climate Fund. URL: http://www. greenclimate.fund/who-we-are/about-the-fund/governance (accessed on 21.12.2019).
14 GCF (2017b), The Green Climate Fund. URL: www.greenclimate. fund/meetings/2017/tbilisi (accessed on 21.05.2018).
15 GCF (2017c), The Green Climate Fund. URL: https://www. greenclimate.fund/documents/20182/239759/Proposal_ Approval_Process__Updated_.pdf/53357eae-1a4d-48da-99c5-e11c5ef7761c and URL: https://www.slideshare.net/Ecofys/a-nama-for-the-electrification-of-sialkot-with-pv-technology (accessed on 21.05.2018).
16 GCF (2017d), The Green Climate Fund. URL: https://www. greenclimate.fund/boardroom/meeting/b29 (accessed on 21.05.2018).
Identification of a project opportunity
Projet appraisal
• Financial
• Economic
• Social
• Environmental »Technical
Management Committee Review / Approval
Fig. 4. Structure of the EIB project cycle
Source: EIB (2018), The European Investment Bank's Project Cycle. URL: http://www.eib.org/projects/cycle/index.htm (accessed on 21.03.2020).
decision, VII. Legal arrangements for approved proposals".17
the european investment bank (eib)
The EIB18 "represents the interests of EU member states'" and is the EU's long-term non-profit lending banking institution as established under the Treaty of Rome in 1958. The EIB is not to be confused with the European Central Bank. The EIB (whose shareholders are the member states of the EU), as a "policy-driven bank" uses its financing operations to enhance social cohesion and European integration.
Mission of EIB
Often nicknamed "the Bank of the European Union", EIB's mission is to make a difference to the living future of Europeans and EU partners by supporting solid investments that promote goals of EU policies. Especially, EIB strongly supports the SME sector.
Although some 90% of EIB-financed projects are geographically located in EU member states, the bank funds projects in over 150 other countries such as non-EU South-Eastern European countries, Mediterranean partner countries, ACP group countries, countries in Asia and Latin America, Eastern Partnership countries and Russia.19 EIB works in these countries in order to implement the financial pillar of the EU policies on
17 GCF (2017a), The Green Climate Fund. URL: http://www. greenclimate.fund/what-we-do/portfolio-dashboard (accessed on 21.05.2018).
18 EIB (2017a). The European Investment Bank. URL: http:// www.eib.org/about/index.htm and related sub-pages (accessed on 21.03.2020).
19 EIB (2017b), The European Investment Bank's Central Asian Engagements. URL: http://www.eib.org/projects/regions/central-asia/index.htm (accessed on 21.03.2020).
external cooperation and development by encouraging development of the private sector, security of energy supply, development of infrastructure and a sustainable environment.
Outside the EU, EIB's lending strategy follows priority objectives for its lending activities:
• Development of private sector.
• Development of financial sector.
• Development of infrastructure.
• Energy supply security.
• Environmental sustainability.
• EU presence.
How the EIB acts
• Lending: A wide majority in its financing works through loans, while EIB also offers microfinance, equity investment, guarantees, etc.
• Blending: European Investment Bank support unlocks financing from other sources, particularly from the EU budget. This is blended with loans to form a full financing package.
• Advising: Often, lack of finance is not the key barrier to investment, as described above. Thus, EIB helps with project and administrative management capacity to facilitate investment.
The EIB Project cycle includes: Application for a loan; Appraising; Deciding; Procuring; Monitoring; Repaying (Fig. 4).
the european bank for reconstruction and development (ebrd)
The EBRD (European Bank for Reconstruction and Development), founded in April 1991, headquartered in London, represents a multilateral developmental investment bank and an IFI. it uses investments as a strategic tool to
build market economies. While EBRD initially focused on the former Eastern Bloc, it meanwhile expanded to support development in over 30 countries from CE (Central Europe) to CA (Central Asia). EBRD member countries come from Europe, and five more continents (na, af, as, au, [3, p. 334]), whereof the US are the biggest single shareholder. Formally, the 65 countries and 2 EU institutions own the EBRD. While its shareholders represent the public sector, EBRD mainly invests into private enterprises, and does so jointly with commercial partners.
As the largest single donor to the EBRD, the European Union, accounts for over a third within total EBRD grants since its foundation. In 2016, EBRD received contributions of over 289 M€ from the EU, which represents 2/3 of entire donor funding delivered for the EBRD's projects.
In a nutshell: EU & EBRD
• EU = EBRD's single largest donor.
• This amounts to over 1,990 M€ of all donors' contribution.
• Meaning 378 M€: contributions in 2019 for EBRD projects.
• As the largest single donor to the EBRD, the EU has accounted for about 40 per cent of total donor funds channelled through the EBRD since the Bank's inception.20
• 3% share in capital.
EBRD focuses on Environment
The EBRD considers itself the first developmental multilateral bank to have explicitly required by mandate ensuring of environmentally sound sustainable development. As follows, EBRD describes itself:
• EBRD applying strict social and environmental standards for all its financed projects. Such is regulated by its "Environmental and Social Policy and Performance Requirements".21
• EBRD acts as one of the largest investors for environmentally focussed projects for its operating countries, including 12,200 M€ in climate
20 EBRD (2021) EU: EBRD shareholder profile. URL: https:// www.ebrd.com/who-we-are/structure-and-management/ shareholders/european-union.html (accessed on 21.03.2021).
21 EBRD (2017a), The European Bank for Reconstruction and
Development. Environmental project criteria. URL: http:// www.ebrd.com/who-we-are/history-of-the-ebrd.html, http:// www.ebrd.com/news/publications/institutional-documents/ basic-documents-of-the-ebrd.html, http://www.ebrd.com/ news/2016/ebrd-investment-in-central-asia-reaches-record-14-billion-in-2015.html (accessed on 21.03.2021).
change, EE and resource financing under EBRD's approach abbreviated "GET" (Green Economic Transition). This GET approach contains projects summed up under two earlier initiatives, namely the "Sustainable Resource Initiative" plus the "Sustainable Energy Initiative".
EBRD rolled out and officially adopted its GET approach already in 2016.
Financing procedure for EBRD projects
From initiation to repayment, the total lifecycle of an EBRD project could vary from 1 year (e.g., for trade financing or working capital projects) to 15 years (e.g., for sovereign long-term infrastructural projects). An EBRD procedural cycle as described22 contains the following principal stages (Fig. 5 shows identical key steps):
Concepts' review: The OpsCom (Operations Committee) of EBRD, consisting of senior mgt. from banking, Chief Economist's Office, General Counsel's Office, Finance, and Evaluation & Operational & Environmental Support) approve a project's concepts and its entire structure, containing financing structures proposed plus supportive obligations. A mandate letter is signed at this stage by the EBRD and the client; it is to outline project plan plus expenses or responsibilities for its development.
Final reviews: After the basics of a business deal has been negotiated (incl. a term sheet signed) and every investigation has been substantially finished, a project receives their final reviews by the OpsCom.
Board reviews: Presidents of EBRD & EBRD's operations teams present this project for approval to their Board of Directors.
Signing: Client and EBRD sign this deal and thus it is binding legally.
Disbursement: After the conditions for repayment are agreed upon and EBRD's conditions are met, these funds are transferred to client's account from EBRD's account.
Repayment: Under an agreed schedule, client will repay to EBRD the amount of loan.
Sale of equity: On a non-recourse basis, EBRD sells its equity investments.
Final maturity: The amount of final loan is due for being repaid to EBRD.
Completion: The full loan is entirely repaid or EBRD's equity investment is divested.
22 EBRD (2017b), The European Bank for Reconstruction and Development. URL: http://www.ebrd.com/work-with-us/project-finance/funding-process.html%20 (accessed on 21.03.2020).
Fig. 5. The EBRD project cycle
Source: EBRD (2016), The European Bank for Reconstruction and Development. URL: http://www.ebrd.com/work-with-us/project-finance/ funding-process.html%20 or https://www.slideshare.net/CentralEuropeanInitiative/ebrd-presentation-october-2015-innovation-bootcamp-1 (accessed on 21.03.2020).
the french development agency (afd)
The "French Development Agency" (Agence française de développement AFD) is France's public national FI, "contributing to implementation of state ODA policy abroad" and working for fighting poverty and promoting sustainable development.
A Common World: The AFD adopted such a new slogan for inspiring all its teams. To build both a more sustainable and fairer world that leaves no one behind — a "world in common" — is seen to imply five key transitions, in both France and target countries, regarding energy, social, digital, territorial or civic spheres. Achievement of SDGs depends on mastering such structural shifts [47, 48] and transitions.
Priority fields: In these areas, AFD works for the above targets: FI and supporting the private sector (the vast majority); Agriculture & food security; Biodiversity; also minor fields within Climate; Water; Local communities and urban development; Sustainable energy; Education and training; Transportation; and Health. In general, its projects refer to Sustainable consumption and production, Climate, Employment and shared prosperity, Water and sanitation, Forests and biodiversity, Hunger and
food, Inequality, Infrastructures, Peace and justice, Oceans, Health, Global partnerships, Sustainable cities, Education, Poverty, Energy, and Gender equality.
With 14.1 billion euros committed in 2019, AFD Group (with its subsidiary Proparco and in connection with the French technical cooperation agency Expertise France) finances and supports development projects in 115 countries, while 815M€ come from financial resources allocated by the state, 706 M€ are delegated resources (of which 506€ come from the EU), and more than three quarters, namely 6400 M€ are borrowed from markets.23
Within France, main ODA stakeholders are the French Ministries for Europe, for Foreign Affairs, Education and Research, and Economy, as well as French public actors like CIRAD or IRD.24
The motto of its project cycle (Fig. 6): Report, inform, dialogue.25
23 AFD (2020).
24 AFD (2018). Agence Française de Développement. URL: https://www.afd.fr/en/development-aid-whats-it-all-about (accessed on 21.03.2020).
25 AFD (2015), Agence Française de Développement. URL: https://issuu.com/objectif-developpement/docs/csr_gri_ report_2015_afd_group (accessed on 21.03.2020).
Beneficiaries of financing
States, companies, local authorities, NGOs
1 - Project idea
Submitted to AFD for financing
3 - Feasibility study
Generally entrusted to external consulting firms
Agence Française de Développement contributes to financing projects
2 - Analysis of proposals
Especially of the project's objectives and conformity with AFD's priorities for operations in the country in question
4 - Analysis of feasibility studies and financing requests
Analysis of the economic, social and environment effects of projects, their compliance with France said policy, the financing plans, corruption, environmental, social, economic risks...
7 - AFD makes decision on the financing
5 - Negotiation on the financing terms
6 - Financing requests sent to AFD
Agreement on project content and financing terms
8 - Signing of loan or grant agreements
9 - Physical Implementation of projects 9 - Disbursements of financing
Selection of companies in accordance with local law and in compliance with AFD's Control of compliance with the clauses set out in the agreement. Vigilance over the procurement principles (competitive bidding in particular) risks of money laundering, terrorist financing and corruption. Technical and financial
monitoring of the project.
10 - Repayment to AFD in the case of loans Ex post evaluation of the project
Evaluation of the achievements, their viability and their economic, social and environmental impact. 30 project evaluations
Fig. 6. The AFD project cycle for group financing
Source: AFD (2015), Agence Française de Développement, p. 21. URL: https://issuu.com/objectif-developpement/docs/csr_gri report_2015_afd_group (accessed on 21.03.2020).
KFW
Domestic promotion International business
We promote Germany We support We promote
internationalisation development
Mittelstandsbank Kommunal- und Privatkundenbank/Kreditinstitute KfW IPEX-Bank KfW Development Bank, DEG
Promotion of SMEs, business founders, start-ups Promotion of housing construction and refurbishment, improved accessibility and education Financing of municipal infrastructure and global loans International export and project finance Promotion of developing countries and emerging economies
Promotion of environmental and climate protection
KFW KFW IPEX-Bank kfw kfw DEG
Fig. 7. KfW's internal structure; it was also called KfW Group or KfW Bankengruppe
Source: KfW (2018), Kreditanstalt für Wiederaufbau. URL: https://www.kfw.de/KfW-Group/About-KfW/Auftrag/Entwicklungsfinanzierung/ (accessed on 21.03.2020).
the german development bank (kfw)
The German "Kreditanstalt für Wiederaufbau" (Reconstruction Credit Institute) located in Frankfurt/Main represents German government-owned developmental banks and is owned by the Federal Republic of Germany (80%) plus its Federal States (20%). After WWII in 1948, the Marshall Plan formed this institution. KfW meanwhile covers > 90% from the capital markets what it needs for borrowing; and this allows KfW advantageous funds raising conditions.
The KfW is promoting social and economic progress in emerging or developing countries in order towards improved lives for people. KfW Group defines their task as to provide advice or support for reformatory procedures or in investing for emerging or developing states. Thus, KfW defines the following targets:
• Improving social or economic conditions sustainably.
• Reduce impoverishment.
• Protect climate and environment.
• Promoting the financial sector.
KfW's partners can be both (non-)governmental institutions or governments, including multilateral or bilateral donors.
KfW's priority areas
KfW Development Bank (KfW Entwicklungsbank, in German) supports many developing areas worldwide by promoting economies, reducing poverty and providing population with education, health care and a future. Meanwhile, KfW did turn into one of the globally biggest developmental banks. DEG, as a KfW subsidiary, is financing companies investing and creating jobs for developing regions. KfW's preferred activity areas comprise economic development and poverty decrease, education, health care, good governance, plus protection of the environment and the climate. Thus, the bank supports the Federal Government of Germany to achieve its political development targets.
KfW's project cycle KfW's preparatory phase means analysing and conceiving, while in line with updated countries' strategies by the responsible German Federal Ministry of Economic Development and Cooperation (BMZ). Undertaking on-site audit analyses on-site conditions.
KfW's executing phase comprises a financial agreement and the executing on a technical level, if a partner country's ownership is to be reinforced, for example by local agencies performing the project, in responsibility for all actions.
KfW's inspecting phase means final KfW inspecting (i.e., checks if a population does accept the offered services), ex-post evaluating performed by the independent KfW administrative departments and finally transparently informing via KfW's transparency portal,26 including informing about the origin, impact and use of provided funds.
KfW generally searches intergovernmental agreements for projects. It is checked by KfW if projects proposed are both realisable and developmentally sound (for criteria see the annex of 45). Specialised consulting firms work jointly with partners and feasibility studies are drawn up, thus providing answers to all key questions in a project, such as developmental impacts, economic efficiency,27 and possible risks.
26KfW-T (2018), KfW's transparency portal. URL: http:// transparenz.kfw-entwicklungsbank.de (accessed on 21.03.2020).
27 KfW (2019), Kreditanstalt für Wiederaufbau. URL: https://
www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/Tasks-and-goals/Unsere-Arbeitsweise/ (accessed on 21.03.2020).
KfW developmental projects were evaluated to have been successful to a level higher than 80%.28
the world bank (wb)
As an IFI, the World Bank (WB) is providing loans to the world's countries for capital programs. WB contains two institutions: IBRD, the "International Bank for Reconstruction and Development", and IDA, the "International Development Association", and itself is a component of WBG, the World Bank Group.
WB officially states its aim to be poverty reduction and promotion of shared prosperity.
WB's Article I of Agreement defines as one of its aims (a) encouraging to develop productive resources and facilities in less developed countries; (b) providing own capital or promoting foreign investment and (c) promoting international trade's growth balanced in the long run of.
Countries' Strategic Documents WBG's "Country Partnership Framework" (CPF) targets making WB's country-oriented model ever better systematically selective, based on evidence, and focused on the WB's double aims: increasing shared prosperity in a sustainable manner and ending extreme poverty. CPF is replacing the earlier Country Assistance Strategies (CAS), and jointly used with WB's Systematic Country Diagnostics (SCD), the CPF directs WBG's support to member countries.
Each new CPF is informed by a Systematic Country Diagnostic (SCD). A target of the SCD is identifying the most relevant opportunities and challenges faced by a country in advancing towards the twin goals. A thorough analysis provided this, and consultations inform a wide range of stakeholders.
WB's Project Criteria
The Sustainable Development Goals (SDGs) and
the eight Millennium Development Goals (MDG) targets are valid for 2000-2015 (MDGs, see the list below) or 2016-2030 (SDGs). To realise MDG goals, six criteria must be met: more effort in health and education, stronger and growing more inclusively in fragile states, more as well as better aid, integration of the development and environment agendas, improvements in trade
28 KfW (2020), Kreditanstalt für Wiederaufbau. URL: https:// www.kfw.de/microsites/Microsite/transparenz.kfw.de/en/ wirkungen/ (accessed on 21.03.2020).
Fig. 8. The WB's project cycle
Source: WB (2017), The World Bank. URL: http://treasury.worldbank.org/cmd/htm/GreenProjectCycle.html (accessed on 21.03.2020).
negotiations, plus more focused and stronger support from multilateral institutions such as WB.
1. Eradicating Hunger and Extreme Poverty.
2. Ensuring Environmental Sustainability.
3. Promoting Gender Equality.
4. Achieving Universal Primary Education.
5. Child Mortality Reduction.
6. Maternal Health Improvements.
7. Combatting AIDS/HIV, Malaria, or Other Diseases.
8. Developing a Global Developmental Partnership.
To ensure that WB-financed operations would not counteract these aims but rather add on to realising them, a so-called Environmental and Social Framework (ESF) was defined in 2016.
The WB and climate change: WB doubled its support on CC adaptation amounting to 2,300 M$ in 2011 to 4,600 M$ in 2012 plus a Climate Change Action Plan was produced. As we know, our planet now is more than +0.8 °C warmer as compared to the pre-industrial epoch; and its warming could reach +2 °C within 2 to 3 decades.
The World Bank project cycle: how does it function?
Given that there is no unequivocal vocabulary and definition, the 6 key phases in any WB project cycle comprise to: identify; prepare; appraise; negotiate & present to the board; implement & supervise; evaluate (Fig. 8). While many project suggestions do not even pass an early identification phase, others undergo improvements during preparing or appraising phases which makes them look very differently as compared to original design. Over 200 projects are approved by WB in the course of a typical year.29
1. Identification: To identify and propose a project for WB financing is a task for governments borrowing. During this early phase, questions are answered by planners: Who is intended to benefit from this project? Could the same objective be achieved by other options? Will the project's
29 WB (2016), The World Bank. Taking Kazakhstan as example for an achieved iterative process. URL: http://documents. worldbank.org/curated/en/576651477533678239/Kazakhstan-Perf ormance-and-learning-review-of-the-country-partnership-strategy-for-the-period-FY 12-17.
benefits be greater than the costs? A project must also successfully pass a test against WB priorities.
2. Preparation: Even if the WB might help often, a borrowing country always carries the responsibility to examine all aspects of their project: technical, social, environmental, and economic ones. It has to define and analyse existing and available options to this project, all their degrees of feasibility including their benefits and costs.
3. Appraising: A dedicated assessment of the project, now independently undertaken by WB, is named appraisal. Over 150 appraisal missions on-site, each during 3-4 weeks, are performed annually performed by consultants and WB staff envisaging technical, economic, financial or institutional questions.
4. Negotiating and Presenting to Board: A WB appraisal report summarises recommendations on how the loan's conditions form a basis to negotiate with the borrower. Negotiations involve the borrower and WB staff in for an agreement on necessary measures for the final success of the project. At this point in time, the WB Board of Directors is presented with the project.
5. Implementing and Supervising: Around 10 WB weeks of staff annually will be used to supervise each single project; also visiting the project site identifies problems and supports finding solutions.
6. Evaluating: OED, the Operations Evaluation Department within the World Bank, carries responsibility as an independent department for the ultimate assessment of project results in an impartial manner.
adb, the asian development bank
The Asian Development Bank ADB is an FI and in 1966 established as a regional development bank, having headquarters in Mandaluyong, Metro Manila, Philippines, more precisely located in the Ortigas Centre. Around the world, ADB additionally maintained over 30 field offices for promotion of economic and social development within the Asia and the Pacific regions. In spite of the many successes in this region, a large share of the world's poor lives there: over 300 million still dispose of less than $ 1.90 daily and an astonishing 1.2 billion earn less than $ 3.10 daily.
ADB's Focus Areas
These include:
• Infrastructure at large, including energy, water supply, water sanitation, transport, urban development, communications.
• CC, Environment, DRM (Disaster Risk Management). For 2008-2020, ADB's long-term strategic framework defines environmental sustainability as a prerequisite to poverty reduction and economic growth in the Pacific and Asia.
• Regional Integration and Cooperation (RCI): by this process, economies and states turn more regionally interconnected, poverty-reduced, and with less economic disparity, accelerate economic growth, strengthen institutions in Asia, and raise productivity and employment. With the Wecoop2 [46] project's regional approach and encouragement [14], RCI matches strategically well.
• Developing the Finance Sector. This means that a finance system is an economic lifeline to a country.
• Lending to the private sector.
ADB's Co-financing
ADB's private sector operations (considered apart from its own funds) generated also a record-high of 5,840 M$ of co-financing — thus increasing by 1,200 M$ from 2015 — also including 238 M$ of co-financing to officially support operations by non-sovereign actors.
The CPS (country partnership strategy) represents the primary ADB platform used when designing operations for delivering developmental results on a country level. ADB works to map out a developmental strategy (medium-term) plus a 3-year business plan for country operations (COBP) for its implementation in each developing member country.
The ADB project cycle: How does it work?
Financing is provided for such projects that effectively will contribute to further social and economic development in the given country and will have a highly strong poverty alleviation impact while conforming to the ADB and country strategies. Fig. 9 shows ADB's project cycle.
1. Countries' Partnership Strategies: For each member country developing, ADB works by defining a development strategy (medium-term) and an operating program named CPS (country partnership strategy), aligned with this country's poverty reduction goals and development plan, and prepared coherently with a DMC planning cycle.
2. Projects' Preparation and Identification: Often, ADB provided a grant entitled project or program preparatory TA technical assistance (technical assistance) to help for identification and preparation by government of a feasible project, which could include initial social &
Fig. 9. The ADB project cycle
Source: ADB (2017), Asian Development Bank. URL: https://www.adb.org/site/disclosure/public-communications-policy/cycle; https://www.adb.org/sites/default/files/page/82563/project-cycle.pdf (accessed on 21.03.2020).
poverty analysis or a TA report. While examining the project, ADB examines project feasibility in a fact-finding mission.
3. Approving: consists of the sub-phases: (i) Loan Negotiation: submission of draft loan agreements or project proposals; (ii) Board's Approval: approval by ADB's Directors' Board through the Recommendation and Report of the President; (iii) Signing the Loan: signing by cabinets of the borrowing countries' Governments and ADB President; (iv) Loan Effectiveness: After conditions (cross-effectiveness of co-financing, legal requirements, and other agreements) are met, the loan takes effect.
4. Implementation: Implementation by an executive agency (usually 2-5 years), then recruitment of project consultants to assist the Government, as needed.
5. Evaluation after Completion: When the TA activities and project facilities are completed, ADB prepares a project completion report to document the overall experience.
aiib, the asian infrastructure investment bank
As a new multilateral FI, AIIB was founded with the declared intention of bringing countries
together across Asia for addressing daunting infrastructure necessities. By enhancing economic development and interconnectivity in this region through advancements within infrastructural or other productive sectors, the Asian Infrastructure Investment Bank seeks to improve access to basic services and to help stimulate growth.
AIIB sets out to offer (non-)sovereign finance for sustainable and sound projects in power and energy, rural infrastructure and agriculture development, transportation and telecommunications, environmental protection, water supply and water sanitation, and urban development & logistics.
AIIB started to operate on 25 December 2015 the foundational agreement entered into force, having its headquarters in China's capital Beijing. AIIB was proposed as China's governmental initiative and has 56 member states as of 2017 (Fig. 10), plus another 24 prospective members. Its capital has a value of 100,000 M$, thus equivalent to two thirds of ADB's capital and about half that of WB.
Following AIIB's AOA (Articles of Agreement), it will "provide or facilitate financing for any member, agency, instrumentality or political subdivision thereof, or any entity or enterprise operating in the territory of a member, as well as to international
Fig. 10. Member states of AIIB
Source: AIIB (2017), Asian Infrastructure Investment Bank. URL: https://www.aiib.org/en/projects/process/index.htmL (accessed on 21.03.2020).
or regional agencies or entities concerned with the economic development of the Asia region".30
Goals and Priorities
The creation of the AIIB shows the greater economic level of Emerging Markets in China and in general — AIIB might act as a game-changer.
energy pipelines and telecoms, roads and rail, ports, and reopening marine routes in South and South East Asia, the Middle East and beyond.
• Mobilising Private Capital: with other MDBs in partnership, private financers, governments, and other partners devise innovative solutions that catalyse private capital.
Priority Themes
In its 1st operating year, both stakeholder engagements and client demand were validating AIIB's original rationale of creation, emphasising 3 particularly relevant areas, now evolving into AIIB's thematically emerging priorities:
• Infrastructure Sustainability: to support countries in meeting their developmental and environmental goals as well as promoting green infrastructure.
• Cross-country Connectivity: across Central Asia, prioritising transnational infrastructure, namely
30 AIIB (2017), Asian Infrastructure Investment Bank. URL: https://www.aiib.org/en/projects/process/index.html.
Sector Strategies
AIIB's Asia Strategy for Sustainable Energy establishes a new framework for energy projects investments that will increase access for safe, reliable and clean electric energy to millions across Asia. For such strategy implementation, AIIB supports members when they perform their obligations as defined in the Paris Agreement, namely "holding an increasing average global temperature to well below 2 °C (beyond pre-industrial levels) and pursuing efforts for limiting this increasing temperature to 1.5 °C". AIIB plans to achieve such aim and aligns support with national energy investment plans of their members, and also their NDCs (Nationally Determined Contributions).
Fig. 11. AIIB's principal project cycle
Source: AIIB (2017), Asian Infrastructure Investment Bank. URL: https://www.aiib.org/en/projects/process/index.html (accessed on 21.03.2020).
Project cycle
This bank's project process (Fig. 11) is guided by AIIB's thematic priorities and strategic goals: sustainable infrastructure, private capital mobilization and cross-country connectivity. First, AIIB analyses ideas for projects and proposals from its partners, clients and other stakeholders, and then seeks to attain appropriately balancing between sectors, borrowers and (non-) sovereign projects. Subsequently, those projects meeting all preliminary screening criteria will be included in a rolling investment program.
recommendations and conclusions
This article's target is twofold: (1) it shows in which way international financial institutions (IFIs) can contribute to climate protection projects and (2) how the method for application and implementation (= the so-called project cycle) works for the most relevant IFIs. Moreover, EU's IFCA (Investment Facility for Central Asia) was laid out as a case study for the generally used "blending" tool.
All mentioned IFIs, namely the entirety of
• GCF (Green Climate Fund),
• EIB (European Investment Bank),
• EBRD (European Bank for Reconstruction and Development),
• AFD (French Development Agency),
• KfW (German Development Bank),
• WB (World Bank),
• ADB (Asian Development Bank), and
• AIIB (Asian Infrastructure Investment Bank) established social and environmental project
criteria by which efficiency and suitability of submitted projects are evaluated.
Thus, this article provides introductory practical guidance on how to cooperate with IFIs for responsible climate protection projects.
Moreover, this article answers the question posed in the title, namely how IFIs' procedures can contribute to climate protection:
1. Already at present, IFIs require a dense set of environmental and social project criteria.
2. Driven by the increasing need for blended financing, however, these environmental and social project criteria should be harmonised among IFIs in order to (i) facilitate proposal submission for involving several IFIs and (ii) establish a planet-wide and consistent regulatory body of interlinked criteria.
3. By redirecting their financial volumes into climate-compatible projects (as discussed on these pages), IFIs re-shape the framework of action among the industry of infrastructure projects: success means to obey criteria of climate compatibility.
4. The effect of such redirection of global project financing towards climate protection will support recently declared EU policy supporting the needed "Green Deal", as proclaimed by the new Presidency of the European Commission.31
Therefore, this article spans from IFIs' rationales to the rational of climate protection, while keeping a viewpoint of societal learning. Thus, the question formulated in the title is answered.
31 EU (2019), Innovative Financial Instruments (blending). Brochure and information. URL: https://ec.europa.eu/ europeaid/policies/innovative-financial-instruments-blending_en.
acknowledgements
The author thanks the European Commission and EuropeAid for having financed a preliminary version of this study in the framework of the Wecoop2 project to Central Asia, namely in the Kazakh capital city then named Astana (now Nur-Sultan), and with a contribution by the institution EAA for MWH.
благодарность
Автор выражает благодарность Европейской Комиссии и EuropeAid за финансирование предварительного исследования в рамках проекта Wecoop2 для стран Центральной Азии, в столице Казахстана Астане (ныне Нур-Султан), при участии института ЕАОС для MWH.
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about the author / информация об авторе
Gilbert Ahamer — Dr. Sci. (Eng.), Advisory Board Global Studies, Graz University, Institute for Economic and Social History, Graz, Austria; Environment Agency Austria, Vienna, Austria
Гилберт Ахамер — доктор технических наук, Консультативный совет по глобальным исследованиям, Университет Граца, Институт экономической и социальной истории, Грац, Австрия; Агентство по окружающей среде Австрии, Вена, Австрия gilbert.ahamer@umweltbundesamt.at
The article was submitted on 23.04.2021; revised on 10.05.2021 and accepted for publication on 17.05.2021. The author read and approved the final version of the manuscript.
Статья поступила в редакцию 23.04.2021; после рецензирования 10.05.2021; принята к публикации 17.05.2021.
Автор прочитал и одобрил окончательный вариант рукописи.
