Energy Finance
Huge capital investments will be required in the coming decades to
meet the world's increasing energy requirements - UNEP is working
to ensure that these investments are made in an environmentally friendly
way. Although sustainable energy technologies have been in development
for years, mainstream financiers still too often consider them a niche
technology, making the challenge of scaling up financing to this sector
a difficult one.
Achieving some critical mass in this sector will require investment,
finance and insurance products to create the liquidity necessary
for vibrant primary and secondary markets in sustainable energy.
However, the market development and initial transaction costs of
creating new financial products for a niche sector are prohibitive,
which leads most players to wait on the side-lines instead of acting
as first-movers. This wait-and-see attitude of traditionally risk-averse
financial institutions is compounded by an overall lack of information,
experience and tools needed to quantify, mitigate and hedge project
and product risks.
UNEP has been working with the finance sector since the late 1990s
on new approaches to financing sustainable energy in developing
countries. Through it's Renewable Energy and Finance Unit, UNEP
has implemented a variety of 'financial catalysts'- including seed
financing and enterprise development, credit enhancements and financier
advisory support services.
These different catalysts are aimed at helping financiers share
risks, buy down transaction costs, build capacity and address various
other barriers that make building sustainable energy investment
portfolios a challenge.
These efforts to green energy finance flows build upon UNEP's Finance
Initiatives (FI), which now include
a membership of over 170 banks and 85 insurers committed to integrating
environmental considerations into their internal and external business
activities and asset management. UNEP Energy also works closely
with the Basel Agency for Sustainable Energy (BASE), a UNEP Collaborating
Centre that promotes and facilitates investment in the renewable
energy and energy efficiency sector.
Although having innovative projects and partnerships is important,
catalyzing broad support within the finance community requires an
overall approach to enhance knowledge transfer and replication.
Part of UNEP strategy is to support growth of a nascent sustainable
energy finance community through an initiative developed by UNEP
Energy, the UNEP Finance Initiative, and BASE. The Sustainable Energy
Finance Initiative, or SEFI, brings together financiers, engages
them to do jointly what they may have been reluctant to do individually,
and coaxes them to enter into public-private alliances in the sustainable
energy finance area.
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