Public resources are limited, especially during the period of austerity measures across many of the EaP countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine). Therefore, reliance on public-sector investment must be minimised, and more attention paid to attracting private finance, which is at the core of the green growth transition.
Recognising this, international financial institutions (IFIs) such as the European Bank for Reconstruction and Development (EBRD), the European Investment Bank, the World Bank and the Asian Development Bank, have established credit lines earmarked for environmental purposes in commercial banks. In addition to supporting immediate investment priorities, IFIs have established such credit lines in order to support the capacity of local banks to conduct due diligence assessments and to demonstrate the viability of green financing as an attractive business model. However, this will only happen if local banks see sufficient opportunities to make the necessary investments in staff and capacity compared to other business opportunities. This in turn requires sufficient demand from borrowers and a supportive public policy framework.
|DID YOU KNOW? ...that evidence from climate-specific investment, including IFI-supported credit lines, illustrates that the targeted use of public finance can scale up private financial flows into green investment. While leverage ratios are difficult to compare across projects, countries and instruments, ratios of 1:5 and above are not uncommon, and there are some cases of instruments, such as grants, delivering much higher ratios.|