SUNREF, AFD S GREEN FINANCE LABEL. Agence Française de Développement

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1 Solar panels at Strathmore University in Nairobi Kenya Boisseaux-Imageo / French Red Cross Agence Française de Développement AFD S GREEN FINANCE LABEL

2 Towards a shared sustainable development model Despite significant technological progress and increasing international awareness, the current development model (characterized by an overexploitation of natural resources and the belief in the infinite resilience capacity of our ecosystems) has impacts on the environment and the viability of the economy: Geopolitical and economic tensions caused by the explosion in demand for raw materials, in a context of strong population growth, particularly in urban areas; Ecosystem degradation and a threat to biodiversity due to the emission of undesirable byproducts (gaseous, liquid or solid). The costs of dealing with these negative effects are constantly increasing (water treatment, climate change adaptation). To address these issues, the international community is gradually converging towards a common agenda that recognizes the need to build a model with a reduced carbon footprint in order to achieve the Sustainable Development Goals. Encourage banks to finance the ecological transition As the main financers of companies, local banks can play a key role in financing this transition. Removing technical and financial barriers allows these institutions to finance green investments. Seize the opportunities of the ecological transition Companies are vectors of low-carbon and resource-efficient innovations. They are central to the transition towards a more sustainable economic model. This ecological transition leads to the rapid expansion of a number of markets, particularly in the fields of energy (renewable energies and energy efficiency), sustainable natural resource management, eco-technologies and pollution reduction. However, a number of obstacles continue to hold back the implementation of investments, despite the dynamism of these sectors and the performance of technologies: low level of awareness of companies and individuals, lack of capacity of actors, overestimation of risks, low level of appropriation by banks vis-à-vis this type of project, limited or inappropriate financial resources Geothermal exploitation, Olkaria area Kenya James Keogh AFD s strategy: Mobilize banks and companies for green growth For many years, AFD has been engaged in an active partnership with banks in its countries of operation. The aim is to finance projects at the intersection of the objectives for development and environmental protection. AFD provides its expertise and appropriate financial resources in order to make investments attractive in sectors where there is little or poor coverage, while banks provide their knowledge of the local context, their network and their clients confidence. This rich and diversified experience, which makes AFD one of the most dynamic donors for this type of financing, has made it possible to develop the SUNREF (Sustainable Use of Natural Resources and Energy Finance) initiative in order to promote investments in energy and environmental services in developing countries. AFD s aim, via a specific product line, is to offer its partners an innovative approach as part of an integrated process.

3 AFD s green finance label AFD, a pioneer in an integrated approach to environmental finance The innovation of the SUNREF product lies in the combination of a financial approach and technical approach. SUNREF offers an integrated approach that aims to cover all mechanisms capable of advancing the positioning and strategy of companies. It provides a range of tools and services for this, which are intended to meet the demand of all actors: financial incentives, technical assistance, support for the creation of a new organization in local banks, valorization of the results obtained SUNREF offers benefits to actors involved in the ecological transition To banks and companies: Access to new markets related to green growth: dedicated financing and consulting services for banks, new production methods that strengthen the resilience of companies to external shocks; Management of environment-related risks: assessment and management of the financial and image risk for economic and financial actors in sectors that are dependent on fossil fuels; Upgrading of production facilities and competitiveness gains by reducing the energy bill; Greater societal recognition by clients, employees, civil society and international financial partners; Reduction of risks of non-compliance with environmental protection rules thanks to a better anticipation. To individuals: Access to low-cost new technologies; Use of renewable energies, which are often the only way for isolated households to access energy; Use of more environmentally friendly and less harmful solutions, thereby safeguarding the physical capital and health. And places partnership innovations at the center of an integrated approach With AFD offers its partners an integrated approach that: Provides banks and their clients with structured financing with tariffs tailored to green investments; Builds banks capacities to sustainably finance its activities; Assists companies in structuring their green investments; Shares, via guarantee mechanisms, certain credit risks borne by banks seeking to develop their green finance portfolios; Feeds into the public policies of the governments concerned; Facilitates access to green finance for individuals and companies. Grant STIMULATE DEMAND Technical assistance + capacity building Loan/Guarantee Partner banks STIMULATE SUPPLY Technical assistance for the bank s potential clients: financing of energy or material audits, support for project design, monitoring of implementation Loan agreement or loan + investment premium Companies Financial incentives for green investment via financing at attractive rates, investment premiums

4 SUNREF range of services In the context of a partnership, AFD and banks identify the investment potential, select the most promising thematic areas and develop an action plan to reduce the barriers to investment in the country in question. In order to promote the investment, the bank s client is allocated a loan on terms which provide incentives (maturity, rate, investment premium ). SUNREF also offers a set of additional and continuously available tools via a dedicated platform in order to measure the impact of projects and train banks in new technologies and methods, which allows them to offer better advice and products to their clients. SUNREF in figures (end of 2014) Over 35 projects successfully implemented by AFD since 2006 Over 50 partner financial institutions Over EUR 2bn of loans allocated by AFD including over EUR 1bn already disbursed Results and impacts Annual reduction of 14 million tons of CO 2 equivalent Annual saving of over 1 billion KWh Creation of a new green capacity of 300,000 KW Annual generation of 1.5 million MWh of green energy Investments supported by SUNREF Industry Services Individuals and professionals Agriculture Energy management: energy efficiency and renewable energies Energy efficiency of industrial processes Renewable energy development (independent power producers, use of biomass by the agroindustry ) Energy efficiency in buildings Small-scale renewable energies High energy performance housing Solar water heaters, biodigesters. Photovoltaic solar power Class A+ household appliances: air conditioning, refrigerators, washing machines Methanization of agricultural waste Access to energy: photovoltaic solar power systems for irrigation Environmental performance Reduction of pollutant emissions and environmental compliance Development of the environmental certification of services (tourism ) Recycling and sanitation for local authorities High environmental quality housing Conversion to sustainable/organic farming Sustainable forestry exploitation Key and structuring role of technical assistance in the sustainability of the partnership The specific objective of a technical assistance program is to support and expand the financing market for green investments. Its aim is to promote: The development of an energy and environmental management culture in companies and with individuals; Capacity building for companies in order to optimize the use of energy and natural resources; Support for banks in the mobilization of funds to finance these projects. Thanks to grants allocated by the French Government, European Union or other partners, technical assistance is made available to actors without any charge or at a very affordable cost. The main expected outcomes are as follows: Development and consolidation of a financing market for green investments: green financing central to the commercial strategy of banks; Support for the development of eligible, innovative and profitable green projects; Support for the green strategies of companies that are leaders in their markets; Support for the emergence of experts; Capacity building for the various actors and knowledge transfers; Increased awareness of green issues; Broad dissemination of experiences and good practices; Long-term viability of green investments. Cogeneration system in the company El Mazraa Tunisia AFD

5 Development of SUNREF s range of services MEXICO PERU BRAZIL MOROCCO TUNISIA WAEMU ( * ) TURKEY LEBANON EGYPT SOUTH AFRICA ARMENIA JORDAN EAST AFRICA INDIAN OCEAN INDIA CHINA INDONESIA NEW CALEDONIA ( * ) Benin, Burkina Faso, Côte d Ivoire, Guinea Bissau, Mali, Niger, Senegal, Togo. A project financed by the Cooperative Bank of Kenya: Improving the energy efficiency of a dairy cooperative The dependence of Kenya s economic growth on its resources and its demographic pressure make the sustainable management of energy resources a key challenge for the country. AFD has allocated a EUR 30m concessional SUNREF loan to Co operative Bank of Kenya, the country s third largest bank, in order to support projects with high energy efficiency and renewable energy potential. This loan is combined with a technical assistance program financed by the European Union. Under this program, Co-operative Bank of Kenya has allocated a loan to the Meru Central Dairy Cooperative Union whose processing activities (production of ice-cream, milk powder) offer beneficial growth drivers on a dynamic market. The financing of more efficient equipment in terms of energy consumption (boilers, electrical and compressed air systems ) has reduced operating costs, increased the processing capacity and reduced production losses. With a total cost of USD 2.3m, the project allows an annual energy saving of 1.4 GWh and a reduction of 532 tons of CO 2 equivalent. This project meets the eligibility criteria of SUNREF. It has been assessed, then validated from a technical point of view, by the consultants of the technical assistance program. A project financed by UBCI in Tunisia: Recovering industrial waste and improving the energy efficiency of a company in the agri-food sector Faced with an increasing structural energy deficit, Tunisia has implemented a proactive energy management and environmental preservation strategy. In the industrial sector, AFD assists these public policies by supporting productive investment. The partnership initiated by AFD with the bank UBCI to finance environmental projects results in investments financed by a dedicated credit line. This range of environmental financing is also followed up by a technical assistance program and a grant allocated by the European Union. One of the beneficiaries of this program is the company El Mazraa (Poulina Group), for a total amount of EUR 4.9m, to finance energy efficiency investments (installation of a 5 MW cogeneration unit) and recover industrial poultry waste to produce food for animals. This project has reduced the company s consumption by 2,500 toe fuel, thereby reducing greenhouse gas emissions by 5,500 tons of CO 2 equivalent. Some 7,300 tons of poultry waste are also recovered every year.

6 Agence Française de Développement (AFD), a public financial institution that implements the policy defined by the French Government, works to combat poverty and promote sustainable development. AFD operates on four continents via a network of 71 offices and finances and supports projects that improve living conditions for populations, boost economic growth and protect the planet. In 2014, AFD earmarked EUR 8.1bn to finance projects in developing countries and for overseas France. PROPARCO, AFD s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment. Project to preserve forests against climate change Mexico AFD The French Facility for Global Environment / Fonds Français pour l Environnement Mondial (FFEM) is a bilateral public fund initiated by the French Government in The FFEM secretariat and its financial management are entrusted to Agence Française de Développement (AFD). FFEM co-finances projects that encourage the protection of the global environment in developing countries. Its co-financing is exclusively via grants and is used for the implementation of pilot projects that combine environmental protection and economic development in the recipient countries. FFEM is an influential strategic instrument for the French policy on Official Development Assistance regarding global environmental protection. Its activities focus on the topics of biodiversity, international waters, the climate change, land degradation and desertification, persistent organic pollutants and the stratospheric ozone layer. By the end of 2014, FFEM had co-financed 275 projects with EUR 317m. Two thirds were earmarked for sub-saharan Africa and the Mediterranean. - ffem@afd.fr / PEFC certified / This publication comes from sustainably managed forests and certified sources. / pefc-france.org Creation: Planet 7 July 2015 Agence Française de Développement AGENCE FRANÇAISE 5 rue Roland Barthes Paris Cedex 12 France Tel Fax PRIVATE SECTOR, BANKS AND LOCAL AUTHORITIES DEPARTMENT (EBC) FINANCIAL INSTITUTIONS AND PRIVATE SECTOR DIVISION (IFP) Agence Française de Développement