Ebook Greening the Financial Sector - How to Mainstream Environmental Finance in Developing Countries

This book is part of a publication series initiated by KfW on selected topics in the field of financial systems development, which is one of the core competencies of KfW Development Bank. This edition will focus on environmental finance. It will cover a broad range of issues including programmes to promote energy efficiency and renewable energies as well as innovative approaches such as weather insurance.
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Ebook Greening the Financial Sector - How to Mainstream Environmental Finance in Developing Countries Greening the Financial Sector Doris Köhn Editor Greening the Financial Sector How to Mainstream Environmental Finance in Developing Countries Editor Doris Köhn Senior Vice President Africa and Middle East Palmengartenstr. 5-9 KfW Entwicklungsbank 60325 Frankfurt am Main Germany info@kfw-entwicklungsbank.de ISBN 978-3-642-05086-2 e-ISBN 978-3-642-05087-9 DOI 10.1007/978-3-642-05087-9 Springer Heidelberg Dordrecht London New York Library of Congress Control Number: 2011943109 © The Editor(s) (if applicable) and the Author(s) 2012. The book is published with open access at SpringerLink.com Open Access. This book is distributed under the terms of the Creative Commons Attribution Non- commercial License, which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited. 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Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) Foreword In light of a growing number of extreme weather events in developing countries, it is becoming more and more evident that the most vulnerable people at the ‘base of the pyramid’ will also suffer most from climate change. Climate change is ex- pected to put development successes in jeopardy and makes sustainable poverty alleviation more difficult. Hence, a strategy for adaptation to and mitigation of climate change is indispensable for sustainable development and poverty reduc- tion in emerging and developing markets. Ecological sustainability is also reflected in the Millennium Development Goals: Achieving MDG 7 aims at environmental protection as well as sustainable use of natural resources. I am deeply convinced that ecological sustainability is a major requirement for development and a crucial contribution to the fulfilment of the MDGs. The German Ministry for Economic Cooperation and Development (BMZ) has therefore introduced a ‘climate check’ to consider climate protection and adaptation aspects in strategies and programmes of German development co- operation. As industrial nations are important drivers of climate change, they bear a historic responsibility. However, global environmental problems cannot be solved without contributions from emerging and developing markets. Sustainable and globally effective solutions can only be achieved through extensive interna- tional cooperation and contributions by all stakeholders. Against this background, my ministry is committed to mainstreaming environmental finance in develop- ment finance. In 2009 Germany allocated EUR 1 billion for climate protection and adaptation measures in developing countries. At the Copenhagen Summit the German gov- ernment agreed to provide an additional EUR 420 million annually as part of the EU’s fast-start climate funding until 2012. Despite all these efforts, the public sector alone will not be able to handle an order of this magnitude and should, therefore, form strategic alliances with the private sector. Public and private finance should complement each other in order to provide an intelligent mix of financial instruments. In this context, the target is to raise an amount of USD 100 billion per year by 2020 for climate protection and adaptation measures from public and private sources. How can these ambitious goals be achieved? I am convinced that the financial sector in developing and transition countries has an important role to play in this process. Environmental finance markets will need to be established and existing environmental finance instruments will need to be mainstreamed to ensure climate protection. Green finance is one of the answers to obtain the necessary financial resources required. Investing in energy efficiency, for instance, has had encourag- V VI Foreword ing effects both in financial and ecological terms. The financial sector has the po- tential not only to complement scarce public resources, but also the know-how to combine public and private funds in an intelligent way. It is also important to me to note that financial markets are not only vital for the development of the overall economy – sometimes not a very popular argument in these times – but can also be important agents of sustainable development. In this sense financial systems development has been and will remain a very important development challenge as well. So why not try to address both challenges at the same time? Green finance tries to do exactly that. KfW has already been very active in promoting environmental finance through the financial sector, particularly in the field of energy efficiency and renewable energy. I am grateful that these efforts have helped to mainstream green finance products into the “regular” product mix of financial institutions in our partner ...