The German Federal Ministry of Environment(B.M.U.) and KfW Entwicklungsbank, Germany’s leading development bank, plan to raise about $500 million for global climate protection over the next five years.
The ministry and the bank will jointly provide $100 million of initial funding for the global climate protection fund, while the remaining amount will be generated through investments from the public and private sectors.
The fund will help small- and medium-sized enterprises and private households in developing and threshold countries invest in renewable energyand energy efficiency projects to reduce their carbon dioxide emissions and enhance their energy resources.
“As a result of the B.M.U. providing equity capital and hence taking on some of the commercial risk, we are creating the necessary incentives for private investors to take a stake with outside capital,” said Norbert Röttgen, environment minister.
The ministry provided 20 million euros ($25.04 million) in equity capital from its international climate protection initiative, which was established in 2008 to support climate protection projects in developing, threshold and transition countries.
Meanwhile, KfW Entwicklungsbank will provide around $75 million for the global fund.
The fund, which will be managed by a private fund manager, will also allow access to funding and consultation services that will executed by relevant principal banks. This, in turn, will provide an opportunity for refinancing packages.
In addition, the fund includes a financing component of around 2.5 million euros for associated consultation services.
The fund reportedly does not eat into the public funds. Instead, it uses the funds on a rolling basis to allow the money paid back to flow into the fund assets.
“The public-private partnership concept on which this global climate protection fund is based, for example, the cooperation between private and public investors, plays an important role in financing these investments,” said Norbert Kloppenburg, a member of the board of the KfW group of banks.
“The reliability of energy supplies and global climate protection are two of the key challenges for the 21st century. It is a central issue for the future of KfW Entwicklungsbank to promote wide-ranging investment in climate protection in developing countries and threshold countries,” Dr. Kloppenburg added.
Because of their continuous economic growth, developing and threshold countries are expected to see a significant increase in energy consumption, as well as its related environmental impacts.
Thus, the global climate protection fund will focus on countries that have a significant industrial basis and a large population, including Brazil, Chile, China, India, Indonesia, Mexico, Morocco, Philippines, South Africa, Tunisia, Turkey, Ukraine and Vietnam.