The IFIs’ new clothes: “leveraging” investment and other stories

Instead of directly funding climate projects, IFIs are increasingly claiming that their key role should
be to encourage (or “leverage”) private investment in climate-related projects, appealing to the
funds and actors we encountered in the previous session. This seminar examines the concept of
“leveraging”, and some of its potential problems. It will look at the instruments that the World Bank
Group and others are using to encourage private investment, focussing in particular on new forms
of debt finance (loans and bonds) and risk management products (such as political risk insurance
and currency guarantees). To what extent do these new instruments end up transferring private
sector risk to the public, and encourage more speculative investments? With leveraging encouraging
a greater role for “financial intermediaries” in the provision of climate finance, we will also examine
what role these intermediaries play, and what risks are involved in a reliance on them.

Core reading
Bretton Woods Project (2012) “Leveraging” private sector finance, How does it work and what are
the risks [PDF – external site]

Bretton Woods Project and ‘Ulu Foundation (2010) Out of sight, out of mind? The International
Finance Corporation’s investment through banks, private equity firms and other financial
intermediaries [PDF – external site]

Background Reading

J. Pereira (2012) Cashing in on climate change? Assessing whether private funds can be leveraged to
help the poorest countries respond to climate challenges, Eurodad. [PDF – external site]

B. Buchner et al. (2011) The Landscape of Climate Finance, Climate Policy Initiative [excerpt]. [PDF – external site]
 [see also the CPI Full report]

J. Brown and M. Jacobs (2011), Leveraging private investment: the role of public sector climate
finance, Overseas Development Institute. [PDF – external site]

J. Brown et al. (2011) “Improving the Effectiveness of Climate Finance: A Survey of Leveraging
Methodologies, Overseas Development Institute. [PDF – external site]

Presentations

Peter Chowla, Bretton Woods Project
Audio

Stephanie Fried, ‘Ulu Foundation
PowerPoint