THE PRIVATE SECTOR ENERGY TRANSITION
Hande I ş lak, Director of Corporate Debt Portfolio at the European Bank for Reconstruction and Development, discusses how work with the private sector is fueling the energy transition By Nicholas K. Smith and Howard Hudson, OPEC Fund STOKING THE GREEN ECONOMY EBRD ON THE RECORD
G iven the huge “course correction” toward a global green economy, public funding for international development needs to be supplemented – and even surpassed – by private capital. That pivot needs to happen sooner rather than later and definitely this decade. One major hurdle has long been the perceived high risk of green projects, especially for large infrastructure works in emerging markets. In other words, the kind of projects that make a real di ff erence to communities in need of climate and development support across the Global South. To address the uncertainties at play, multilateral development banks (MDBs) have emerged as key players o ff ering a range of risk-sharing tools such as guarantees and insurance schemes. These provide coverage, for example, if partners fail to honor their financial commitments or for initial losses up to a certain amount, while also covering a portion of debt service payments. They also protect against environmental damages and political or social unrest. MDBs are also leading on blended finance, combining concessional funds with private investments to improve the overall risk-return profiles of green projects. By lowering financial barriers
OPEC Fund Quarterly : How has EBRD been championing the green economy transition? Hande I ş lak: EBRD was the first MDB to set up a banking team dedicated to energy e ffi ciency. We launched our Sustainable Energy Initiative (SEI) in 2006 to use the full range of the bank’s financial instruments to support investments in energy e ffi ciency and renewable energy. In 2015 we transformed SEI into a strategy for the whole bank under our Green Economy Transition approach to increase our focus on green financing and targeted 40 percent of our investments to be green financing by 2020. We’re increasingly ambitious because the green transition is particularly relevant to our operations – because the countries where we work are not only vulnerable but already a ff ected by the climate crisis: From wildfires in my home country Türkiye, to flooding in the Western Balkans and Kazakhstan, to water shortages in the southern and eastern Mediterranean region and Central Asian countries. The economic and environmental landscapes are changing. Over the last 50 years, access to carbon-intense energy has been a source of competitive advantage. But increasingly, over the
and boosting potential returns, blended finance serves as can be a magnet for private sector participation. Other innovations include green and climate resilience bonds, which MDBs are using to set benchmarks and shore up market credibility. MDBs are also providing technical assistance to help governments and corporations construct their own frameworks, combined with advice on policy and regulatory reforms. Carbon pricing and renewable energy mandates, which provide long-term clarity and stability for private investors, are two recent examples. MDBs also contribute to knowledge sharing and advocacy. By organizing conferences, including the annual OPEC Fund Development Forum and the Climate Solutions Week 2024, institutions are not only promoting successful green investments. We’re mainstreaming partnerships between public, private and civil society actors – evolving our role from regional development financiers to global sustainability catalysts. To find out more, we spoke with Hande I ş lak, Director of Corporate Debt Portfolio at the European Bank for Reconstruction and Development (EBRD).
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