Partner: International Development Finance Club (IDFC), French Development Agency (AFD)
Agenda:
Introduction
Moderator: Claire Eschalier, Head of Secretariat, Mainstreaming Climate in Financial Institutions
Presentation: How can IFIs support the alignment of financial intermediaries? Alice Pauthier, Project Manager, I4CE
Panel discussion with international finance institutions:
- Marine Lagarde, Senior Operations Lead & Climate focal point, Financial Systems Division, French Development Agency (AFD),
- Peter Hilliges, Director of the Climate and Energy Competence Centre, KfW Development Bank,
- Elina Kamenitzer, Department Director for Operations Support & Climate, Operations Directorate, European Investment Bank (EIB).
Panel discussion with financial intermediaries :
- Javier Díaz, CEO, Bancoldex
- Pradana Murti, Director of Risk Management, PT SMI
- Hesham Elsafty, Group Head, Financial Institutions and International Financial Services, National Bank of Egypt (NBE)
- Sara Belahsen, Crédit Agricole Maroc
Conclusion
Recording:
Summary of discussions:
Presentation: How can IFIs support the alignment of financial intermediaries? Alice Pauthier, Project Manager, I4CE
- Supporting the alignment of financial intermediaries is an important step of IFIs’ alignment process, that can contribute to foster transformative outcomes
- A number of IFIs are starting to develop Paris alignment due diligence processes, together with climate-related risk due diligences. However they are facing a number of constraints including the access to data and the fact that a number of institutions are at the early stages of this journey.
- To align financial intermediaries, IFIs need to support the “consistency” of the broader economic and financial system. IFIs are well placed to create enabling conditions for financial intermediaries to align as they can:
- Offer capacity building to financial intermediaries
- Engage with and provide support to national governments
- Engage with and provide support to national central banks, regulators and supervisors
- However, they need the resources and mandate to engage in these different areas of work at the scale that is needed
Panel discussion with international finance institutions:
- Marine Lagarde, Senior Operations Lead & Climate focal point, Financial Systems Division, French Development Agency (AFD),
AFD just released a position paper presenting AFD approach to support financial institutions in their journey towards Paris Alignment.
AFD Paris alignment assessment methodologies rely both on Paris alignment intervention criteria to ensure that operations “do no harm”, as well as a Paris alignment impact approach, to increase the impact of operations.
AFD is moving from an approach focusing on the use of proceeds of financial intermediaries towards also assessing institutions’ integration of climate considerations.
In piloting this approach, AFD identified that this diagnostic and process could be a powerful tool to increase AFD’s impact.
This approach relies on three main principles:
- Performance based
- Forward-looking
- Context specific
AFD calls to pursue discussions with other DFIs, think tanks ad other international initiatives as part of the FI group on Aligning financial chains.
- Peter Hilliges, Director of the Climate and Energy Competence Centre, KfW Development Bank,
KfW approach for the alignment of financial intermediaries is coming from KfW own Paris alignment journey.
KfW has long-term relationships with partner FI. The Paris alignment approach complements the climate mainstreaming approach.
Paris alignment is a voluntary process for KfW partners. However, KfW supports them on their journey and provides them with the tools that they need. In addition, KfW offers guidance and consultants if required.
At the moment there is no conditionality regarding the climate ambition of partners. However, KfW offers to include projects components or whole projects to strengthen partners’ path towards Paris alignment.
Initial conversations have started to launch pilot projects with DBSA and IDC.
KfW has developed a Paris Alignment questionnaire, sent together with the ESMS questionnaire.
If the intermediary is willing to receive support from KfW, it is possible for KfW to request funds from the Ministers. There is no dedicated fund set up for this purpose speifically.
- Elina Kamenitzer, Department Director for Operations Support & Climate, Operations Directorate, European Investment Bank (EIB).
From the start of 2021, all new EIB Group operations are aligned with the Paris Agreement.
EIB Group Climate Bank Roadmap included a commitment to develop an approach to assess the alignment of counterparties.
EIB released its PATH framework at COP26
This framework:
- Centers on the concept of the low carbon resilient pathway toward Paris Alignment
- Applies inside and outside EU
- Scopes in high-emitting sectors, significant financial institutions and counterparties with high vulnerability to climate change
- Builds on engagement and support to the willing
- Emphasizes on transparency and disclosure – considers evolving EU legislation (CSRD) and global initiatives to harmonize sustainability reporting standards
With financial intermediaries, EIB centres on the concept of transparency, asking mandatory TCFD disclosure for FIs in scope.
EIB assesses institutions’ readiness as well as transparency policies to manage climate change.
- Marine Lagarde, Senior Operations Lead & Climate focal point, Financial Systems Division, French Development Agency (AFD),
AFD has started the dialogue with clients on climate for some time and tartedto develop programs and tools to support them, like a MOOC on climate risk management for example.
AFD participates in different clubs, and encourages financial institutions to join forums and initiatives like the Mainstreaming Initiative.
- Peter Hilliges, Director of the Climate and Energy Competence Centre, KfW Development Bank,
KfW doesn’t believe in “carrots & sticks” but in self interest from institutions that KfW can support.
- Elina Kamenitzer, Department Director for Operations Support & Climate, Operations Directorate, European Investment Bank (EIB).
The PATH framework represents a paradigm shift: it is not about compliance but about opportunities for client banks.
Among the different tools that EIB offers, there is the EIB green checker that helps financial institutions assess their SMEs operations.
Panel discussion with financial intermediaries:
- Javier Díaz, CEO, Bancoldex
Bancoldex is a development bank working with SMEs and has developed a climate strategy.
Implementing this climate strategy is difficult. It is difficult to know how much your institution can push this agenda, and find the silver lining that will be best to enable their clients to advance in this journey.
It is hard to align the portfolio and support will be needed for that.
The post-covid and energy crisis are complexifying the access to capital. Access to capital and technical assistance will be key to move forward.
- Pradana Murti, Director of Risk Management, PT SMI
In 2016, PT SMI established a sustainable finance division and developed guidelines of environmental and safety management frameworks.
Since the beginning of this journey, PT SMI has made progress, but further efforts are needed to further mobilize private finance and increase climate-related projects.
Going forward, PT SMI is participating in the country platform for Indonesia Energy Transition Mechanism.
- Hesham Elsafty, Group Head, Financial Institutions and International Financial Services, National Bank of Egypt (NBE)
NBE journey started in 1998 with a program called the Egyptian abatement program with European partners. At that time climate change was not a mainstreamed considerations.
NBE climate banking roadmap for 2020-2030 is built on six pillars:
- Governance
- External & internal strategic alignment with country’s policy and regulation
- Capacity building of management and staff
- Climate finance
- Climate risks
- Disclosure and reporting
NBE is participating in AFD’s program for transforming financial systems for climate, with five deliverables expected:
- A climate finance strategy
- An environmental and social management system
- A gender equality strategy
- A monitoring & evaluation system
- Communication & marketing
The most successful programs were the ones that were not pre-designed, but the ones that are tailored made.
- Sara Belahsen, Crédit Agricole Maroc
Crédit Agricole du Maroc is tackling climate change by two angles:
- Opportunities: offering products and capacity building to clients.
- Risks: developing and improving an ESMS with the support of AFD, as well as a process for assessing climate-related risks and opportunities with the support of EIB.