Following the successful climate change agreement reached in Paris at the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21), attention needs to shift quickly to how countries will achieve their Nationally Determined Contributions. Governments will need to take actions that will help accelerate a shift away from investments in carbon-intensive infrastructure and toward low-carbon, climate-resilient (LCR) infrastructure. Investment is growing in renewable energy and energy efficiency, but not quickly enough to get the world on track to achieve zero net greenhouse gas emissions globally by the end of this century. This “decarbonisation” of the global economy will be necessary if we are to hold the increase in the global average temperature to well below 2°C above preindustrial levels, as 195 countries agreed in Paris. To achieve these very ambitious goals, governments need to make full use of their capacity to leverage and unlock much larger flows of private investment in low-carbon infrastructure.

This report aims to provide policy makers with the first comprehensive study of publicly capitalised green investment banks (GIBs), examining the rationales, mandates and financing activities of this relatively new category of public financial institution. It provides a non-prescriptive stock-taking of the diverse ways in which these public institutions are helping to leverage and catalyse private investment in domestic green infrastructure, with a spotlight on energy efficiency projects. Highlighting the role of GIBs within a broader policy framework to mobilise investment, the report also provides practical information to policy makers on how green investment banks are being set up, capitalised and staffed.

Despite growing investment in renewable energy and energy efficiency, efforts to significantly scale up private investment in green infrastructure, including low-carbon and climate-resilient (LCR) infrastructure, continue to face challenges. Pricing signals often favour investment in unabated fossil-fuel intensive activities over LCR alternatives since the social costs of emissions are not adequately reflected and even commercially viable LCR projects can be associated with higher risks and transaction costs. As governments work to meet their pre- and post-2020 emission reduction pledges, they will need to make efficient use of public funding to mobilise much larger amounts of private investment in LCR infrastructure.

This chapter introduces green investment banks as a relatively new type of institution focused on increasing private investment in domestic low-carbon and climate-resilient infrastructure and other green sectors. Given the variety of existing public and private financial institutions that support green infrastructure investments, the chapter situates green investment banks within this wider context. The chapter closes with a discussion of factors governments may consider when evaluating the need to create a green investment bank. The chapter serves as a detailed introduction to green investment banks for policy makers and as an extended summary of the main messages of the report.

This chapter examines the investment mandates and target sectors and sub-sectors of green investment banks. It addresses the range of green investment banks’ investment objectives including the importance of profitability, leveraging additional private investment and demonstrating that commercial investments are possible. The chapter also discusses other mandates such as promoting project replicability and encouraging standardisation. It closes with a discussion of the range of sub-sectors that green investment banks target for investment.

This chapter reviews the types of investments that green investment banks undertake, the types of instruments and funds they use to invest and the co-investors they attract. It examines the range of de-risking approaches used by green investment banks and their innovative approaches to reduce the high transaction costs often associated with low-carbon and climate-resilient infrastructure investments. The chapter closes with a discussion of the types of private investors green investment banks collaborate with or seek to attract.

This chapter discusses how green investment banks are working to reduce barriers for private investment in energy efficiency and explores the range of interventions they use to scale up energy efficiency investment. It also describes the investment partnerships that green investment banks pursue in the field of energy efficiency.

This chapter provides “nuts and bolts” information regarding the process of setting up a green investment bank. It introduces the political processes that may be pursued to establish a green investment bank and discusses sources of capitalisation and continued funding. The importance of appropriate leadership, staffing and oversight is discussed as well as the variety of reporting and evaluation metrics used by green investment banks.