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World Cafe

The World Café sessions provided an informal, engaging and mobile platform for participants to interact and have stimulating and energizing discussions, knowledge sharing and the exchange of  ideas among participants.

The following five statements were discussed:

1. Green is risky. What instruments are out there to de-risk and protect my investments?

2. What is driving green growth in your countries?
    What challenges do you currently see or foresee that could hinder green investments in your country?

3. How can regulation support or hinder the transition to a green economy? What type of regulation 
    should be in place to encourage climate investments and promote capital flows to green projects?
    - Please find a summary of this session below.

4. I want to be major player in the green space. Where do I start and who do I partner with?
    - Please find a summary of this session below.

5. Follow the money! I have the funding, where do I find bankable projects?
    I have bankable projects, how do I access the right funding?

It was a highly energized session with most interesting outcomes that were shared amongst all participants during the event.

Table 3: How can regulation support or hinder the transition to a green economy?

I. Refinancing of green projects

Negative regulatory factor:

• A cap on green Masala bonds has been introduced by RBI: g-securities, (currently 6.6%) + 300bp => cap is a temporary regulation to limit appreciation of INR versus USD.
• Due to additional expenses related to (i) planning + monitoring of green projects, (ii) credit enhancement/ guarantess which might be necessary, the cap is a limiting factor.
• Good corporates such as Tata Group/ Adani group benefit from cheap borrowing costs and thus are not hampered by the interest rate cap; however, smaller corporates/ project sponsors such as Indian Infrastructure debt funds with refinancing costs exceeding 10% face difficulties due to the interest rate cap => regulation makes strong companies stronger and weak companies weaker!
• The interest rate caps on ECB lending are a limiting factor to attract additional foreign capital for financing of green projects.
• Central Bank of Bangladesh offers various refinancing schemes for green projects but at the same interest rate as for other type of projects. As green projects require additional work/ documentation, the refinancing costs should be cheaper/ subsidized.

Positive regulatory factor

• RBI introduced better disclosure norms for issuance and listing of green bonds such as independent third party review,  certain disclosure requirements such as use of funds

II. Direct implementation and financing of green projects

Negative regulatory factor:

• Inconsistent and unclear policies related to Power Purchase Agreements (different form State to State in India and tariffs keep on changing)
• Lack of coordination between generation, transmission and distribution of power
• Unclear policy formulation for open access requires significant own research and clarification (1 example where 10 legal opinions had been obtained)
• There is a contradiction between the requirement for distribution companies (discoms) to offer low electricity tariffs to households but to pay higher tariffs to power producers.
• Financial difficulties of discoms and resulting payment delays are a significant threat for electricity producers.
• Concerns over whether discoms will honour their commitments especially for projects earlier awarded at high tariffs.
• Challenging regulatory process for project developers as various approvals from different ministries have to be obtained
 Positive regulatory factor:
• Net metering had been introduced in 25 Indian states
• UDAY reforms in India (partially) helped to improve financial situation of discoms (off loading huge amounts of debt from balance sheet of discoms)

Positive example for introduction of modern technologies: In Gujarat solar panels had been implemented on top of a canal which has helped to safe space and to preserve water quality.

III. Proposals / Solutions

• Abolish interest rate caps on green Masala Bonds
• Abolish interest rate caps on ECB lending for green projects
• Regulators do not understand green projects/ green finance => request for less regulation (basically unregulated e-commerce business has developed much better)
• Government shall improve transmission lines and introduce better technologies (subsidies for smart grid)
• Introduce Public Private Partnership- Models, e.g. government buys services from private companies
• State Electricity Boards shall be more active (on the basis of proper studies)  in exploring suitable ways varying from State to State
• Simplify the process for getting approvals from ministries for green projects => create one agency which can provide all relevant approvals
• Add financing of green projects/ renewable energy as additional sector under Priority Sector Guidelines
• Regulator shall stop leakages e.g. at wood-fired factories and direct the companies to green power sources
• Privatize transmission companies
• Government shall offer subsidized funding to green projects

Table 4: I want to be major player in the green space. Where do I start and who do I partner with?

  • Start with a clear vision e.g. Triple bottom approach - people, planet, profit.

  • Be a problem solver. Use the SDGs and ask how are you contributing to solve the world's urgent problems.

  • Build a relevant portfolio which will enable you attract funding on the capital market.

  • On one hand, Government is competing with private sector by providing subsidy. On the other, government had played an instrumental role in helping to identify which sectors are green and eligible for investments.

  • Beyond financial partners, look for other local partners in the communities you seek to serve.

  • Assess which sectors are relevant on a risk return basis.

  • Undertake a portfolio assessment to determine which sectors qualify as green in your portfolio.

  • Look for partners who can give long term financing at a competitive rate.

  • Look for partners who can mitigate the risk of funding.

  • Develop a proper dataset to understand your market and product.

  • Develop or invest in the right technical expertise in the market you want to enter.

  • Auditors/regulators need to give guidance on what is green.

  • Seek partners that are co-owners, share responsibility.

  • Engage with local communities to get their buy-in, potentially seek intermediaries who can lobby with these communities. Engage with NGOs, government entities etc.

  • Anchor investor/guarantor is required to mitigate the high (perceived) risk.

  • Partner with Universities/R&D institutions.

  • Technology partner is key, need one that can tailor the project to local circumstances (eg. a waste to energy project in one country can be very different from another country as the nature of waste is different).

  • Partner with people/institutions with complementary skills.