Proposal for a Global Credit Guarantee Facility (GCGF)

The Climate Policy Initiative (CPI) proposes the establishment of a Global Credit Guarantee Facility (GCGF) to reduce the cost of capital for renewable energy investments in emerging markets and developing economies (EMDEs). The facility would primarily mitigate credit risk—including sovereign, off-taker, and average foreign exchange risk—through partial guarantees, while transferring political and residual FX risks to existing institutions like MIGA and TCX.

• The cost of capital for developing economies is on average 7 times higher than for developed economies, with spreads ranging from 3% to 50%, despite the marginal cost of carbon mitigation through renewable energy being less than half in developing countries compared to developed ones.
• To meet the solar targets of countries analyzed in a June 2023 CPI paper, approximately USD 175 billion in capital is required, with debt accounting for 70% (USD 120 billion). The calculated Expected Loss (EL) for this portfolio is USD 8.4 billion, and the mean Unexpected Loss (UL) is USD 22.1 billion.
• CPI proposes three sizing approaches for the GCGF based on a 50% guarantee coverage: a 'Conservative' approach requiring USD 4.2 billion in funded capital and USD 11 billion in callable capital (28x leverage); a 'Base Case' requiring USD 1.2 billion in funded capital and USD 14 billion in callable capital (98x leverage); and an 'Optimistic' approach requiring USD 660 million in funded capital and USD 5.9 billion in callable capital (250x leverage).
• If the GCGF is managed by an AAA-rated supranational institution, the average reduction in risk premium for the sample set of countries is estimated at 6%, with an average credit rating improvement of 5-6 notches.
• Under a more conservative scenario where theSSSSSS-rated agencies consider the guarantee only to lower the expected default rate rather than overall risk, the average reduction in risk premium for the sample countries is 3%, with a rating improvement of 2-3 notches.

APA

Gautam, K., Purkayastha, D., & Widge, V. (2023). Proposal for a Global Credit Guarantee Facility (GCGF). Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/10/Discussion-Paper-Proposal-for-a-Global-Credit-Guarantee-Facility-GCGF-Oct-2023.pdf

Chicago

Gautam, Kushagra, Dhruba Purkayastha, and Vikram Widge. Proposal for a Global Credit Guarantee Facility (GCGF). Climate Policy Initiative, 2023. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/10/Discussion-Paper-Proposal-for-a-Global-Credit-Guarantee-Facility-GCGF-Oct-2023.pdf.

Wikipedia

{{cite report |last1=Gautam |first1=Kushagra |last2=Purkayastha |first2=Dhruba |last3=Widge |first3=Vikram |title=Proposal for a Global Credit Guarantee Facility (GCGF) |publisher=Climate Policy Initiative |date=October 2023 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2023/10/Discussion-Paper-Proposal-for-a-Global-Credit-Guarantee-Facility-GCGF-Oct-2023.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gautam2023proposal, author = {Gautam, Kushagra and Purkayastha, Dhruba and Widge, Vikram}, title = {{Proposal for a Global Credit Guarantee Facility (GCGF)}}, institution = {Climate Policy Initiative}, year = {2023}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2023/10/Discussion-Paper-Proposal-for-a-Global-Credit-Guarantee-Facility-GCGF-Oct-2023.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }