Effective Green Financing: What have we learned so far?

This 2012 report by the Climate Policy Initiative examines how public policies and financial injections can mitigate risks to attract private investment in green infrastructure. Through case studies in the UK, Tunisia, and Morocco, it argues that well-articulated policies and innovative risk-mitigation instruments (like first-loss protection and policy risk insurance) are essential to overcome the inertia of 'plain vanilla finance.' The report highlights the critical role of National Development Banks in emerging economies, noting that China, Brazil, and India were the largest recipients of mitigation-directed climate finance in 2011.

• Well-articulated public policies are essential for transitioning to low-carbon production systems and can attract private investment at scales that impact emissions. These policies can be delivered through indirect means, such as Feed-in Tariffs and carbon taxes, or direct means, such as concessional loans and guarantees.
• Public resources are most effective when they reallocate risk to the party best suited to handle it. The private sector is not a homogeneous entity and often responds to policy signals with lags, costs, and selectivity, meaning targeted public injections are needed to overcome institutional inertia and perceived risks.
• New risks, specifically policy risk (changes to support policies) and financing risk (access to long-term capital and liquidity), hinder the scale-up of green finance. Innovative instruments like policy risk insurance (e.g., MIGA and OPIC products) and first-loss protection mechanisms (e.g., European Investment Bank's Project Bond Initiative) are needed to address these gaps.
• While leveraging private funds is a key metric, the effectiveness of public spending should also be measured by its ability to align stakeholder interests and achieve environmental and social goals. In the Ouarzazate I case, high levels of public investment were justified by the goal of developing commercially immature CSP technology for future export to European markets.
• Green investment should prioritize emerging economies, where energy demand is growing rapidly. National Financing Institutions (NFIs) and National Development Banks (NDBs), particularly in China and Brazil, play a dominant role in global climate finance; in 2011, NFIs provided approximately USD 42.7 billion, or 56.7% of total public climate finance.
• The Prosol program in Tunisia demonstrates that well-designed renewable energy policies can offset the economic losses caused by fossil fuel subsidies. By investing USD 21.8 million, the Tunisian government saved USD 15.2 million between 2005 and 2010 through avoided LPG subsidies, with projected total savings of USD 49 million to USD 101 million over the systems' lifespan.

APA

Buchner, B. K., Heller, T. C., & Wilkinson, J. (2012). Effective Green Financing: What have we learned so far? Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Effective-Green-Financing-What-have-we-learned-so-far.pdf

Chicago

Buchner, Barbara K., Thomas C. Heller, and Jane Wilkinson. Effective Green Financing: What have we learned so far? Climate Policy Initiative, 2012. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Effective-Green-Financing-What-have-we-learned-so-far.pdf.

Wikipedia

{{cite report |last1=Buchner |first1=Barbara K. |last2=Heller |first2=Thomas C. |last3=Wilkinson |first3=Jane |title=Effective Green Financing: What have we learned so far? |publisher=Climate Policy Initiative |date=December 2012 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Effective-Green-Financing-What-have-we-learned-so-far.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{buchner2012effective, author = {Buchner, Barbara K. and Heller, Thomas C. and Wilkinson, Jane}, title = {{Effective Green Financing: What have we learned so far?}}, institution = {Climate Policy Initiative}, year = {2012}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2012/12/Effective-Green-Financing-What-have-we-learned-so-far.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }