Climate Policy Initiative reveals green financing tools for India

Gireesh Shrimali, Climate Policy Initiative's director, said there was potential to mobilise $9 of foreign debt per dollar of public subsidy

Gireesh Shrimali, director, Climate Policy Initiative and India Lab

Gireesh Shrimali, director, Climate Policy Initiative and India Lab

Jyoti Mukul New Delhi
The India Innovation Lab for Green Finance, a public-private initiative, funded by Shakti Sustainable Energy Foundation, David and Lucile Packard Foundation, Oak Foundation, and the UK Government, and supported by Climate Policy Initiative and the Ministry of New and Renewable Energy, completed one year of its inception. In an interview with Jyoti Mukul, Gireesh Shrimali, director, Climate Policy Initiative, that acts as the secretariat for India Lab, gives details about the three financing instruments adopted by it for green projects. Edited Excerpts:

What has been the experience of India Lab in the first year of its inception?

The purpose of India Lab is to identify, develop, and accelerate innovative solutions to drive more investment for green growth in India. In October 2016, India Lab announced the endorsement of three innovative investment vehicles that will help drive millions of dollars of needed to achieve India’s clean energy and green growth targets. The three endorsed instruments – a rooftop solar financing facility, a peer-to-peer lending platform for green investments, and a currency exchange instrument – were selected from among a highly competitive pool, and refined and developed over the course of a year. They will now move forward for piloting in India, with the support of India Lab’s public and private lab members.

How many investors do you have on board and how many investments were made last year?

India Lab has 29 public and private lab members who help develop and support the lab instruments, including the Indian Ministry of New and Renewable Energy, the Ministry of Finance, the Indian Renewable Energy Development Agency, the Asian Development Bank, ReNew Power, the World Bank, and the development agencies of the French, UK, and US governments, among others. The three endorsed instruments have been just launched for piloting and we’re excited about the potential investment these instruments will attract for green growth in India in the upcoming year.

The Global Innovation Lab for Climate Finance, a sister initiative and model for the India Lab, has so far successfully been able to raise nearly $600 million through the lab network for the Global Lab instruments in renewable energy, energy efficiency, and climate-smart land use projects, launched in 2015 and 2016.

What is the investment analysis and expected amount of investment which India Lab will  make over 5 years?

The Rooftop Solar Private Sector Financing Facility aims to drive capital at a lower cost by providing long-term debt financing through securitisation. Over 2017-2022, the facility can mobilise $320 million of private capital for rooftop solar power.

Loans4SME is a peer-to-peer lending platform that would increase access to debt financing for small and medium enterprises (SMEs) for renewable energy and energy efficiency initiatives, by connecting them directly with lenders. Loans4SME has the potential to mobilise around $2.2 billion in debt financing for SMEs in renewable energy and energy efficiency by 2022, and thereby help in providing access to finance almost 800 Mw of rooftop solar projects.

The FX Hedging Facility aims to facilitate large-scale foreign investment into renewable energy in India by providing a cheaper currency hedging solution for managing currency risk. The FX Hedging Facility can reduce the cost of currency hedging by around 30 per cent and has the potential to mobilise a minimum of $9 of foreign debt per dollar of public subsidy. 

What are the trends you see in green financing?

India Lab thinks it's important that green financing instruments should be able to effectively leverage public or "blended" finance to drive large-scale private sector investment, and we select instruments to help develop and launch with this goal in mind. For example, the FX Hedging Facility is a currency hedging solution that enables more effective use of public subsidy than other available currency hedging instruments — it has the potential to mobilise a minimum of $9 of foreign debt per dollar of public subsidy, with more than 50 per cent probability that the entire subsidy will be recovered.

India Lab has recently launched its open call for ideas for innovative green finance instruments for its 2016-2017 cycle. We will focus on selecting ideas that can effectively leverage public finance to scale up private investment. 

How can increased money flow in the sector be insulated from risks?

We take an early stage idea through a rigorous analytical process to design an instrument that demonstrates the ability to address barriers to private finance that have never been addressed before, or in an improved manner. In the overall context of financial sustainability, India Lab develops an instrument that shows potential to achieve market viability by phasing out public finance support, and also demonstrates potential in scalability and replicability.

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First Published: Nov 23 2016 | 1:23 AM IST

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