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Trade-Related Financial Services - Denmark

Trade-Related Financial Services - Denmark

Information dated: 2017
Regional Energy Savings Insurance and Risk Management Program

The objective of the ESI-LAC is to promote investments in energy saving measures by SMEs in five countries in the LAC region: Brazil, Colombia, El Salvador, Mexico, and Peru by addressing existing financial and non-financial barriers related to both demand and supply of financing for energy savings projects by private sector companies. The ESI-LAC program is implemented via the Inter-American Development Bank (IDB).

The project will support the development and strengthening of markets for energy efficiency services by conducting market analysis and developing financing strategies, identify energy efficiency project opportunities, providing credit lines and build trust and confidence among market actors. The program builds on partnerships with national development banks, international insurance companies, and verification entities and aims at strengthening the capacity to address the barriers to climate finance in the local context. Key elements of the risk management and financing strategies include a standardized contract; the insurance instrument; and validation and verification mechanisms.

The ESI-LAC program is expected to mobilize credit lines of the IDB of USD 100 million, and additional private investment, resulting in reduced energy consumption and associated GHG reductions in various, targeted sectors.

Access to Investment Finance for SMEs

The African Guarantee Fund is a financial institution, which has been established as a recommendation of the Danish Africa Commission. The purpose of AGF is to increase medium-term lending to small and medium-sized enterprises (SMEs) in Africa through the provision of guarantees to African financial institutions for their lending to SMEs. Obtaining loans for investment purposes is often difficult and constitutes a significant barrier to SME growth. Financial institutions are reluctant to offer medium-term lending to SMEs due to their lack of appropriate collateral, limited knowledge of and experience with SMEs in African financial institutions, and extraordinarily high-risk assessments on lending to SMEs. In addition to guarantees, AGF offers support for capacity development to both SMEs and financial institutions through the AGF Trust for Capacity Development. Such capacity building efforts are directly linked to AGF's core business of providing guarantees and require at least 50% cost sharing with recipients.

Nationally Appropriate Mitigation Actions (NAMA) Facility

The NAMA Facility was set up by Germany and the UK in 2013. The overall objective set out for the facility is to facilitate transformation towards low carbon pathways in developing countries with reference to the internationally agreed goal to keep global warming below two degrees Celsius compared with pre-industrial levels. This facilitation is achieved by supporting the realization of ambitious and innovative NAMAs (National Appropriate Mitigation Actions) in developing countries and emerging economies.

Through the NAMA Facility, Denmark seeks to attribute to demonstration short-term of successful leverage of finance for implementation of ambitious and transformational NAMAs. The facility provides funding for technical support and institutional and regulatory capacity development combined with or closely linked to development financial instruments to leverage public and private finance.

The NAMA Facility is at present the predominant international financing mechanism for supporting the implementation of NAMAs in particular as the Green Climate Fund is not yet operational. The UK and DE have up until now allocated Euro 119 million and both countries pledged additional funding for 2015/2016 in December 2014 at COP20 in Lima. The Facility is open for other multi- and bilateral donors. Through Climate Envelope 2014 Denmark joined the NAMA Facility as an additional donor providing financing amounting to DKK 73.8 million for a third call announced by the Facility at COP20. The EU Commission also contributed Euro 15 million to the Facility.

So far five projects in Colombia, China, Kenya, South Africa and Guatemala has been selected by the board and have started the in-depth appraisal phase. By the end of 2015, the NAMA Facility had five full-fledged projects under implementation from the previous calls in Costa Rica, Indonesia, Chile, Peru and Mexico and other projects in Thailand, Burkina Faso and Tajikistan are being developed.