Establishing a Green Bank or Greening an Existing Bank?

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March 2019
Source: 
Inter-American Development Bank (IDB)

The recent proliferation of green finance facilities by public sector players – at the national, subnational, regional and municipal level – is a response to the massive gaps between available funding and demand for funding for climate-friendly projects, and the vital need to mobilize private sector finance to meet international obligations of the Paris Agreement.

This paper examines the relative merits of starting a de novo Green Bank compared to “greening” an existing National Development Bank (NDB). The report starts with a brief analysis of the general problem that demand for financing of green investments exceeds existing supply, including a description of key financial and non-financial barriers to investment. It then presents the question of whether to green existing NDBs or grow a de novo Green Bank, and identifies criteria from institutional, government, and economy-specific perspectives to help inform the decision. Finally, this paper outlines a basic process for how to ‘green’ a NDB, should that path be chosen.

Sectors: 
Finance