Green Finance and Investment Mobilising Finance for Climate Action in Georgia

Table of contents 9 Foreword 5 Acknowledgements 7 Acronyms and abbreviations 11 Executive summary 15 Chapter 1. Mobilising finance for climate action in Georgia: Assessment and recommendations 17 Table 1.1. Green growth indicators in Georgia 19 Investment needs for climate action vs. available and potential sources of finance 19 Figure 1.1. Stocktaking of long-term investment needs (USD million) 20 Ensure coherence between strategic policy documents to mobilise finance for climate action 22 Figure 1.2. Factors that influence mobilisation of private finance for climate action in Georgia 22 Create demand for climate-related activities 23 Improve the capital market and other enabling conditions to meet investment demand 25 Notes 27 References 27 Chapter 2. Investment needs for achieving Georgia’s climate targets 33 Stocktaking of investment needs for climate action in Georgia 34 Figure 2.1. Stocktaking of long-term investment needs (USD million) 35 Table 2.1. Examples of renewable energy projects in Georgia, excluding hydropower 36 Capital sources to meet the needs: An example from NEEAP 36 Figure 2.2. Expected financial sources for energy-efficiency measures in NEEAP for 2017-30 37 Note 37 References 37 Chapter 3. Creating investment needs: Overview of climate policies in Georgia 39 Outline of Georgia’s nationally determined contribution 40 Figure 3.1. GHG emissions trend and NDC targets 40 Table 3.1. Overview of Georgia’s nationally determined contribution 41 Strategic policy documents on climate action and broader development agenda 41 Table 3.2. Examples of laws and strategic policy documents relating to climate change action in Georgia 42 Box 3.1. Financing climate action at the municipal level 44 Need for coherence among policy documents and strong stakeholder engagement 45 Table 3.3. Sector coverage and objectives of national-level strategic documents on green growth and climate action in Georgia 45 Enhancing environmental regulations to drive investment demand for climate action 47 Figure 3.2. Expected changes to regulations that would drive demand for resource-efficient and cleaner production 48 Figure 3.3. Trends in energy intensity in Georgia 48 Table 3.4. Summary of national-level mitigation policies in Georgia and benchmark countries 49 Need for energy subsidies reform 50 Figure 3.4. Total primary energy supply by fuel (2000-14) 51 Greening public procurement 51 Table 3.5. Examples of cross-boundary green public procurement initiatives 52 The level playing field between different renewable energy options 53 Note 53 References 53 Chapter 4. Channels of finance for climate action in Georgia 57 Stocktaking of financial channels for climate-related investment 58 Figure 4.1. Investment in fixed capital stock in Georgia (2001-15) 58 Table 4.1. Examples of financial channels already or potentially available for financing climate action in Georgia 59 Central and municipal governments 60 Sovereign funds 61 Figure 4.2. Volume and growth rate of commercial bank loans in Georgia 62 Domestic commercial banks 62 Other private sector investors 63 Box 4.1. Greening the loan operation and management system of Procredit Bank Georgia 63 Table 4.2. Examples of private-sector investors in renewable energy in Georgia (excluding commercial banks) 65 Box 4.2. JSC m2 Real Estate’s investment in electric vehicle chargers 65 Figure 4.3. Annual climate-related development finance committed to Georgia in 2013-15 66 Development finance institutions 66 Table 4.3. Examples of credit line programmes by development financial institutions related to energy efficiency and renewable energy 68 Exploring new financial channels for green finance 69 Box 4.3. Different types of green bonds 70 Box 4.4. Microfinance Organization Crystal’s Green Funding Action Plan 71 References 72 Chapter 5. Aligning broader enabling conditions for investments with Georgia’s climate action 77 Financial market policies 78 Current issues: High interest rates, collateral requirement and dollarisation 78 Figure 5.1. Interests rates in Georgia 78 Table 5.1. Examples of issued bonds and their performance 80 Looking at Georgia’s capital market development through a green finance lens 80 Table 5.2. Key factors for developing Georgia’s capital market and its status 81 Making best use of risk mitigation instruments 81 Table 5.3. Examples of risk mitigation instruments 82 Considering development of a Georgian green bank or fund 83 Competition policies 84 Developing an open and competitive electricity market 84 Table 5.4. The structure of Georgia’s electricity market 85 Box 5.1. The Energy Community 86 Access to the electricity grid 86 Addressing information gap and enhancing capacity 87 Notes 88 References 89 - Foreword and Acknowledgements - Acronyms and abbreviations - Executive summary - Mobilising finance for climate action in Georgia: Assessment and recommendations - Investment needs for achieving Georgia's climate targets - Creating investment needs: Overview of climate policies in Georgia - Channels of finance for climate action in Georgia - Aligning broader enabling conditions for investments with Georgia's climate action