C4C Event: Synergies between technical & financial assistance
A Capacity4Change (C4C) event
Finance for sustainable development (part of SGD 17) has become ever more important in the COVID-19 context, where building better and greener cannot be realised without the support of international financial institutions. However, complementary capacity development and supportive framework conditions, as supported by Technical Assistance (TA) organisations has proven essential to prepare the ground for green investment. At EU level the discussions around a renewed financial architecture for development are intensified. At global level commitments made during the Finance in Common Summit in Paris in 2020 put the crucial role of FIs in development cooperation in the spotlight. However, stakeholders from both 'worlds' often do not act in direct synergy, therefore potentially foregoing opportunities and impact.
On the 30th of March 2021 the first online C4C event, organised by the GIZ Representation in Brussels, in cooperation with the European Investment Bank (EIB) and the Agence française de développement (AFD) took place.
Opening words were held by Siegfried Leffler (Director, GIZ Representation in Brussels) opened the event and asked to bridge the gap between financial (FC) and technical cooperation (TC) to achieve synergies that had not been exploited in the past.
Gerry Muscat (EIB, Head of Division Urban Development and Urban Advisory) stressed in his keynote speech that investment outside the EU remained a key objective for the European Investment Bank (EIB). He stated that TC-FC-cooperation could in this context lead to synergies through the combination of practical and financial expertise. TC could prepare the ground for investment projects where the local context did not fulfil requirements for e.g. competitive procurement and social and environmental standards. TC could support local authorities by ameliorating framework conditions like good governance, local capacities etc. in cooperation with local agencies, thereby enabling the preparation and implementation of projects fulfilling international standards. TC activities which are supporting specific investment projects should be designed with the requirements of financial institutions in mind, considering long-term bankability and financial efficiency of projects, as well as potential financiers, to fight the occurrence of financing gaps. Therefore, the partnership between financial institutions like the EIB and European delegations, practitioners and other international organisations needed to be reinforced to optimise the allocation of limited resources of the EIB in TC.
After the keynote, best practices of TC/FC cooperation from the field of sustainable infrastructure were presented:
Ina de Visser (Programme Director, City Climate Finance Gap Fund, GIZ) introduced the cooperation of GIZ and EIB in the City Climate Finance Gap Fund, funded by the German and Luxemburg governments. The fund is led by a joint technical secretariat (GIZ and EIB) that provides technical assistance to cities in low- and middle-income countries. It focuses on mitigation and adaptation projects in urban areas in the sectorsmobility, buildings, water management and energy. De Visser stressed the advantage of the complementarity between the partners: EIB’s expertise in fund management, bankability, financial structures and financial feasibility, and GIZ’s experiences in implementation, capacity building and its direct contact with the recipients on the ground through its worldwide network.
Alexandra Linden (Programme Director, FELICITY, GIZ) presented the Financing Energy for Low-carbon Investment – Cities Advisory Facility (FELICITY) that is implemented jointly by GIZ and EIB. The facility helps to prepare and implement financially viable, climate friendly projects in sectors like energy, mobility, waste and water management. It feeds into the exchange network on urban climate action, supports policy reforms and capacity development. Linden pointed out challenges for FC-TC cooperation, namely: i) closing the gap between fragmented project landscapes and overarching finance cooperation, ii) linking project identification in an early stage to financial institutions, iii) building a credible project pipeline and capacities of financial intermediaries in the partner countries and iv) setting standards and common practices for the implementation of sustainable finance.
José Lopez (Energy Task Team Leader, AFD) and Christiana Hageneder (Head of PEEB secretariat, GIZ) presented the “Programme for Energy Efficiency in Buildings” (PEEB), a French-German cooperation. The program combines technical and financial support for the implementation of large-scale building projects and programs and to improve the policy frame of the sector. Currently PEEB encompasses five partner countries. Perspectively, a program with DG NEAR in the Southern Mediterranean for financing support of further construction projects is discussed on AFD side with DG NEAR. Christiana Hageneder gave insights in two examples, combining technical support on the policy level by GIZ with the financial assistance by AFD: i) the development of a national green housing programme in Vietnam, and ii) the support for the construction of energy efficient hospitals in Tunisia.
The following Panel was moderated by Sarah Weiss (Advisor Financial Systems Development, GIZ) and joined by the following speakers. The following comments include answers to questions from the moderation, as well as the audience:
Fulvio Capurso (Team Leader – International Financial Institutions Sector, DG NEAR) called the alignment of priorities of TC and FC providers a core interest of the DG NEAR and DG INTPA, and pointed out sustainable finance and the embedding of the European Green Deal as programme priorities. He explained that the European Fund for Social Development (EFSD) had been extended to continue investment in TC for guarantee and funding projects in a holistic approach, combining TC with investment and policy dialogues. He demanded sectoral approaches that created regulatory and legal frameworks for investments, thereby allowing long lasting effects after the provision of donor assistance. In the attempt to enable such structural reforms while leveraging the expertise of international financial institutions, three contracts had been established with the International Monetary Fund (IMF), the European Bank for Reconstruction and Development (EBRD) and the World Bank. Meanwhile, dialogue needed to continue on higher political levels, in Brussels as well as in the partner countries, and programming and coordination of instruments needed to include local partners and the private sector.
Mike Enskat (Head of Energy – Water – Mobility; Global Programs at GIZ) explained that fruitful cooperation with the EIB and AFD could foster green transformation, as it started with GIZ’s support for the EU-Africa Infrastructure Trust Fund. He underlined that reform process needed to be owned by the partners, for example by launching projects hosted by partner countries’ line ministries. Long-term activities were necessary for a sound understanding of the needs of the local institutions and reform processes to align the project cycle with policy reforms. He also asked for the facilitation and promotion of new financing schemes. Moreover, new types of public-private cooperation were possible and the cooperation on and between the levels of institutions, society and the private sector was to be improved. More common platforms between TC and FC providers were needed to enable a joint and inclusive approach, merging expertise, aligning the engagement and joining resources, if possible within the lines of the Team Europe approach.
Gerry Muscat referred to the EIB Group Climate Bank Roadmap which the implementation is likely to need TC-FC-cooperation . The EIB has pledged to be fully Paris-aligned by the end of the year and invest at least half of its funds to environmental sustainability and climate by 2025. Therefore, EU taxonomy needed to be reconciled with sustainable finance. The implication for TC was i) to figure out the implementation at the project and investment level, ii) design projects that contributed to climate action without increasing costs, and iii) build the capacity of agencies and financial intermediaries through advisory support , all in close cooperation with FC. He demanded to link grant loans and TC in one blending facility to draw the links closer together. He explained that the new EFSD could include innovative financing models and guarantees to de-risk investments and loan financing. He concluded that the blending of grants with other financial instruments needed to be coordinated with long-term financing and TC.
José Lopez requested to foster investment in the green building sector and build interfaces of TC-FC-cooperation and facilities. He explained that TC involvement was very valuable, lowered the risk perception of investors and beneficiaries and facilitated project implementation. He explained, TC-FC-cooperation needed to take into account social and ecological perspectives and include local expertise to improve the feasibility of projects, especially in the climate sector. He explained that there were more complementary instruments and approaches needed and the type of financing applied was to be weighted properly. Linking a part of disbursement to implementation advancement would make financial products more effective.
Many thanks to all participants and especially to our speakers. Please do not hesitate to contact Events_RepBrussels@giz.de with questions or feedback.
Capacity4Change (C4C) is an event series in Brussels organised by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in cooperation with selected partner institutions and organisations. C4C aims to enrich the Brussels policy debate with practical know-how and implementation experiences. It features innovative approaches, challenging analyses, interesting publications and thought-provoking ideas.