ENERGY EFFICIENCY AND THE FINANCE SECTOR (2009)

This survey was carried out in 2008, when high and volatile oil prices, steadily rising demand for energy, and global imperatives, such as climate change, created significant renewed attention to energy efficiency – both in the policy and commercial world. UNEP Finance Initiative sought to provide an evidence base on current lending activities in the energy efficiency space, as well as views on this issue through a survey among financiers. Identifying market activity and where market failure is occurring, from a finance and investment perspective, is critical in formulating appropriate policy responses from governments, as well as signaling how financial sector actors may move forward. Insights were sought through a series of structured interviews with a range of mainstream public-sector and private-sector financial institutions, as well as two specialised financial service companies. This is an indicative set of financial institutions (FIs) rather than a comprehensive review of all activities or geographies in this area. The survey explored: Whether and how external drivers to reduce energy use on the supply and demand side are impacting lending activities, both in terms of client demand, due diligence procedures, and new product development; Specific financing issues for energy efficiency; The role of government regulation in developing this market; Other issues relevant to the evolution of energy efficiency financing and investment. The definition of energy efficiency (EE) was left deliberately broad in order to capture the widest range of activities possible. However, from the outset it was recognised that energy efficiency would fall into two main categories: firstly, specific activities to deliver energy savings, for example, through entities such as energy service companies (ESCOs); and secondly, activities and opportunities that are spread throughout the entire spectrum of banking operations. It was anticipated that the latter may not be defined as energy efficiency per se, and this was reinforced during the survey. The following section on key findings is structured, in analogy to the overall report, as follows: current market activities, key external and internal drivers including specific barriers raised, financing issues, and policy and regulatory issues. These are followed by a set of core recommendations both to financial practitioners and policy-makers