Green investment banks: Leveraging innovative public finance to scale up low-carbon investment

Investment is growing in renewable energy and energy efficiency, but not quickly enough to get the world on track to achieve zero net greenhouse gas emissions globally by the end of this century. Mobilising investment from the private sector will be essential to meet climate change goals. Governments can find ways to make efficient use of available public funding to mobilise much larger pools of private capital.
The Policy Perspectives – Green investment banks: Leveraging innovative public finance to scale up low-carbon investment describes the relatively new phenomenon of publicly-capitalised green investment banks and examines why public green investment banks are being created, and how they are mobilising private investment.
A GIB is a public entity established specifically to facilitate private investment into domestic low-carbon, climate-resilient (LCR) infrastructure.  GIBs are facilitating investment in such areas as commercial and residential energy efficiency retrofits, rooftop solar photovoltaic systems and municipal-level, energy-efficient street lighting.
Many of the investments GIBs mobilise are undertaken in urban areas where 54% of the world’s population lived in 2014, and where 66% is projected to live by 2050.
GIBs are typically established in countries that do not have national development banks or other entities that are actively promoting private investment in domestic LCR infrastructure. Governments tailoring their GIBs based on their unique national and local contexts. GIBs and GIB-like entities have diverse rationales and goals including meeting ambitious emissions targets, supporting local community development, lowering energy costs, developing green technology markets, creating jobs and lowering the cost of capital. Using a range of metrics, GIBs are measuring and tracking their performance. These metrics generally focus on emissions saved, job creation, leverage ratios (i.e. private investment mobilised per unit of GIB public spending), and – for those GIBs that are required to be profitable – rate of return.
GIBs are relevant for both developed countries and emerging economies as a tool to help meet emissions, technology and infrastructure deployment and green investment targets. The creation of a GIB can send a signal to the marketplace and other countries that a country or region is seeking to become a leader in scaling up private low-carbon investments.