 Thank you very much for this kind introduction from the up fully enough by the end of my presentation It should may I should be able to make clear how you move from hydrology to finance when you work on climate change Can you hear me? Okay the The the the amount of money involved in the financing transition from a brown economy to a green economy is quite Humongous depending on the these teammates you believe it's anywhere between One trillion dollars to ten trillion dollars a year I will say it doesn't matter if it's one or ten because when you speak about Trillions of dollars. Can you hear me? When you speak about trillions of dollars you speak basically about capital markets you speak about private sector investment The we are speaking about additional investment and a lot of this investment For a lot of this green investment. Normally should be profitable a lot of you might be familiar with this greenhouse gas cost advertisement curve It was developed by by that and fall in the 90s and popularized by Mackenzie Basically, what this cost curve shows is that a lot of the green investment Can be extremely profitable. They are negative cost For example, when you invest in energy efficiency or water efficiency, not only you save energy and water, but you also save money So this graph is quite interesting in terms of sending a very powerful signal to political decision makers, however, it's important to understand how it's kind of how it is constructed and This graph is very much based on the cost of money in Industrial countries and that's as a real meaning when it comes to green technologies One key features of green technologies is that they often shift operation and maintenance cost against upfront capital cost and That's the case for energies. That's the case for water. That's the case for climate resilient roads When you speak about green climate resilient technologies, you often speak about technologies that have higher upfront capital cost and less operation and maintenance cost and So for example, if you take wind The bulk of your money will be upfront. It's two million dollars per megawatt And after you have only some fairly low operation and maintenance cost and this you can compare this with gas Where your upfront cost is much lower 750 800 900 thousand dollars per megawatt hour But after you have significant Fuel cost that could potentially increase quite dramatically depending on the fossil fuel reserves the So the cost of money When you have such high capital costs become extraordinary important If you borrow one million dollars for your house at a cost of 45 percent you will basically have to reimburse another million dollar in interest rate but if you borrow it at 14 15 percent It's three million dollars more that you will have to reimburse an interest rate and so depending on your cost of financing the Technology can be profitable or not when I started my career and As an engineer the main issue with renewable energy were Performance technical performance and cost of the technology Today the key issue with renewable energy is a cost of the financing of the technology And it's how hydrologists and climatologists suddenly became finance Finances because the issue is very much an issue of having access to long-term affordable finance The if we take a wind power project in Europe right now Wind power is if you have good wind these sites is basically competitive with gas turbine It's an extraordinary Competitive technology even if you do not internalize the external cost in pure direct cost It is competitive and the cost of money in Europe is basically 10 percent for equity 5 percent for debts Now you take the same Wind power Farm the same wind farm the exactly the same wind technology exactly the same type of Wind resources, but this time you transpose it to a developing country where the cost of money is different where the cost of money is 10 percent for debts and 18 percent for equity Suddenly your wind power project that was competitive in Europe is Absolutely not competitive in in a developing country and the only Only things that has changed is the cost of money Now do you have any idea why there is such a huge difference in cost of money between Develop countries and the developing country risk the level of actual and perceived risk the Financiers basically price risk when they have the impressions that there is for example a sovereignty risk. That's The they could be an expropriation When they have the impression that's the technical skills of a country are such are not high enough to guarantee a good Operations or that's the wind survey was maybe not robust whenever they have the impression that there is a risk they price it and So when you want to promote green technologies one of the key things to do is To reduce risk reduce investment risk improve the risk reward profile of green investment Now last year I made a presentation to the UN wider workshop on De-risking strategy. How do you de-risk green investment? And in a sense You either treat the risk for example, you simplify Licensing processes to make sure that you can immediately get a seating license for your wind farm You can transfer risk through partial guarantees or you can tax risk negative tax subsidies or positive tax for fossil fuels So I'm not to further discuss this issue of de-risking green energy investment I will basically refer you to the presentation of last year Today I would like to focus on the second part of a green market transformation, which is to deepen national financial infrastructure Even if you reduce dramatically your risk if you have to rely on International capital markets for your asset financing you will be limited first because international capital market tends to be extraordinary conservative and volatile so the The premium they will put even on your residual risk will be extremely high The second reason is because green technologies are mostly local 70% of the technologies are local technologies And so it's extraordinary important not only to de-risk the investment But also to deepen the national financial architecture Are you still with me? so Let's discuss about what is a national financial architecture for green energy The you have a number of different Institutions that can have access to different type of financial resources But in a sense you are speaking about public agencies national development banks commercial banks power utilities special proposed form equity funds, etc and Leasing companies and each of these institutions play a key role in terms of Revenue in terms of accessing different type of money budgetary allocation extra budgetary also finance capital market Operating surpluses and in terms of products that they gives by and large every single developed country today as all this different type of Financial institutions operating in the field of clean energy and Not only it's important to have each of these different type of institution, but the way they interact is also extraordinary important and I would like to take one example They would like to compare Germany and France in terms of financing of decentralized renewable energy They there's two countries have more or less the same GDP per capita They have more or less the same cooperative traditions. They have more or less the same level of Awareness in terms of climate change. They have the same type of institutions exactly the same type of institutions So you will expect the results to be more or less the same between the two countries know Cooperative are playing an extraordinary important role today in Germany in terms of financing decentralized renewable energy PV PV panels win wind turbine, etc Cooperative basically 100 200 500 people come together pools of money as equity and Finance one big wind turbine for example in Germany. It's extraordinary popular It's we are seeing a huge boom today. We have close to 800 energy cooperative Each of them with a capital of more than two million dollars So we are not speaking about a kind of anecdotal finance here. We're speaking about 1.6 billion dollars and In Germany what's happened is that's when people decide to create a cooperative First they are helped by a very attractive feeding tariff a guaranteed price In addition The road the law for the cooperative is extremely friendly for energy cooperative You have a specific type of law that makes it easier for people to come together The it's very light in terms of regulatory requirement, etc. And so You have a negative feeding tariff. You have an easy Regulatory framework and in addition this cooperative can get some debt finance from From a commercial banks thanks to the facts that's kfw the national development bank can provide some credit enhancement mechanism guarantees Junior debts low interest dates, etc. And in addition local government can easily also provide some equity for cooperative So you have a very very dynamic Financial sector that is helping individual initiatives Now let's look at France There's two countries are very similar in terms of institutional infrastructure But in France you don't have 800 cooperatives You have a handful of cooperatives despite the fact that you have the same level of activism and The difference are very minute but are extraordinarily significant one thing is that's the Regulatory framework for energy cooperative in France does not exist There is not a special regulatory framework for energy cooperative. It's the traditional investment community framework and This there's regulation. We are designed to Protect consumers from con jobs. They were designed to make sure that people will not be abused So you have a lot of check and balances and it's a hell of a job to try to simply set up a core an energy cooperative so you do not have Despite the fact that you have like in Germany dinner Public agency for regulation in France is called Adam. Despite the fact that you have the same agency You do not have the same regulatory framework in addition the in Germany Why kfw provide credit enhancement the equivalent of Kfw in France called case the the the deploy the consignation does not provide credit enhancement and therefore the Cooperative have to go straight to capital markets to try to get money or to commercial banks and The common most commercial banks are not familiar and not really enthusiastic about financing this energy cooperatives And in addition it's very difficult for governments to provide equity for energy cooperative I did not put a red cross here because actually they can't provide but in a modest quantity So the result you have the same institutions You have the same configuration, but some very very tiny differences and the result is that in one country 800 cooperative in the other one eight one of the times less Now let's take Developing country with an ascent financial architecture You often you you often end up In the situation where the national development bank is not capitalized and cannot provide credit enhancement You often end up in the situation where the commercial banks the national commercial banks do not have access to International capital markets and they cannot tap in well-developed domestic capital markets people who have savings end up investing in US treasury bond not in national currency bonds and You often have public agency which are under capitalized which are not able to provide the type of demonstration projects the trap the type of project development support and the policy Support needed for a cooperative and the local government often do not have the right to intervene as equity Financiers and in any in addition do not have the money to do so and so you end up in a situations where You do not have the institution and often the institutions are not capitalized to do so and often They do not have the the partnership needed and so there it's next to impossible for cooperative to see the light of the day Now a key issue in terms of Green market transformations is what kind of a small step can we make in order to improve Access to domestic resources Knowing that's today the The most developing countries have huge savings Trillions of dollars of savings So it's not the absence of money in the absence of proper investment vehicle for that money to contribute to national infrastructure development and so my office is increasingly being asked by By governments to explore the the potential of special proposed fund to try to connect different type of institution and Come with and and catalyze institutional innovations Now a special proposed fund is simple. It's a special special type of money for a special objectives and For example KFW in Germany was established after the Second World War to manage the Marshall plan money For reconstruction the case the depot the consignation in France was established after the battle of Waterloo To manage some specific type of savings for reconstruction It seems that losing a war is good in terms of national development agencies So this kind of special proposed fund the basically our immediate band aid to do something very specific and so one could perfectly imagine that one could use a national fund to Catalyze international public assistance wherever it comes from To help to provide grants to help in developing an enabling regulatory environment to provide some Grant to help in Establishing some pilot demonstration projects Establishing a track record for banks to learn to show that this technology can work and after such a national fund cool increase is Capitalization sources of capitalization through for example Developing extra budgetary allocation innovative sources of finance So you grow the amount of public money you have and we could imagine that such a national form will enter in cooperation With a national development bank to provide credit enhancement mechanism Once you have your track record once you have your projects on the ground you start providing some credit enhancement Instruments to help commercial banks to basically support the next generation and one could imagine that such a national climate fund would basically flood bonds to tap the National domestic markets in the future with credit enhancement to guarantee the return for domestic investors So you have an instrument that over a period of Four to six seven years could basically help you in getting some connection Establish and this national fund school either be phased out and this goes back to a budget budgetary allocation or could be subsumed under a public agency or Could be subsumed under a national development bank or like kfw and CDC become national development bank themselves and so one of the most interesting Areas of research in the field of green market Transformation in the coming years will certainly to be be to to see how we can use some special proposed fund to to to foster institutional innovations and Start connecting different type of players