4 months ago

Climate Action 2014-2015


NAFINSA, PROVIDING DEVELOPMENT FINANCE FOR MEXICO’S ENERGY INFRASTRUCTURE Mexico has resolved to embark on a series of new legislative reforms to make the way for the modernisation of all strategic sectors, particularly energy, finance, education, labour and telecommunications. In the energy field, profound reforms have taken place in 2014 that will promote growth in Mexico, and will require large investments in infrastructure for the production, transport and distribution of energy within the next 15 years. In this enterprise, Nacional Financiera (Nafinsa), the main development bank in Mexico, is undertaking the financial lead within the reforms in the energy sector including electricity generation, transport and distribution. Renewable energies are an important priority for Nafinsa. Within the Investment Banking Division, the Sustainable Projects Area is responsible for a project finance portfolio covering more than 2GW, with a total investment of US$5 billion in the renewable energy area such as solar, wind, hydro and co-generation. As well as energy, the Investment Banking Division is also involved in infrastructure, such as gas pipelines and industrial plants. We work with other development banks in Mexico for big projects, not only in the energy sector, but other types that require large amounts of investment such as water infrastructure. SPREADING THE RISK Nafinsa is renowned as a bank that focuses on small businesses, to whom it provides funds and guarantees. We are involved in the value chains of small and medium enterprises, with different products such as funding and guarantees that work through financial intermediaries, banks and non-banks. For small projects we rely on commercial banks, sharing up to 50 per cent of the credit risk through credit guarantees. Renewables are high impact projects, not only because energy is produced without the use of carbon-rich fuel, but in terms of technology innovation. We work with new and proven technologies in Mexico, but also promote the achievement of the objectives declared in the Energy Reform. Interest in projects of this kind is high because companies want to obtain green credentials and work for long-term stability in energy prices; this is a key consideration, because the main cost for many companies is energy. Finance has now become available, through specialised investment funds and private equity, that was not obtainable two or three years ago in Mexico. Now these type of projects are competing on a level playing field with other industrial or commercial products. Nafinsa also provides long-term funding not only directly for projects, but also to support commercial banks that participate in the development of renewable energy schemes. Nafinsa will continue to participate in large-scale renewable energy projects in Mexico in conjunction with the most important financial institutions, national and international, including multilateral agencies. The development of energy infrastructure, in support of energy reforms, is one of the most important priorities for Nafinsa. 38

CLIMATE FINANCE THE WBCSD URBAN INFRASTRUCTURE INITIATIVE By Peter Bakker, President, the World Business Council for Sustainable Development (WBCSD). It has become clearer than ever that cities are key to driving real action on climate change. One of the most prominent features of cities is that they are taking action now, regardless of what happens in global negotiations, involving both public and private sectors. The WBCSD’s groundbreaking Urban Infrastructure Initiative (UII) has shown how effectively the collaboration between cities and business can work. By 2050, 70 per cent of the world’s population will live in cities; and cities are where the battle for a sustainable future for humanity will be won or lost. City governments around the world are rising to this challenge by pursuing ambitious sustainability visions that will make them more competitive, resource efficient, resilient and inclusive. The role of city governments is increasingly recognised within international negotiations as cities become key ‘non-state actors’. In addition, business is aware of the exciting opportunity city–business collaboration represents and an increasing number of leading solution providers are working to make lowcarbon cities a reality. The WBCSD works to catalyse business innovation and action for low-carbon cities. LATIN AMERICAN RESPONSES With COP20 taking place in Lima, Peru, it is a prime opportunity to focus on Latin America. With 80 per cent of its population living in cities today, Latin America is more urbanised than any other region in the developing world. This share is expected to rise to 85 per cent by 2025. The shift from country to town has contributed significantly to Latin America’s growth, as economies of scale have boosted the productivity of expanding cities and reduced the cost of delivering basic services to their inhabitants. Despite this positive progress, important complex challenges remain, often linked to the negative consequences of rapid growth such as congestion, air quality problems, social exclusion and public safety issues. Recent extreme weather events have also highlighted the vulnerability of urban centres across the region to a changing climate. Luckily, there are excellent examples among Latin American cities making real progress on addressing these challenges. The recent transformation of Medellin in Colombia, the successful development of the Bogota Bus Rapid Transit system, and the City of Rio’s Intelligent Operations Center are developments that cities from all over the world come to learn from. THE NEED FOR A BROAD APPROACH However, addressing complex sustainability issues in practice remains a daunting challenge for city leaders. Solutions often necessitate major transformations in a city’s infrastructure systems – including buildings, energy, mobility, telecommunications, water, sanitation and waste management services – and optimising the links between these systems. These challenges are coming at a time when cities face major difficulties in financing infrastructure, particularly in view of the constraints on public sector resources and commercial debt in the wake of the financial crisis. A 2013 report from McKinsey, Infrastructure Productivity: how to save $1 trillion a year, estimates that the world will require US$57 trillion in infrastructure investment by 2030 – more than the current value of the worlds’ existing infrastructure – with the majority of investment needed in urban centres. This is a global issue: as advanced economies need to maintain and replace 39