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Environmental Lending in EU Eastern Partnership Countries

Author: OECD, EC, EaP Green May 02, 2018
Type:Technical Research Study

This resource is publicly available.

This report (100 pages) presents an overview of existing environmental credit lines in the EU’s Eastern Partnership (EaP) countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine), which are mostly supported by International Finance Institutions and donors and disbursed by local commercial banks. Lessons learned from this type of credit-line implementation provide useful insights for spurring the banking sector into financing green investments.

+ At least 8 IFI's have extended environmental credit lines to the EaP countries, the Russian Federation and Central Asia, focussing most on SME and energy efficiency, renweable energy.
+ about 70 banks in the region have received support
​+  cost of IFI funds is often not the lowest available to commercial banks​; however, interest rates offered on IFI environmental credit lines may be more concessional than for other products (such as SME credit lines), making them more attractive for local financing institutions. Lower rates may be achieved through the blending of donor grant finance ...
+ Most credit lines are accompanied by some form of (donor-financed) technical assistance for the local financial institution. A number of local banks have received capacity building support alongside the credit line.

Key messages:
+ The supply of IFI finance is not sufficient to change the market dynamics by itself. A supportive regulatory and policy environment was identified as critically important to ensure the development of demand for green investments.
+ IFIs need to demonstrate the commercial sustainability of green lending by keeping concessionality to a minimum where there is already a positive financial investment case.
​+ Technical assistance and incentives are useful for overcoming behavioural barriers, but should not be used to subsidise economically non-viable projects.
 most IFIs set environmental performance indicators for their credit lines, commercial and performance information associated with IFI portfolios is generally not made publically available.
+ ....
country-level analysis is needed in order to produce country-specific recommendations with regard to better promoting the access to private finance for green investments in the countries ....
 

OECD (2016), Environmental Lending in EU Eastern Partnership Countries, Green Finance and Investment, OECD Publishing, Paris,

read online here or see more at OECD library

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