Page 166 - Low Carbon Development in China and India
P. 166
2.5.5 Risk Management Instruments of International 2.2
Financial Institutions
Multinational Investment Guarantee Agency (MIGA) provides political
risk guarantee for foreign private investors, including expropriation
risk, currency transfer limit, default, war and civil disturbance and
offers investment promotion services for its members so as to increase
their capacity in foreign capital attraction and then facilitates the
investment of foreign investors to flow into developing countries.
MIGA’s main contributions to coping with the climate change sector are
to provide guarantee for green infrastructure investment of developing
countries and thus, help developing countries with renewable energy
competency construction, encourage resources protection, improve
allocation efficiency and improve the health and environment and
offset the greenhouse gas emission. Up to 2012, MIGA had provided
guarantee for 39 programmes and is providing guarantee for seven
programmes at present in China, with a total amount of USD 160
million. Most of the programmes are in the infrastructure sector such
as water and waste processing.18 Using MIGA to provide financing
guarantee for local governments to carry out low carbon economy
programmes could effectively reduce the programme risk and improve
the capacity to obtain loans.
In addition to insurance instruments, official export credit,
guarantees, factoring, credit rating, derivatives and letters of credit
could also become risk management instruments in the green
financial sector. Besides, public funding may set up a series of
financial instruments, conduct joint investment with public capital
through multiple forms, and attract the private capital to invest in
low carbon industry with higher risks by some loss sharing facilities.
At present, some international public funds have encouraged banks
to provide green credit in the form of primary loss sharing facility or
supported the development of emerging low carbon service industry
by guarantee deposits. These instruments could be introduced to
China and contribute to lowering the climate financing risk rating and
promote capital flow. Therefore, the central government is required
to further strengthen risk management cooperation with international
institutions on investment in low carbon sector so as to provide
supreme and more comprehensive risk management instruments for
the local government in low carbon financing, and reduce investment
risks and promote more investment in the low carbon sector.
18 http://www/miga.org/
Chapter 2 Innovative Financing for Low Carbon Development 131
Financial Institutions
Multinational Investment Guarantee Agency (MIGA) provides political
risk guarantee for foreign private investors, including expropriation
risk, currency transfer limit, default, war and civil disturbance and
offers investment promotion services for its members so as to increase
their capacity in foreign capital attraction and then facilitates the
investment of foreign investors to flow into developing countries.
MIGA’s main contributions to coping with the climate change sector are
to provide guarantee for green infrastructure investment of developing
countries and thus, help developing countries with renewable energy
competency construction, encourage resources protection, improve
allocation efficiency and improve the health and environment and
offset the greenhouse gas emission. Up to 2012, MIGA had provided
guarantee for 39 programmes and is providing guarantee for seven
programmes at present in China, with a total amount of USD 160
million. Most of the programmes are in the infrastructure sector such
as water and waste processing.18 Using MIGA to provide financing
guarantee for local governments to carry out low carbon economy
programmes could effectively reduce the programme risk and improve
the capacity to obtain loans.
In addition to insurance instruments, official export credit,
guarantees, factoring, credit rating, derivatives and letters of credit
could also become risk management instruments in the green
financial sector. Besides, public funding may set up a series of
financial instruments, conduct joint investment with public capital
through multiple forms, and attract the private capital to invest in
low carbon industry with higher risks by some loss sharing facilities.
At present, some international public funds have encouraged banks
to provide green credit in the form of primary loss sharing facility or
supported the development of emerging low carbon service industry
by guarantee deposits. These instruments could be introduced to
China and contribute to lowering the climate financing risk rating and
promote capital flow. Therefore, the central government is required
to further strengthen risk management cooperation with international
institutions on investment in low carbon sector so as to provide
supreme and more comprehensive risk management instruments for
the local government in low carbon financing, and reduce investment
risks and promote more investment in the low carbon sector.
18 http://www/miga.org/
Chapter 2 Innovative Financing for Low Carbon Development 131
