Climate change presents a major challenge for countries, communities,
companies and citizens. According to the
United Nations Framework Convention
on Climate Change
, “Climate change" means a change of climate which is attributed
directly or indirectly to human activity that alters the composition of the global
atmosphere and which is in addition to natural climate variability observed over
comparable time periods. Including anything from shifting weather patterns that
threaten food production, to rising sea levels that increase the risk of catastrophic
flooding, the impacts of climate change are global in scope and unprecedented in
scale. Without drastic action today, adapting to these impacts in the future will
be more difficult and costly.
Climate change is a business risk
Climate change is a business risk. Climate risks will have major implications for most
sectors of our economies. They impact revenues, cash flows and operating costs, asset
values and financing cost, and ultimately the competitiveness and profitability of
firms and financial institutions. The physical effects of climate risk tend to
materially impact industries with physical assets in risk-prone areas (e.g., real
estate in coastal areas or wildfire-prone areas);
industries where infrastructure
resiliency and business continuity are societal necessities
(e.g., health care delivery,
telecommunications / Internet, utilities); and industries dependent on natural capital
(e.g., those that rely on productive land and availability of water, such as agriculture,
meat, poultry, and dairy).Given that businesses face these risks, rational self-interest
of businesses should be a major driver of adaptation actions.
a) The private sector adapts to climate change
Climate change poses a threat not only to individuals, households, and the public sector, but also to the private sector,
both in developed and in developing countries. Slow onset climate change (e.g. temperature increase and sea level rise)
and extreme weather events (such as increasingly intense and frequent storms or heat waves) can:
•   directly affect companies, e.g. by damaging their buildings, disturbing production processes and reducing the
productivity of their employees; and
•   indirectly affect companies, e.g. if critical transport infrastructure is destroyed, a government issues a new
regulation to reduce vulnerability of its citizens, or if (financial) markets change.
It is important that private entities adapt to climate change simply to ensure their survival. Adapting operations
and business models to climate change can also be an opportunity for companies – it can make them more resilient
to shocks than their competitors and allow them to tap new markets for adaptation products and services. Hence,
adaptation is also a driver of business growth.
In addition, private sector adaptation also has wider effects for societies and economies.
The private sector is
a key contributor
to job creation, economic growth and poverty reduction. In some countries, more than 80 percent
of critical infrastructures (e.g. energy, water, transport, food supply, etc.) are delivered by private actors.
By investing in its own adaptation, the private sector can increase resilience of its stakeholders,
including employees, clients, surrounding communities and local governments.
b) The private sector finances climate change adaptation of others
Private financial institutions and investors
such as banks, pension funds, insurance companies or impact investors can invest in climate
resilience or provide funding for climate change adaptation of others, e.g. through (micro) loans, bonds or venture capital.
Increasing awareness and disclosure of the risks of climate change already today incentivizes financial institutions to shift investments
away from companies and activities, which are vulnerable to the physical, transitional and liability risks of climate change,
towards those that have a sound business case under changing climatic conditions.
While conceptual and practical issues make it difficult to track how much the private sector already invests in adaptation today,
it is clear that significantly more finance from the private sector is needed in order to meet the financing needs for climate change adaptation
c) Private entities support others through products and services for climate resilience
Besides critical infrastructure, jobs and financing, private entities can develop and provide specific products or services that help others become
more resilient and cope with the risks of climate change. For example, in agricultural value chains this may include providing micro
irrigation and heat-resistant crop species to small-scale farmers.
Table 3 proposes potential different roles of different actors and summarizes which of the three roles each type of
company/private player could focus on in order to lever its strength for resilience building.
Gender Action Plan and UNFCCC
A first-ever Gender Action Plan to support gender-responsive climate action is the first UNFCCC Gender Action Plan (COP23, 2017),
which aims to integrate gender equality principle around climate change (nationally and internationally) through five priority areas.
Enhanced Lima Work Programme on Gender (LWPG) (COP 25, 2019)
The Enhanced Lima Work Programme on Gender (LWPG) (COP 25, 2019) and the Gender Action Plan (GAP) set five priority areas to advance the development
of gender-responsive climate actions, which will lead towards increased effectiveness, fairness and sustainability of climate policy and action.
The enhanced five-year GAP is focused on implementation of gender-related activities and affirms that action by all stakeholders
- public and private - towards gender-responsiveness is critical.
TOOLKIT FOR PRIVATE SECTOR ENGAGEMENT IN CLIMATE ACTION
INFO SHEET NO. 1
CLIMATE CHANGE – WHY IT IS RELEVANT FOR THE PRIVATE SECTOR
1.1 What is the climate change expected impact for the Republic of Serbia?
The European climate law is based on Regulation (EU) 2018/1999, which with certain changes became binding for Serbia through the Energy Community Treaty (hereinafter: EnCT), i.e. through the Decision of the Ministerial Council from November 2021 (Decision - Ministerial Council Decision 2021/14/MC-EnC of 30 November 2021 on incorporating Regulation (EU) 2018/1999 in the Energy Community acquis communautaire and amending Annex I of the Treaty).
With this Decision, the member states, including Serbia, undertake to draw up long-term strategies, integrated plans for energy and climate (Integrated National Energy and Climate Plans - NECPs) and reports on the progress or implementation of the NECP, as well as a strategic plan for reducing methane emissions, but also reports on policies and measures to reduce GHG emissions, on GHG projections and on funds collected through carbon taxes or similar mechanisms, as well as strategies and plans for adaptation to changed climate conditions.
The implementation of the aforementioned Decision, as well as visible and ambitious climate actions, in addition to being necessary in order for the Serbian economy to be competitive on the EU and international markets and to protect itself from damages and losses due to climate change, also represent the fulfilment of obligations from the Sofia Declaration (Green Agenda for Western Balkans) and accompanying documents.
Characteristics of climate change
According to official data from the Republic Hydrometeorological Institute (RHMZ), 2019 is the warmest recorded year in Serbia since 1951, and in Belgrade since 1888. Nine of the ten warmest years in Serbia were registered after 2000 (period 1951-2020), and fourteen out of fifteen in Belgrade.
Analysis of climate changes and observed and/or expected climate changes in the Republic of Serbia show that the average temperature in the period 2001-2020. increased by +1.4°C compared to the values in the period 1961-1990. With a maximum increase in the summer season (from +2.2°C). In the period 2021-2040 the expected increase is +2.2°C, which increases to +2.5 to +3.1°C in the period 2041-2060 and goes from +3.1°C to +5.8°C in 2081-2100 compared to 1961-1990.
Increased climate variability means more frequent occurrence of years with drier conditions as well as the aforementioned increase in droughts. A significant impact on drier conditions is the increase in temperature, as well as changes in the precipitation regime. The percentage of years with drought increased by + 30% in 2001-2020 compared to 1961-1990. It is expected that in 2041-2060 every year will be with drought. The frequency of years with severe drought (happened once in 2011-2020) is increasing, in 2021-2040 there will be 2-3 per decade (in a period of 10 years), in 2041-2060 3-4 per decade, and in 2081-2100 can be expected in 7-8 years per decade. Thus, one can expect an extension of the period of low flows in the rivers, a decrease in the rate of groundwater renewal and a decrease in the average soil moisture.
What is of additional concern is the observed and expected increase in the number of occurrences of heat waves per year (in the period 1961-1990 there were less than 1, and in the period 2001-2020. even +2.4, of which +3 in the period 2011-2020) , days with high temperatures (maximum daily over 30°C and over 35°C), days with very heavy (daily precipitation 20mm-30mm) and extreme (daily precipitation over 30mm) precipitation (which result in an increase in the risk of floods and erosion )
Analysis of the impact of climate change have shown that the sectors of agriculture, water resources management and forestry are most affected, as well as energy and infrastructure, which result in additional impacts on health and the healthcare system of the Republic of Serbia.
Threats and risks due to climate change
In addition to the obligations arising from international agreements and EU legislation, Serbia has the obligation to plan and implement measures and activities to adapt to changed climate conditions, due to increasing damages and losses caused as a result of climate change. The results of analyzes and modeling show that the increase in the average global temperature can have a significant impact on the total value of the GDP of the Republic of Serbia in the absence of adaptation/adjustment to the changed climatic conditions. The reduction of the total GDP in relation to the potential that would have been achieved without global warming and without adaptation to changed climate conditions is shown in Table 1. Additionally, it should be borne in mind that in 2030 a loss of 0.03% of working hours can be expected that is, a thousand jobs just because of heat waves, mostly in the agriculture and construction sectors.
Temperature increase:
2020-2040
2040-2100
2020-2100
1°C
15,465 (1,20%)
328,899 (4,74%)
344,364 (4,19%)
2°C
58,124 (4,53%)
708,193 (10,2%)
766,317 (9,32%)
3°C
59,107 (4,97%)
831,296 (12,88%)
890,403 (11,65%)
4°C
97,536 (6,87%)
1.904,874 (18,46%)
2.002,41 (17,06%)
According to estimates from the first NDC, Serbia in the period 2000-2015. suffered damages of over 5 billion euros due to natural calamities and natural disasters, more precisely caused primarily by droughts (over 3.5 billion euros), floods (over 1.5 billion euros) and forest fires (about 300 million euros in the period 2000-2009 ). The need for investment in adaptation is also confirmed by the assessment of minimum damages and losses of 7 billion USD in the period 2000-2020. years, caused by natural disasters and natural disasters. Most of which is the result of droughts and high temperatures. On the other hand, only the flood in 2014 showed sensitivity to natural disasters, resulting in a total damage of EUR 1.7 billion or more than 4% of GDP. In addition, it should be borne in mind that more than 18% of Serbia's territory is exposed to floods and torrential floods, 21% of the territory is exposed to droughts, and the risk of forest fires is present on 3.6% of the territory and increases from year to year.
Climate risks for private sector can be divided into
Direct and indirect risks :
xIncreasing water scarcity and changes in the availability of natural resources
xPhysical impacts of extreme weather events and sea-level rise on utilities and infrastructure
xChanging demand for consumer and intermediary goods and services
xHealth issues affecting workers and consumers (e.g., heat waves or infectious diseases)
xRegulatory uncertainty as governments prepare to cope with climate impacts (e.g., new water regulations and changes to zoning laws due to expanding flood zones)
xReputational consequences for companies that are seen as failing to support their communities
Figure 1 Risks of catastrophic events increases with temperature
(Adopted from World Resource Institute and CCA report 2019)
Figure 2 Benefit cost ratio of climate investment in adaptation
Accelerated investment in climate change resilience is urgently needed to ensure the
well-being of economies, companies and people. According to the Global Commission on adaptation report
published in 2019, investing $1.8 trillion globally in five areas: strengthening early warning systems,
making new infrastructure resilient, improving dryland agriculture crop production, protecting mangroves
and making water resources management more resilient from 2020 to 2030 could generate $7.1 trillion in
total net benefits. Thus, the overall rate of return on investments in improved resilience is very high,
with benefit-cost ratios ranging from 2:1 to 10:1, and in some cases even higher (Figure 2).
Global response to the climate challenge
The United Nations Framework Convention on Climate Change (UNFCCC) entered into force on 21 March 1994.
Today, it has near-universal membership. The 197 countries that have ratified the Convention are called
Parties to the Convention. Preventing “dangerous” human interference with the climate system is the
ultimate aim of the UNFCCC.
The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196
Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016. Its goal is
to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial
levels. To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse
gas emissions as soon as possible to achieve a climate neutral world by mid-century. The Paris Agreement
is a landmark in the multilateral climate change process because, for the first time, a binding agreement
brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt
to its effects.
Implementation of the Paris Agreement requires economic and social transformation, based on the best available
science. The Paris Agreement works on a five-year cycle of increasingly ambitious climate action carried out
by countries. By 2020, countries submit their plans for climate action known as Nationally Determined Contributions (NDCs).
International agreements, such as the
2030 Agenda for Sustainable Development, the Addis Ababa Action Agenda and
the Paris Agreement
on climate change all strongly emphasise the critical role for the private sector in achieving
development outcomes, both as a source of finance as well as know-how. There is also clear recognition across the
development co-operation community of the central position private sector actors can play in supporting the
implementation of Nationally Determined Contributions (NDCs) – as drivers of green growth in developing countries,
promoters of green supply chains, as a source of investment in low-carbon, climate-resilient infrastructure,
and as leaders in innovation in clean technologies and resource efficiency. In recognition of this, the OECD
Development Assistance Committee is looking at the lessons learned and best practice experiences from efforts
to engage the private sector for development outcomes, more broadly, and in relation to green growth and
climate change, in particular.
Nationally Determined Contributions (NDCs) are the expressions of efforts made by countries in
reducing national emissions and adapting to the impact of climate change. NDCs are at the heart
of the Paris Agreement and the achievement of these long-term goals. The Paris Agreement requires
each party to outline and communicate the NDCs that it intends to achieve. The UNFCCC receives
and records NDCs in a public registry.
National Adaptation Plans (NAPs) are plans made to identify a country's medium- and long-term climate
adaptation needs, as well as strategies and programmes that need to be developed and implemented to
address those needs. The development of NAPs is a continuous, progressive and iterative process,
following a country-driven, participatory and transparent approach. These planning processes are
intended to catalyse action and finance to generate systemic change that addresses climate impacts and
vulnerabilities. Taking effective climate action requires countries to work out what kinds of adaptation
measures will be effective. That is why the proper planning and formulation of National Adaptation Plans
(NAPs) and/or other planning processes are so important.
Climate Change Adaptation and Mitigation
Adaptation refers to adjustments in ecological, social, or economic systems in response
to actual or expected climatic stimuli and their effects or impacts. It refers to changes
in processes, practices, and structures to moderate potential damages or to benefit from
opportunities associated with climate change. In simple terms, countries and communities
need to develop adaptation solution and implement action to respond to the impacts of
climate change that are already happening, as well as prepare for future impacts. (UNFCCC)
As there is a direct relation between global average temperatures and the concentration
of greenhouse gases in the atmosphere, the key for the solution to the climate change
problem rests in decreasing the amount of emissions released into the atmosphere and in
reducing the current concentration of carbon dioxide (CO2) by enhancing sinks
(e.g. increasing the area of forests). Efforts to reduce emissions and enhance sinks are
referred to as “mitigation”. (UNFCCC)
The difference between climate change mitigation and climate change adaptation is that mitigation is
aimed at tackling the causes and minimising the possible impacts of climate change, whereas adaptation
looks at how to reduce the negative effects it has and how to take advantage of any opportunities that
arise. Where mitigation strategies fail to reach emissions containment targets, climate resilience will
be key to lessen the impacts of climate change and pave the way for as more sustainable and environmentally
sound development.
How can private sector participate/contribute to strengthening climate governance? Global perspective
There is no single blueprint of private sector engagement
in climate governance and climate action, and the engagement of private sector is country and region specific. Yet, some of the approaches for state-business
partnerships for sustainable development can include:
ensuring additionality of private sector efforts (i.e. going beyond what business would have invested in anyway); financial sustainability of approaches; mutual transformation (i.e. changing of attitudes and business models); and risk-sharing,
all within a transparent manner without market distortion
(Garside et al (2016).
Over the course of Green Climate Fund (GCF) engagement in various countries, a couple of roles of private sector potential engagement have been identified, including:
Private sector actors who make direct investments—whether in the form of debt or equity—in projects.
These actors include institutional investors (including sovereign wealth funds, endowments, pension
funds, mutual funds, insurance companies, hedge funds, and private equity firms), commercial banks,
and corporations making internal capital allocation decisions. Some capital providers may also act as
project developers or market facilitators.
Around the world, companies are putting in place measures to anticipate for and adapt to climate impacts,
otherwise known as ‘’adaptation’’. Companies recognize that their ability to grow and prosper cannot be disconnected
from community well-being. Companies view building community climate resilience as an imperative for strategic business
action that must go beyond the realm of corporate philanthropy.
by companies at COP 21 include the Science Based Targets initiative, which saw 144 companies commit to set targets in line with the overarching
2C temperature goal of the Paris Agreement, and the Paris Pledge for Action or ‘L’Appel de Paris’, which united 400 businesses
and 120 investors with other non-state actors in committing to support the delivery of the Paris Agreement (Science Based Targets,
n.d.; COP 21, 2015). The Global Commission on Business and Sustainable Development, headed by Unilever, highlights why companies
need to engage in delivering the SDGs: economic benefits from new markets and innovation, risks to business performance and stability,
and the necessity to work closer with the government and other stakeholders in the future (Business and Sustainable Development Commission, n.d.).
is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
The companies include 100 ‘systemically important emitters’, accounting for two-thirds of annual global industrial emissions,
alongside more than 60 others with significant opportunity to drive the clean energy transition. Launched in December 2017 at the
One Planet Summit, Climate Action 100+ garnered worldwide attention as it was highlighted as one of 12 key global initiatives to tackle climate change.
Private sector actors who provide critical financial services. Examples include insurance companies
(who offer products that can reduce project and market risks), financial institutions (who provide
underwriting, advisory, and other financial services), liquidity providers (who provide short- term
loans and/or currency exchange services), rating agencies (who evaluate a project's ability to repay
its debt), and data providers (providing market information). “Market Facilitators” are critical to
market creation and growth.
Entities (ranging from small and medium enterprises to larger corporations) undertaking projects and seeking
financing. Project developers often act as “Capital Providers” since they typically provide a portion of a
project's financing through their own capital contribution (also known as an “equity stake”). In the case
of low-carbon development, projects can range from wind and solar installations, to energy efficiency
retrofits, to biomass and waste-to- energy conversion facilities.
    To understand the current and potential
contribution of the private sector to the delivery of the climate agenda, it is important to highlight what we mean by ‘private sector’ .
The term ‘private sector’ refers to a broad range of individual professionals and companies interacting with each other within diverse
associations, public-private partnerships and the community, such as:
• Investors, land- and business- owners. These include individuals and companies, private financial institutions,
pension funds, as well as public estate companies acting as private bodies and blurring the line between ‘public’ and ‘private’;
• Developers and contractors;
• Architects, engineers, landscape and urban design/planning practitioners;
• Consultants to the public or private actors involved in research and development and capacity building (knowledge providers);
• Service managers facilitating interaction between local authorities and private contractors/ communities;
• Service providers, for example, transport, energy, and waste companies.
• Businesses involved in the production of climate technology, hereunder-renewable energies, such as windmills, solar cells, etc.
2.2 Climate risks for the private sector
Today it is generally accepted that climate risks are also common
risks that trigger private sector investments. The potential impacts of climate change on the private sector is not only physical and do not only manifest in the
long term. Climate related risks are created by a range of weather hazards. Some are slow in their onset (such as changes in temperature and precipitation leading
to droughts, or agricultural losses), while others happen more suddenly (such as tropical storms and floods). There is scientific evidence for the expected climate
impacts, but uncertainty regarding the magnitude of the impacts, such as due to increasing temperature and sea level rise is expected.
The profile of private sector actors operating under the “risk-return” scheme and subject to climate risks may change significantly, since such organizations may be
more susceptible to the physical effects of climate change, climate policy and new technologies. These climate risks include:
2.3 What is the role of private sector in addressing climate change?
Generally, the private sector has an important role in delivering climate goals,
typically based on a partnership or collaborative approach involving all sectors and emphasizing the role of cities, public agencies, and civil society. There is a growing reliance
on the private sector’s contributing role, suggesting that governments cannot singularly manage development and drawing attention to benefits related to private-sector involvement in development.
Clearly, involving the private sector can help in terms of capacities as no local or national government can mobilize necessary capital
and political consensus to make effective investments in infrastructures leading to sustainability. There is an ‘unrecognized opportunity for the private sector to engage in selective
investments that can help cities limit the effects of these trends (meeting the need of urbanizations and shortage of resources, energy, clean air)’. A related idea is that private
parties can be incentivized to mobilize their capacities, so they can deliver verifiable climate outcomes and make a material contribution to closing the emissions gap’. At the same
time, these contributions would be broad ranged. Emissions-reduction and adaptation projects also deliver other benefits than climate adaptation and mitigation, such as health
improvements and biodiversity conservation, and can be part of more holistic plans contributing to social, environmental, and economic benefits.
Private sector can engage with various climate adaptation activities to reduce climate related risks to core business operations,
and in climate mitigation activities to promote green and efficient development. These actions not only reduce risks for private sector entities, but also contribute to national
and global efforts to address climate change. ;
Private actors involved in sustainability practice, whether occupying a space, involved in industrial production, in construction or
service delivery (water, waste) ought to be committed to reducing CO₂ emissions through internal and external processes in compliance with national and local regulations.
They should be committed to designing products and processes to limit CO₂ emissions.
It should be noted that the degree of private sector involvement in climate finance directly depends on the level of development of the sector and is largely determined
by the national development context of countries.
2.3.1 Reducing climate related risks to private sector core business operations (adaptation)
According to the Global Commission on Adaptation (GCA) report, without adaptation to climate change, the following losses are envisioned globally:
• Depressed growth in global agriculture yields up to 30% by 2050. About 500 million small farms around the world will be most affected.
• The number of people who may lack sufficient water, at least one month per year, will soar from 3.6 billion today to more than 5 billion by 2050.;
• Rising seas and greater storm surges could force hundreds of millions of people in coastal cities away from their homes, with a total cost to coastal urban areas of more than $1 trillion each year by 2050.
• Climate change could push more than 100 million people within developing countries below the poverty line by 2030.
Thus, the GCA initiative proposes a triple dividend approach to private sector adaptation to climate change: avoiding losses, economic benefits and social and environmental benefits:
Yields for private sector of investing in climate change adaptation
Challenges and opportunities for adaptation (GCA examples)
50 percent increase in global demand for food between 2010 and 2050
R&D investment is crucial to address climate stresses on crops from increasing heat, drought, and disease.
In Zimbabwe, farmers using drought-tolerant maize were able to harvest up to 600 kilograms more maize per
hectare than farmers using conventional maize.
70% increase of demand for meat, dairy, and fish by people in developing countries.
Private finance models that works for small-scale producers and cooperatives, including microfinance.
Investments in basic and applied research in both national
and internationally oriented research agencies as well as extension services have high rates of return.
Depressed growth in global yields by 5–30 percent by 2050.
Equal property rights for women to advance gender justice for female farmers.
Increased variability and extremes in temperature and rainfall will lead to production shocks that will worsen food insecurity.
Development of new marketing and export networks.
Increased food prices (by 20%), reduce food availability, and reduce the incomes and food production of smallholder farmers.
Exploit digital technology, better weather information, and farmer to-farmer education.
Challenges/Opportunities
Actions
Examples
Lack of private sector investment in nature-based solutions
Public private partnerships with national and local governments to reorient policies,
subsidies and investments, including developing programs to better mobilize private sector support
Examples include payments for ecosystem services (PES), green bonds, resilience bonds, insurance schemes, and water user fees.
Challenges/Opportunities
Actions
Examples
Crucial water supplies, like aquifers and lakes, are shrinking or increasingly polluted.
Floods and droughts cause damages
in the billions of dollars and take a huge human toll, in particular on women and girls
Irrigation modernization, including using new techniques such as just-in-time irrigation,
coupled with climate-appropriate agricultural policies, can slash the amount of water needed
in agriculture, which now accounts for about 70 percent of global water use. This can be done while also increasing yields.
In response to poor water supplies, system leaks and financial mismanagement of utilities
in Karnataka,
India, a water use efficiency scheme was developed
, with reduction of leakages as a main climate adaptation
strategy. With public-private partnership (PPP) contracting planning support from
Public Private Infrastructure
Advisory Facility (PPIAF)
, a pioneering design, build, operate (DBO) contract for privately operated water service
in the North Karnataka cities of Hubballi Dharwad, Belgaum, and Kalaburagi was implemented. Service and availability
of water jumped from 10 hours a week to 24 hours a day. To boot, the volume of water lost to leakages was reduced
by 2 500 m3/day proving that 24/7 water service was possible in India while improving water resource resilience to droughts.
Challenges/Opportunities
Actions
Examples
While spreading and growing, many cities have been relentlessly stripping away or building over floodplains,
forests, and wetlands that could have absorbed stormwater or offered respite and precious water
during heat waves and droughts.
Knowledge providers to make the latest modeling technologies and credible data on climate risks
available to cities and communities.
Need for updated topographic maps, along with weather and climate information, satellite, and remote
sensing data; models that reveal risks of climate impacts to local areas; and assessments of the
vulnerabilities for specific population groups, such as women and people living in poverty
City governments and private actors to build capacity to use this information in order to drive
integrated urban planning, investments, and operations and reduce climate risks.
International financial institutions, donors, and the private sector to step up finance for urban adaptation,
and to prioritize valuing and incentivizing such investments.
2.3.2 How exactly can the private sector contribute to climate change adaptation?
Implementing adaptation measures to protect own assets and operations
Tire manufacturer improves water efficiency of production process
Several food stall owners jointly invest in installation of sun blinds to protect themselves from direct sunlight
Small-scale, local private entities have to focus, first and foremost, on protecting their immediate operations
and assets. Given low financial resources, financing climate change adaptation of others does not seem to be a
priority for these actors. Yet, considering how difficult it is for many of the smaller, informal companies,
to access funding from financial institutions (IFC 2010), their role in financing each other’s adaptation through
peer-to-peer lending might have to be reconsidered.
Adaptation products and services can open up new opportunities for those who have the resources and flexibility
to adapt their business models accordingly.
Provide finance
Providing small-scale financing for business partners
Roaster pays in advance to allow coffee farmer to purchase irrigation equipment
Offer products & services
Offer products & services Offering products or services that can help clients adapt to climate change
Gardening company builds green spaces in urban heat trapped areas.
Individual business development consultant integrates resilience into advisory for agricultural processing companies.
Large enterprises and multinational corporations
Activities
Examples
Possible focus of adaptation efforts
Adapt to climate change
Implementing adaptation measures to protect own assets and operations
Car manufacturer improves storm resistance of headquarter offices.
Large and multinational companies need to make their own operations and assets resilient
but should also support their suppliers and business partners – financially and through
other inputs, e. g. organizational help for local adaptation – in order to avoid business
interruption. Adaptation can potentially be a large business opportunity for companies that
already have clients, which are increasingly vulnerable or want to access new markets
(see, for example, UN Global Compact and UNEP 2012).
Provide finance
Providing finance for adaptation of companies in the value chain
Food company pays higher per-unit price to finance adaptation of small-scale farmers who supply raw goods
Offer products & services
Otherwise supporting adaptation of suppliers or business partners
Textile company helps organize local adaptation round tables with companies and government .
Offer products & services
Offering products or services that can help clients adapt to climate change
Solar panel manufacturer sells solar panels to improve access to energy
Large rating agency develops rating methodology for adaptation bonds
[1] Annica Cochu, Tobias Hausotter., Mikael Henzler., The Roles of The Private Sector In Climate Change Adaptation – An Introduction, adelphi research gemeinnützige GmbH, July 2019, p. 5-6
2.3.3 Promoting green and efficient private sector development (mitigation)
As public finances become increasingly constrained, there is a clear need to find resources from elsewhere to support the move
to a low carbon, resilient society with private sector engagement. Clearly, the private sector has an important role to play
in building a low-carbon, climate resilient future for the planet.
Some companies are already hard at work developing weather-based insurance products that provide financial payouts to farmers
in the event of a drought or a flood, for example, allowing farmers to hedge against the risks that are becoming more acute
due to the impacts of climate change. Other companies are co-financing infrastructure projects, while others are making
their own supply chains and business operations more climate resilient.
New international and national policies aim at encouraging these private actors. Examples include the UN Framework
Convention on Climate Change, which has a Private Sector Initiative to catalyse the role of the private sector
in climate adaptation, and forms of climate finance, such as the Climate Investment Funds, which place a special
emphasis on involving the private sector in climate resilience
However, the private sector has generally focused on climate mitigation by, for example, reducing emissions through
developing renewable energy and energy efficient technologies. Financing adaptation has been less of a strong
point and risks being left out. For example, solar lanterns may be sold to communities without access to electricity
by private companies. The lanterns are low carbon (as they are a renewable source of energy) and can increase the
resilience of families to the impacts of climate change by offering them a cheaper and reliable source of light,
and don’t create the health problems caused by burning wood or charcoal, which is a major cause of disease. This
allows families to save money, stay healthy and allows children to study and do better at school. All of these
factors will make a family more climate resilient and so recover more quickly to any unexpected shocks, such as a flood or a drought.
2.3.4 Main barriers for further private sector investment towards climate change action
The main barriers to for companies to invest in climate-related technologies are:
- the lack of clarity regarding domestic regulations
- lack of understanding of climate finance
- lack of access to timely information, lack of understanding of climate technologies and lack of qualified staff
- lack of R&D / technical assistance; lack of own funds; lack of funds in the market; lack of clarity regarding EU regulations; and lack of innovative ideas
To encourage investments in climate-related technologies, the following main drivers are suggested through consultations with the Serbian private sector:
• Simpler procedures (19 percent of respondents)
• Tax incentives / tax breaks (19 percent of respondents)
• Clearer guidance by state institutions (technical experts, feasibility studies) (16 percent of respondents)
• Availability of State aid (12 percent of respondents) and lack of innovative ideas
• Interest rate and grace period of loans (7 percent of respondents)
• Guidance by development banks on types of financial products/instruments (6 percent of respondents)
• Networking with government officials (6 percent of respondents)
• Export facilitation (6 percent of respondents)
• Improving company reputation (4 percent of respondents)
• Market exposure (4 percent of respondents)
• Guidance by private banks on types of financial products (1.4 percent of respondents)
Capacity issues were also uncovered by the same consultation process. Respondents indicated that they would need help with:
• Undertaking feasibility studies
• Project preparation and administration
• Training in emerging technologies or processes relevant to the green economy
• Reporting on environmental performance indicators
• Financial forecasts
• Training in financing arrangements with banks
The following topics were identified as training and capacity-building needs:
• Climate finance – what it entails, main actors and how to access?
• Basics of climate change adaptation strategies and climate change mitigation strategies
• Basic and advanced courses on Sustainable Development Goals and Agenda 2030 - linking the goals for sustainable development with climate action
• Understanding which activities already undertaken by companies are related to climate action and climate finance
• Sharing the examples of successful technology transfer projects with the centers abroad
• Development of the in-country expert base for carbon foot-print measurements in collaboration with academia and international organizations
• Development of the capacity building projects for various stakeholders on measuring methodologies
• Capacity building on EU taxonomy and Carbon Border Adjustment Mechanism (CBAM)
• Developing capacity building programs for local financing institutions to support technology transfers.
The priority areas to strengthen the dialogue and partnership between the public and private sectors, as well as increase access to climate finance include:
• Building partnerships between institutions and other sectors in order to maximize efforts, utilize all existing expertise and potential institutional capacity to achieve better results
• Introduction of a portfolio of joint climate and green investments of the private and public sector
• Analysis of existing legislation related to supporting the development of the private sector (example Smart Specialization) in order to incorporate elements to support climate and green investments of the private sector
• Greater understanding on behalf of the government and orientation to taking more interest in the actions that would help businesses respond to requirements of the EU markets
• Identifying in-country sources that are needed in specific sectors and facilitate access and transfer
• Providing access to companies to new, additional funds for climate investment in order to reduce risk and mobilize private green capital
• Creation of a portfolio of public-private partnerships for climate investments, portfolio of private climate investments with the support of state aid
• Creating financial rewards for champions in climate investment
• Supporting private investment funds that invest in climate and green investments of the private sector to reduce financial risks
• Reduction of corporate taxes for companies investing in climate and green investments
Some of the above barriers can (and already are) be(ing) addressed via GCF Readiness support.
Climate finance refers to local, national or
transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation
and adaptation actions that will address climate change.
The Standing Committee on Finance of the UNFCCC
(United Nations Framework Convention on Climate Change - UNFCCC) has proposed activity-based definition of climate finance
that covers both, mitigation and adaptation actions: “Climate finance aims at reducing emissions, and enhancing sinks of
greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of,
human and ecological systems to negative climate change impacts”.
The United Nations Framework Convention on Climate Change (UNFCCC) underlines that climate
change is one of the greatest challenges of our time. It emphasizes strong political will
to urgently combat climate change in accordance with the principle of common but differentiated
responsibilities and respective capabilities. To achieve the ultimate objective of the Convention
to stabilize greenhouse gas (GHG) concentration in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate system, recognizing the scientific view that
the increase in global temperature should be below 2 degrees Celsius, the Parties shall, on the
basis of equity and in the context of sustainable development, enhance their long-term cooperative
action to combat climate change. They recognize the critical impacts of climate change and the
potential impacts of response measures on countries particularly vulnerable to its adverse effects
and stress the need to establish a comprehensive adaptation programme including international support.
The UNFCCC, the Kyoto Protocol and the Paris Agreement call for financial assistance from parties with more
financial resources to those that are less endowed and more vulnerable. Climate finance is needed for mitigation,
because large-scale investments are required to significantly reduce or sequester GHG emissions. Climate finance
is equally important for adaptation, as significant financial resources are needed to adapt to the adverse effects
and reduce the impacts of a changing climate.
The second Biennial Assessment and Overview of Climate Finance Flows of the UNFCCC, released in November 2016,
recorded USD 41 billion of public international finance flowing to developing countries in 2013-14. In 2018,
the third Biennial Assessment recorded that this had reached USD 56 billion annually in the period 2015-2016
(UNFCCC, 2018). These figures remain relatively small, however, compared to global climate finance estimates,
taking into account all countries and both private and public finance, of USD 579 billion a year in the 2017-2018
period (CPI, 2019).
• Accredited Entity. An Accredited Entity is a national, regional or multilateral institution that meets a fund’s standards
and achieves a given accreditation status. It can be private, public or non-governmental entity. Entities can become accredited
as implementing, delivery or executing entities (depending on the funds, see “Implementing Entity” below).
• Additionality. Additionality refers to the use of development funding to achieve climate-related objectives besides regular,
business-as-usual development. Some funds (like the Green Climate Fund (GCF) or the Global Environmental Facility (GEF) Special
Climate Change Fund) will not fund projects that are development projects with a climate change adaptation or mitigation co-benefit.
Instead, the core focus of the project needs to be on climate change, and the fund’s money will be spent in addition to other
development funding. Additionality is an important and politically-sensitive concept that is still being debated on the international stage.
• Annex I Parties. Industrialized countries listed in the United Nations Framework Convention on Climate Change (UNFCCC) Annex I and
committed to reducing their greenhouse gas emissions. Most of these Parties signed the Kyoto Protocol and the Paris Agreement. See the list HERE.
• Annex II Parties Annex II Parties consist of the OECD members of Annex I, but not the EIT Parties. They are required to provide financial
resources to enable developing countries to undertake emissions reduction activities under the Convention and to help them adapt to adverse effects of
climate change. In addition, they have to “take all practicable steps” to promote the development and transfer of environmentally friendly technologies
to Economy in Transition (EIT) Parties and developing countries. Funding provided by Annex II Parties is channeled mostly through the UNFCCC’s financial mechanism.
• Clean Development Mechanism. “Clean Development Mechanism’’ (CDM) is a mechanism under the Kyoto Protocol through which developed countries may finance
projects on reduction or removal of greenhouse gas emissions in developing countries, and, in return, receive carbon credits for doing so which they may apply
to meeting mandatory limits on their own emissions.
• Climate Action Plan. A Climate Action Plan (CAP) is a detailed and strategic framework for measuring, planning, and reducing greenhouse gas (GHG)
emissions and related climatic impacts. Local governments design and utilize climate action plans as customized roadmaps for making informed decisions
and understanding where and how to achieve the largest and most cost-effective emissions reductions that are in alignment with other municipal goals.
Climate action plans, at a minimum, include an inventory of existing emissions, reduction goals or targets, and analyzed and prioritized reduction actions.
Ideally, a climate action plan also includes an implementation strategy that identifies required resources and funding mechanisms.
• Development Finance Institutions. National and international development finance institutions (DFIs) are specialized development banks
or subsidiaries set up to support development projects and programmes in developing countries. They are usually majority-owned by national governments
and source their capital from national or international development funds or benefit from government guarantees. This ensures their creditworthiness,
which enables them to raise large amounts of money on international capital markets and provide financing on very competitive terms.
• Direct Access Entities. A mechanism in which national accredited entities (direct access entities) of developing countries gain direct
access to funding provided by an international fund to implement the selected projects and/or programmes. These entities may wish to choose other
executing entities to carry out the work.
• Financing Mechanism. Developed country Parties shall provide financial resources to assist developing country Parties in
implementing the UNFCCC Convention. To facilitate this, the Convention established a Financial Mechanism to provide funds to developing
country Parties. The operation of the Financial Mechanism is entrusted to the Global Environment Facility (GEF) and the Green Climate
Fund (GCF).
• Implementing Entity. Generally, an “Implementing Entity” (IE) is responsible for vetting and endorsing project and programme
proposals, and for disbursing funding from a fund when proposals are successful. The term IE can vary slightly depending on the Fund.
o The Adaptation Fund accredits national, regional or multilateral IE. The IE works with an Executing Entity, in charge of the day-to-day
management and on-the-ground interventions.
o The equivalent of IE for GEF is called “Implementing Agency” (IA). IAs can be national (e.g. Development Bank of South Africa),
regional (e.g. West African Development Bank) or multilateral (e.g. United Nations Environment             Programme). NGOs can also become
accredited as IAs (e.g. World Wildlife Fund). Like with the AF, a GEF Implementing Agency works with an Executing Entity.
o The equivalent of IE for GCF is called “Delivery Partner”. The Delivery Partner may work with an “Executing Entity”.
• Multilateral Development Bank (MDB). Multilateral development banks (MDBs) can be categorized in many ways. The two biggest
groups are “main” and “sub-regional” multilateral development banks:
a) Main: created by a group of countries to provide financing and professional advising for development purposes. For example:
World Bank, the Asian Development Bank, the Inter-American Development Bank Group etc.
b) Sub-regional: for a better deal, banks lend to their members, borrowing from the international capital markets.
Because there is effectively shared responsibility for repayment, the banks can often borrow more cheaply than           could any one member nation.
For example: Caribbean Development Bank, West African Development Bank
• National Adaptation Plan (NAP). A process established under the Cancun Adaptation Framework (CAF). It enables Parties to
formulate and implement national adaptation plans (NAPs) as a means of identifying medium- and long-term adaptation needs and
developing and implementing strategies and programmes to address those needs. It is a continuous, progressive and iterative
process which follows a country-driven, gender-sensitive, participatory and fully transparent approach.”
• Nationally Determined Contributions (NDCs). “The Paris Agreement requires each Party to prepare, communicate and maintain
successive nationally determined contributions (NDCs) that it intends to achieve in order to reduce national emissions and adapt
to the impacts of climate change. Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of
such contributions.”
• Non-Annex I Parties. Non-Annex I Parties are mostly developing countries. Certain groups of developing countries are
recognized by the UNFCCC Convention as being especially vulnerable to the adverse impacts of climate change, including countries
with low-lying coastal areas and those prone to desertification and drought. Others (such as countries that rely heavily on income
from fossil fuel production and commerce) feel more vulnerable to the potential economic impacts of climate change response measures.
The Convention emphasizes activities that promise to answer the special needs and concerns of these vulnerable countries, such as
investment, insurance and technology transfer.
• Official Development Assistance (ODA) refers to financial assistance provided to developing countries and the multilateral
institutions by official agencies, including state and local governments of developed countries for promotion of their economic
development and welfare. In 1970, it was agreed that developed countries would provide 0.7 per cent of their Gross National Income
(GNI) as ODA to developing countries. ODA is also known as foreign aid.”
• Climate finance. The 2016 Biennial Assessment and Overview of Climate Finance Flows (UNFCCC), refers to climate
finance as financial resources dedicated to adapting and mitigating climate change globally, aiming at reducing GFG emissions,
reducing vulnerability, and maintaining and increasing the resilience of human and ecological systems to the negative climate change impacts.
• Climate Public Expenditure and Institutional Review. (CPEIR) is a methodological tool to analyze, how climate change related
expenditure is being integrated into national and sub-national budgetary processes. It has three key pillars: Policy Analysis,
Institutional Analysis and Climate Public Expenditure Analysis. It supports to identify and track climate related expenditure
in the national budget.
• Co-financing refers to conditions that recipient entities need to fulfil to receive financial support from funds.
These conditions may include earmarking funds to certain sectors, co-financing, procurement design, fulfilling certain
criteria under social and environmental context, etc.
• Conditionality refers to conditions that recipient entities need to fulfil to receive financial support
from funds. These conditions may include earmarking funds to certain sectors, co-financing, procurement design, fulfilling certain
criteria under social and environmental context, etc.
• Leverage is used in the context of climate finance in which it refers to public finance (e.g. from international
finance institutions) that is used to encourage private investors to back the same project. This can be in the form of loans,
risk guarantees and insurance or private equity. This is also intended to reduce the perceived risk for the private sector.
Financial institutions apply the terminology ‘leveraging’ to understand how their core contributions (for example, money
provided by donor governments to a multilateral development bank) can be invested in capital markets to create an internal
multiplier effect.
• On-lending. An entity accredited under specialized fiduciary standards can receive money from a fund with
the intention of lending it to other executing entities for the implementation of selected programmes and/or projects.
This can also include providing equity or guarantees to other entities.
• Project Preparation Facility (PPF) is used as means of developing bankable, investment-ready projects.
A PPF may provide both technical and/or financial support to project owners/concessionaires. Such supports can cover a wide range
of activities including: undertaking project feasibility studies including value for money analysis; developing procurement documents
and project concessional agreements; undertaking social and environmental studies; and creating awareness among the stakeholders.
• Technical assistance is non-financial assistance provided by local or international specialists.
It can take the form of sharing information and expertise, instruction, skills training, transmission of working knowledge,
and consulting services and may also involve the transfer of technical data.
3.4 Key climate finance actors and sources
Public finance flows are those carried out by central, state or local governments and their agencies at their own risk and responsibility. Public finance actors include:
• Governments through their ministries, departments and aid agencies.
• Development finance institutions – either national or multilateral; development bank or export-credit agency.
• Climate funds - predominantly multilateral climate funds established under international environmental agreements.
Private finance flows are financial flows at market terms financed out of private sector resources (changes in holdings of private,
long-term assets held by residents of the reporting country) and private grants (grants by non-government organisations,
net of subsidies received from the official sector). Private finance actors include:
• Private companies
• Local, regional and global commercial banks
• Non-bank financial institutions
• Leasing companies
• Private equity investors
• Institutional investors
• Households – family-level economic entities, high net-worth individuals (HNWI),
and their intermediaries (e.g. family offices investing on their behalf).
3.5 Public climate finance
Climate finance globally provided by public sources increased 18% from USD 215 billion annually in 2015/2016 to USD 253 billion in 2017/2018,
and the overall share of tracked climate finance provided by public sources fell by two percentage points, to 44% of the total.
3.5.1 Multilateral channels for climate finance
Multilateral financial institutions and funds have multiple governing members, including both borrowing developing
countries and developed donor countries. These channels include multilateral (MDBs) and national development banks
(NDBs), the financial institutions that have been created within the framework of the United Nations Framework
Convention (UNFCCC) itself and United Nations (UN) agencies.
Multilateral development banks (MDBs) are broadly defined as development institutions with a banking business model.
In addition to their lending activities, they can also provide development research and advisory services. They play
a prominent role in delivering multilateral climate finance, with climate finance commitments of USD 43.1 billion
made in 2018 alone (EBRD et al., 2019). Many have incorporated climate change considerations into their core lending
and operations, and most MDBs now also administer climate finance initiatives with a regional or thematic scope.
The World Bank Group (WB) consists of the International Bank for Reconstruction and Development (IBRD) and the
International Development Association (IDA) and was founded in 1944. Originally aimed at supporting the reconstruction
of countries that were devastated in World War II, the focus shifted to supporting development in the Global South.
The World Bank’s carbon finance unit has established the Forest Carbon Partnership Facility (FCPF) to explore how carbon
market revenues could be harnessed to reduce emissions from deforestation and forest degradation, forest conservation,
sustainable forest management and the enhancement of forest carbon stocks (REDD+). It also manages the Partnership for
Market Readiness, aimed at helping developing countries establish market based mechanisms to respond to climate change
and the BioCarbon Fund, which is a public-private partnership that mobilizes finance for sequestration or conservation
of carbon in the land use sector.
The European Bank for Reconstruction and Development (EBRD) is a development bank, which has signaled explicitly that it focuses its
portfolio on the Green Economy Transition (GET) 2021-25 - the Bank’s new approach for helping countries where the EBRD works, to build
green, low carbon and resilient economies. Through the new GET approach, the EBRD will increase green financing to more than 50 percent
of its annual business volume by 2025. It also aims to reach net annual GHG emissions reductions of at least 25 million tons
over the
five-year period.
This ambition, announced at the latest annual meetings in London, October 2020 clearly shows that the EBRD is becoming
even more relevant lender for North Macedonian public and private sector.
EBRR has been very active in providing opportunities to private firms for climate finance. Currently an SMEs Competitiveness support scheme
is active for companies willing to invest in their competitiveness, including product and process improvements, procurement of equipment
and improving energy efficiency. For investments of up to EUR 1 million, the EBRD is offering a 15% grant upon successful performance.
This scheme emphasizes that
SMEs could use the loan for energy consumption and should use technologies that contribute to a green economy
by reducing pollutants such as greenhouse gas emissions.
Beyond this specific scheme, the EBRD can also directly lend to private sector
for investments over EUR 3 million.
National Development Banks (NDBs) are government-backed, sponsored, or supported financial institutions that have a specific
public policy mandate. NDBs come in many different shapes and sizes, and there is no one single or typical operating model.
NDBs can differ in terms of ownership structure, financial objectives, policy objectives (special purpose or multifunctional),
supervisory requirements, and financial instruments.
UNFCC Convention established a financial mechanism to provide financial resources to developing country Parties. The financial
mechanism also serves the Kyoto Protocol and the Paris Agreement. At COP 16, the Standing Committee on Finance was established
under the UNFCCC to assist the COP in meeting the objectives of the Financial Mechanism of the Convention. The Convention states
that the operation of the financial mechanism
can be entrusted to one
or more existing international entities
.
UNFCCC climate funds include the UN Adaptation Fund (AF), the Least Developed Country Fund (LDCF), the Special Climate
Change Fund (SCCF), and the Green Climate Fund (GCF).
The Global Environment Facility (GEF) established in 1991, is an operating entity of the financial mechanism of the UNFCCC,
serving in the same function for the Paris Agreement, with a long track record in environmental funding. GEF aims to help
developing countries and economies in transition contribute to the overall objective of the United Nations Framework Convention
on Climate Change (UNFCCC) to mitigate climate change, while enabling sustainable economic development. It also serves as
financial mechanism for several other conventions, including on biodiversity and desertification. Resources are allocated
targeting multiple focal areas, including climate change, according to the impact of dollars spent on environmental outcomes,
but ensuring all developing countries have a share of the funding. For the 7th replenishment period (2019-2022), close to 30
countries pledged USD 4.1 billion for all five focal areas, with an increase in funding for biodiversity and land degradation
neutrality, but a reduction in funding for climate change to USD 654 million, reflecting the growing role of the GCF. As of
December 2019, through the fourth, fifth, six and seventh Trust Fund, GEF had approved over 750 projects in the focal area of
climate change amounting to USD 2.8 billion.
The GEF also administers the Least Developed Countries Fund (LDCF)
and the Special Climate Change Fund (SCCF) under the guidance of the UNFCCC
Conference of Parties (COP). These funds support national adaptation plan development and implementation, although largely through smaller scale
projects (with a country ceiling for funding of USD 20 million). As of December 2019, the LDCF has made cash transfers to projects of USD 534
million and the SCCF has made cash transfers of USD 181 million, both since their inception in 2001 in close to 100 countries.
Formally linked to the UNFCCC, the Adaptation Fund (AF) is financed largely by government and private donors,
and also from a two percent levy on the sale of emission credits from the Clean Development Mechanism projects
under the Kyoto Protocol. Now mandated to serve the Paris Agreement, a similar automated funding source from a new carbon market
mechanism to be developed under the Paris Agreement is under consideration. However, in times of low carbon prices, the AF is
increasingly reliant on developed country grant contributions to stay afloat. Operational since 2009, total financial inputs
amount to USD 957 million, with total cash transfers to projects of USD 362 million. The AF pioneered direct access to climate
finance for developing countries through accredited National Implementing Entities that are able to meet agreed fiduciary as
well as environmental, social and gender standards, as opposed to working solely through UN agencies or Multilateral Development
Banks (MDBs) as multilateral implementing agencies. The sectors financed through the AF include agriculture, rural development,
water management, forestry, food security, disaster risk reduction, coastal risk reduction and urban development. The Fund also
provides readiness and capacity-building support through its Readiness Programme for Climate Finance, established in 2014.
The Green Climate Fund (GCF) of the UNFCCC was agreed at the Durban COP and became fully operational with its first projects approved at the end of 2015.
Like the GEF, it serves as an operating entity of the financial mechanism of both, the UNFCCC and the Paris Agreement and receives guidance by the COP.
It is expected to become the primary channel through which international public climate finance will flow over time and is intended to fund the paradigm
shift toward climate-resilient and low-carbon development in developing countries with a country-driven approach, and a commitment to a 50:50 balanced
allocation of finance to adaptation and mitigation.
To receive money directly from the Green Climate Fund, entities need to be accredited as an “Accredited Entity” (AE). AEs can be international
(like the World Bank), regional (like the Secretariat of the Pacific Regional Environment Program or SPREP) or national (like a country’s environment ministry).
A list of currently accredited entities for the GCF can be found on the GCF’s website. Entities that prefer not to apply for accreditation have the option of
partnering with an institution that is already accredited. The Republic of North Macedonia accessed resources from the Green Climate Fund through the GCF Readiness
and Preparatory Support Programme. Two readiness projects have were approved with the Food and Agriculture Organization of the United Nations (FAO) serving as
the implementing partner, under the leadership and guidance of the
Cabinet of the Deputy President of the Government in charge of economic affairs, coordination
of economic departments and investments, as National Designated Authority for the GCF
. More information about the GCF Readiness and Preparatory Support Programme
implementation in North Macedonia can be found on the dedicated NDA webpage: www.greendevelopment.mk
Like MDBs, UN agencies commonly take on the role of administrator and/or intermediary of climate finance. The UN-REDD Programme
, made operational in 2008,
brings together UNDP, UNEP and FAO to support REDD+ activities, with the governance structure giving representatives of civil society and Indigenous People’s
organisations a formal voice.
Both MDBs and UN Agencies act as implementing entities for the GEF, SCCF, LDCF, AF and the GCF.
Export credit agencies (ECAs) provide funds (direct loans) or guarantees to facilitate exports. ECAs can remove the risk and uncertainty of payments to exporters
by shifting it to themselves in return for a premium. They can also underwrite the commercial and political risks of investments in overseas markets.
In recent years, the majority of medium and long term official export credit flows that go from OECD governments to developing countries have supported GHG
emitting sectors: transport (37%) and industry (26%), followed by energy projects (11%),
of which about 1% is estimated to go to renewable energy and energy
efficiency in the power sector
. Special liberalized rules governing the provision of ECA support for renewable energy and water projects were agreed by
several OECD countries, who are also engaged in negotiations to further strengthen the ability of export credit arrangements to support action against climate change.
3.5.2 Bilateral channels for climate finance
A significant share of public climate finance is spent bilaterally, administered largely through existing development agencies although a number
of countries have also set up special bilateral climate funds. However, there is limited transparency and consistency in reporting of bilateral
finance for climate change, with countries self-classifying and self-reporting climate-relevant financial flows without a common reporting
format or independent verification. The 2018 Biennial Assessment and Overview of Climate Finance Flows reported that USD 31.7 billion annually
in 2015-2016 was provided by developed to developing countries bilaterally,
in addition to that spent through climate funds and development
finance institutions
. An annual average of USD 30.3 billion in climate related ODA was reported to the Organization for Economic Cooperation
and Development – Development Assistance Committee (OECD DAC ) in the same year.
3.5.3 Regional and national channels and climate change funds
Several developing countries have established regional and national channels and funds with a variety of forms and functions, resourced through international
finance and/ or domestic budget allocations and the domestic private sector. The Indonesian Climate Change Trust Fund was one of the first of these
institutions to be established. Brazil’s Amazon Fund, administered by the Brazilian National Development Bank (BNDES), is the largest national climate
fund, with a commitment of more than USD 1.5 billion from Norway and Germany.
There are also national climate change funds in Bangladesh, Benin, Cambodia, Ethiopia, Guyana, the Maldives, Mali, Mexico, the Philippines, Rwanda, and South Africa.
Additional countries have proposed national climate funds in their climate change strategies and action plans. In many cases UNDP acted as the initial administrator of national funds,
increasing donor trust that good fiduciary standards will be met, but many countries are now passing these tasks on to national institutions.
National climate change funds attracted early interest, largely because they were established with independent governance structures that met high levels of
transparency and inclusiveness and could channel finance quickly to projects suited to national circumstances that were aligned with national priorities.
Working through coordinated national systems could also improve transaction efficiency.
At the same time, many developing countries are beginning to incorporate climate risk into their national fiscal frameworks, and monitoring climate related expenditure.
3.6 Private climate finance
A wide range of private sources can be tapped for the financing of private investment, as long as risk-return expectations are met.
These include the private companies themselves, local, regional and global commercial banks, non-bank financial institutions, leasing
companies, private equity investors and institutional investors (Climate Finance-Engaging the Private Sector-G20Report).
Private finance may be domestic or international. Some countries have mature capital markets, while others may not be able to provide private equity
or long tenor debt or even take the non-recourse project financing structures upon which much privately financed infrastructure depends. In mature markets,
international agencies can focus on addressing risk perception to catalyze private financing, while nascent markets may require a strengthening of the local
financial sector and capacity building in order to do so.
Private climate finance reached a record high of USD 330 billion in 2017, representing an increase of USD 99 billion from 2016, or 43% year-on-year growth.
However, financing fell slightly in 2018 to USD 323 billion, in response to macroeconomic trends resulting in a dampened global investment environment,
as well as continued decreases in global renewable energy capital costs.
Commercial financial institutions are entities such as banks and other financial institution that provide financial services
to non-financial institutions, households and governments. They also invest in physical facilities, such as buildings, using
funds raised domestically or from foreign sources. They are responsible for one to seven percent of the investment in new physical assets.
Private equity capital usually involves later stages of investment and is often sourced from pooled funds.
The key actors are private equity firms, which can range from very small to very large (both with respect to the number of
people involved and the assets under management). Since these investments tend to be made at a more mature stage in a project
or company development, they involve lower risks and the expected return is also likely to be lower than that of angel investors
or venture capitalists. Nevertheless, the risk-return profile associated with private equity is still likely to be higher than
that associated with public equity finance. Forms of private equity finance include:
o Angel capital
Angel capital is private equity finance provided to companies,
technologies, or projects that are particularly small, new, and hence, risky. Such early stage investments are usually very high
risk and experience high failure rates. However, if they succeed, they expect very high returns. The key actors tend to be wealthy
individuals, whose investment are sometimes facilitated by family offices or groups of individuals)
o Venture capital
Venture capital is another form of private equity finance for early-stage investment,
although it is usually in a more organised form than angel capital. The key actors tend to be groups of wealthy individuals and specialized
teams of venture capitalists who target returns that are multiples of their original investment. The high returns are seen as compensation
for the high risk of investing at an early stage.
o Corporations
Business can finance climate investment projects by using either on-balance sheet financing
or borrowing funds from a bank in the form of a loan, or through equity capital from selling a stake in the business itself. The borrowing
capacity of power utilities is large. With a current market capitalization of the global electricity market estimated at USD 1.5 to USD 2
trillion, power utilities could potentially raise USD 3 trillion to USD 6 trillion in debt to fund clean energy projects.
Given their pivotal importance for green investment, institutional investors have a long-term investment horizon, which matches the
long-term financing requirements of climate investment such as wind power or timber forestry. The term ‘institutional investors’ may be described
as organizations that pool and manage the savings of small investors by investing on their behalf. They include pension funds, insurance companies,
investment companies (e.g. mutual funds), endowments and foundations. Individual investors or retail investors on the other hand can be described
as those who invest on their own behalf either directly or through financial intermediaries, such as investment advisers/financial planners. Investment
management, also known as asset management or fund management, refers to the process whereby assets collected by institutional investors are actually
invested in capital markets in the form of equities, bonds, commodities, real estate, etc., depending on the investors’ investment objectives.
Households are individuals. They invest in housing, farms, vehicles and facilities for small businesses. Households are responsible
for 15 – 35 percent of total global investment, all of which is assumed to come from domestic sources. However, remittances by family
members working in foreign countries are substantial for some countries and could help fund household investment in the recipient countries.
3.7 Climate finance in the Republic of Serbia.
The private sector can play an important role in mobilizing the resources required to help Serbia transition towards a low-emission and resilient economy.
For Serbia’s private sector, bilateral development financing (e.g., Agence Française de développement) and multilateral financing from UNFCCC Financial
Mechanisms (e.g., Green Climate Fund and Global Environment Facility) can be instrumental in de-risking and incentivizing the investment of private
capital towards domestic climate action.
These sources of financing can also be combined, or “blended,” to mobilize sufficient resources for effective impact at scale.
UNFCCC
The United Nations framework Convention on Climate Change (UNFCCC) defines climate finance as “local, national, or transnational financing from public, private, and alternative sources of financing that seek to support mitigation and adaptation” (UNFCCC, 2021).
In other words, climate finance refers to financial resources mobilised to help Least Developed Countries (LDCs) and developing countries cope up with a changing climate.
This includes public climate finance commitments by developed countries under the United Nations Framework Convention on Climate Change (UNFCCC), as well as bilateral financing and multilateral non-UNFCCC financial mechanisms.
Bilateral Financing
Serbia received over $488 million in Official Development Assistance in 2020, $271 million of which was from traditional
“Development Assistance Committee (DAC)” bilateral donors (OECD, 2022) and $30.85 million from non-DAC donors.
Serbia’s main bilateral DAC donors include:
01- Japan $46.82
02- Germany $43.06
03- USA $27.95 million
04- Switzerland $27.11
05- Austria $17.15 million
06- Sweden $14.36
07- France $10.72
Some of Serbia’s main non-DAC donors include the United Arab Emirates $17.18 million, Turkiye $2.83 million and Romania $2.82 million.
Multilateral Financing
Serbia received over $186.1 million in net aid from multilateral organizations in 2020 (OECD, 2022).
It received $6.58 million from UN organizations and $240.19
million from EU institutions, while it paid back $66.24 million to the World Bank Group (OECD, 2022).
Although Serbia only received a few hundred thousand dollars from the GCF in 2018 and 2019, the GCF represents an attractive
source of international climate finance. The GCF was conceptualized as part of the Copenhagen Accord of December 2009
(UNFCCC, 2009) and formally established in 2010 at the 16th Conference of the Parties (COP16) (UNFCCC, 2011). This created
the GCF as a new operating entity of the United Nations Framework Convention on Climate Change (UNFCCC) Financial Mechanism.
Private sector actors can access GCF funding in two ways: either by seeking accreditation from the GCF to become a Direct
Access Accredited Entity or by implementing projects as executing entities, working in partnership with an existing Accredited Entity.
The European Bank for Reconstruction and Development (EBRD) has received funding from the GCF for three multi-country programs
that include Serbia as an eligible recipient. These include:
Sustainable Energy Financing Facilities Co-financing Programme, focused on energy efficiency, renewable energy and climate resilience in the industrial, commercial, residential, transport and agricultural sectors;
Green Cities Facility), focused on district heating and cooling, low-carbon buildings and solid waste management;
High Impact Programme for the Corporate Sector, focused on low-carbon technologies in the industrial sector (energy-intensive industries, agribusinesses, and the mining sector). High impact technologies may include renewables, energy efficiency, energy access and low emission transport related investments
Other key multilateral sources of financing for private sector climate action include: the Adaptation Fund, Global Environment Facility, Forest Carbon Partnership Facility, Global Energy Efficiency and Renewable Energy Fund, Climate Investment Funds and BioCarbon Fund.
3.8 National sources of financing of the Climate Action in the Republic of Serbia
The Regulation on the conditions and criteria for compliance of state aid for climate change and mitigation, environmental protection and in the energy sector applies to state aid to market participants in the energy sector, as well as to state aid to all market participants, regardless of the economic sector to which they belong, i.e. activities which they perform.
State aid for investment in order to reach higher standards is harmonized if the investment allows the user to increase the level of environmental protection as a result of his activity above the prescribed standards or in the absence of prescribed technical regulations for environmental protection in the Republic of Serbia. State aid is not harmonized if it is granted to meet standards in the Republic of Serbia that are prescribed, but not yet implemented.
Subsidy (grants) or subsidized interest rate on loans;
Fiscal relief (reduction or exemption from paying taxes, contributions, customs duties and other fiscal duties);
Guarantee of the state, any legal entity that disposes and/or manages public funds or other provider of state aid, given on terms more favorable than market conditions;
Waiver of profits and/or dividends of the state, local self-government or legal entity that manages or disposes of public funds;
Debt write-off towards the state, local self-government or legal entity that manages or disposes of public funds;
Sale or use of property in public ownership at a price lower than the market price;
Purchase or use of property at a price higher than the market price by the state, local self-government or a legal entity that manages or disposes of public funds and other instruments in accordance with this law.
- Support program for SMEs for the purchase of equipment, intended for co-financing the acquisition of new production equipment directly involved in the process of production of tradable goods and the execution of construction works:
• Production equipment and/or machines
• Transport and manipulative means included in the process of production and internal transport
• Parts, specialized tools for machines
• Machines and equipment for improving energy efficiency and ecological aspects of production
• Construction machinery for the needs of carrying out construction works.
For more information on the programme and on criteria for participation, please visit https://ras.gov.rs/en.
Development Fund
- Program to support the development of entrepreneurship through development projects, intended for:
• purchase, construction, extension, reconstruction, adaptation, rehabilitation, investment maintenance of production space or business space that is part of the production space, or storage space for own products, and raw materials;
• purchase of new or used equipment and machinery, including tools, as well as delivery vehicles for transporting own products and other means of transport used in the production process;
• permanent working capital, which can make up no more than 10% of the total investment;
Companies that meet the conditions of the Program can exercise the right to financial support in the amount of up to 20% of grants from the value of the investment, that is, up to 30% of grants for economic entities belonging to the 4th development group. The remaining amount of the project's value will be financed from the Fund's loan, with the fact that the share of permanent working capital in the amount of total funds (Fund's loan and grants) can be up to 10%. The maximum amount of the grant is 12,500,000 dinars, and the minimum is 250,000 dinars, the repayment term is ten years, and the interest rate is 1% with a bank guarantee and 2% with other means of security. Exceptionally, for entrepreneurs, the minimum amount of grants is 75,000 dinars, and the repayment term is eight years.
Innovation Fund
Technology transfer program
Identifying research with commercial potential and providing further support in order to raise commercial readiness to a higher level, with financial resources for the additional development of the invention/innovation up to 50,000 euros, whereby amounts above 20,000 euros are approved in case there is a necessary established cooperation with a private company which will co-finance the proposed development of the project with a minimum of 30% of the funds. The public call is always open.
Innovation vouchers
Applicants submit an application for obtaining an innovation voucher for using the services of public scientific research institutions: universities, faculties, institutes and innovation centers and other public scientific research organizations in Serbia. The innovation voucher covers 60% of the total cost of services, up to a maximum of 800,000 dinars. Funding through the Innovation Voucher Program is aligned with the Smart Specialization Strategy, which focuses on four priority areas: food of the future; information and communication technologies; machines and production processes of the future; creative industries.
Catapult program
Acceleration program aimed at startups that are in the early stages of product development and market conquest, as well as companies with proven market traction that aim to accelerate their growth and raise additional funding. It consists of a three-month intensive training program with financial support in order to develop the startup as quickly as possible and create conditions for rapid growth. Funding through Catapult is available as an entrance grant of 20,000 to 50,000 euros for startups that will participate in the acceleration program and a co-investing grant equal to a qualified investment in the maximum amount of up to 300,000 euros per startup. For more information on the programms and on criteria for participation, please visit http://www.inovacionifond.rs/en/programs/
Waste management incentives
The Law on Waste Management stipulates that waste management is carried out in a way that ensures the least risk of endangering the life and health of people and the environment, through control and reduction measures:
1. water, air and soil pollution;
2. danger to flora and fauna;
3. danger of accidents, explosions or fires;
4. negative impacts on landscapes and natural assets of special value;
5. levels of noise and unpleasant odors.
The Regulation on the amount and conditions for the allocation of incentive funds determines the amount and conditions for the allocation of incentive funds for the reuse and utilization of waste as secondary raw materials or for obtaining energy and for the production of reusable suspender bags. The Rulebook on Harmonized Amounts of Incentive Funds for Reuse, Recycling and Use of Certain Types of Waste prescribes the amounts of incentives prescribed in the Regulation for each year, thereby harmonizing the amounts in the Regulation.
The types of waste are municipal waste (household waste), commercial and industrial waste, and depending on the hazardous characteristics, it can be: inert, non-hazardous and hazardous. Funds for financing waste management are provided from the budget (of the Republic of Serbia, autonomous province, local self-government units), international funds and similar sources for waste management. These funds are used for investment and operational costs of waste management, encouragement of separate waste collection, encouragement of the market for recycled materials and export of waste for which there is no possibility of treatment in the Republic of Serbia. Incentives are determined in the following amounts:
• for reuse and use of waste rubber as secondary raw material - 18,390 dinars per ton
• for the treatment of waste tires for the purpose of obtaining energy - 3,606 dinars per ton
• for the production of reusable suspender bags with a thickness of over 20 microns - 6,010 dinars per ton
• for the production of reusable suspender bags with a thickness of over 20 microns that contain biodegradable additives - 8,414 dinars per ton
The amount of incentives for treated waste electrical and electronic equipment is 55 dinars/kg for all ten classes of waste electrical and electronic equipment. Incentive funds are paid to the operator of the facility for the treatment of waste electrical and electronic equipment, that is, to the collective operator for the management of waste electrical and electronic equipment.
Incentives are determined for the reuse, recycling and use of waste oils as secondary raw materials in the amount of 10 din/kg, for the treatment of waste oils to obtain energy in the amount of 5 din/kg. Incentives are paid to the operator of the waste oil treatment plant.
Incentive funds are paid to the operator of waste accumulators and batteries treatment facilities and are determined in the following amounts:
• for reuse, recycling and use of waste starters, accumulators, industrial batteries and accumulators - 14.50 din/kg
• for reuse, recycling and use of waste portable batteries or starters - 145.50 din/kg
The amount of incentive funds is adjusted annually with the consumer price index, and the minister prescribes the adjusted amounts of incentive funds by February 28 of the current year through the Rulebook. Incentive funds are awarded by the Fund for Environmental Protection based on a public tender to which only operators of facilities for reuse, i.e. waste treatment, who have a permit can apply. Only manufacturers of plastic bags can apply for the public competition for the award of incentives for the production of reusable suspender bags. A collective operator for the management of waste electrical and electronic equipment can apply for a public competition for the allocation of funds for the reuse, recycling and use of waste electrical and electronic equipment, and incentive funds can be allocated for investment in new facilities for the management of waste electrical and electronic equipment and that:
1. in the first year of the investment in the amount of 70% of the value of the investment for small business entities, 60% of the value of the investment for medium business entities, i.e. 50% of the value of the investment for large business entities, but no more than 75% of the amounts that are in the name of compensation, for products that become special waste streams after use, paid by members of the collective operator for the same period;
2. in the second year of investment in the amount of 35% of the investment value for small economic entities, 30% of the investment value for medium economic entities, i.e. 25% of the investment value for large economic entities, but no more than 37.5% of the amount in the name fees, for products that become special waste streams after use, paid by members of the collective operator for the same period.
The collective operator for the management of waste electrical and electronic equipment can be granted incentive funds for investment in new facilities for the management of waste electrical and electronic equipment, which cannot have a smaller capacity on an annual level than the amount of products that become special waste streams after use, and which the members of the collective operator put annually on the market of the Republic of Serbia.
New vehicle subsidies
Regulation on the conditions and method of implementing the subsidized purchase of new vehicles that have an exclusively electric drive, as well as vehicles that, in addition to the internal combustion engine, are powered by an electric drive (hybrid drive), which is in force since January 2022, the right to subsidized vehicle purchase is carried out by paying the following amounts:
- moped and light tricycle 250 euros;
- motorcycles 500 euros;
- passenger vehicle with up to nine seats and light cargo vehicle exclusively electrically powered, 5,000 euros;
- PHEV Plug In Hybrid Electric Vehicle and electric vehicles with a built-in range extender with CO2/km emissions up to a maximum of 50 g/km, 3500 euros;
- vehicles powered by a hybrid drive, with CO2 emissions up to a maximum of 140 g/km, 2500 euros.
The GCF is one of the world’s largest multilateral climate funds that was established to support
developing countries curb or reduce their greenhouse gas (GHG) emissions and enhance their ability
to respond to climate change.
1
The goal of the GCF, which was set up by the United Nations Framework
Convention on Climate Change (UNFCCC) in 2010, is to promote a paradigm shift in developing
countries towards low-emission and climate-resilient development pathways. In this regard, the GCF is
an operating entity and financial mechanism of the UNFCCC and the Paris Agreement. The Fund plays
a crucial role in serving the Paris Agreement, supporting the goal of limiting global temperature rise to
well below 2 degrees Celsius.
2
Furthermore, the GCF supports through its financed projects but also
though it Readiness Support developing countries in the updated and implementation of their Nationally
Determined Contributions (NDCs) by providing the necessary financial and technical resources and
building an investment environment that can help the countries to identify, design and implement
transformational climate interventions.
3
This is done by “channelling new, additional, adequate and
predictable financial resources to developing countries and catalyse climate finance, both public and
private, at the international and national levels”
4
. The Fund shall contribute to achieving the global
objective of providing USD 100 billion annually by 2020 that has been agreed on by developed countries
for climate action in developing countries.
5
To date, the GCF has secured pledges from governments
totalling USD 10.3 billion since 2015.
6
So far, funding for more than 120 different projects in four different
regions (Eastern Europe, Latin America & Caribbean, Africa and Asia-Pacific) has been approved by
the GCF.
7
Figure 1: GCF resources and allocation
Source: GCF (2016) and GCF (2020b)
In general, the GCF aims to achieve a 50:50 balance between mitigation and adaptation in its funding,
with a particular focus on vulnerable countries such as Small Island Developing States (SIDS) ...
Read more
Figure 2: GCF’s strategic result areas
Source: the greenwerk., based on GCF (2020d)
For mitigation and adaptation, the GCF strives to achieve its impact in different results areas. Figure 2
below shows the eight defined strategic result areas. Serving as a point of reference the ...
8
Read more
As of June 2020, the GCF has committed project / programme investment volumes of more than
USD 5.3 billion. Together with leveraged co-finance the total investment value amounts to almost...
9
Read more
As of June 2020, the GCF has committed project / programme investment volumes of more than
USD 5.3 billion. Together with leveraged co-finance the total investment value amounts to almost
USD 19 billion. Regarding the thematic objective, 37% of GCF funding is allocated to adaptation projects
and 63% to mitigation projects. Among adaptation results areas, “health, food and water security” and
“livelihoods of people and communities” have the highest share, while “ecosystems and ecosystem
services” has the lowest coverage. Among mitigation results areas activities, “energy access and
power generation” has the largest portion of GCF funding while “low-emission transport” accounts for
the smallest9 (see Figure 3).
In 2015, the GCF conducted an impact assessment of the eight results areas for five different regions
(Africa, Asia, Eastern Europe, Latin America and SIDS). For Eastern Europe including Serbia, the GCF
identified high-impact investment priorities for ‘Buildings, cities, industries, and appliances’,
followed by ‘Transport’, ‘Livelihoods of people and communities’ and ‘Infrastructure and built
environment’.
10
However, also the results areas ‘Energy generation and access’, ‘Agriculture,
Forestry and land use’ and ‘Health, food, and water security’ bear important investment opportunities
for the GCF and its stakeholders in Serbia.
11
This is reflected in Serbia’s programme for collaboration
with the GCF in future (see below under). Currently, two multi-country GCF programmes are approved and
under implementation which also address activities in Serbia (Table 1).
Table 1: GCF multi-country projects involving Serbia
Accredited Entity
Project(s)
Country/Countries
Short Project Description
European Bank for Reconstruction and Development (EBRD)
Green Cities Facility (FP086)
Serbia, North Macedonia, Albania, Georgia, Jordan, Republic of Moldova, Armenia, Tunisia, Mongolia
Enabling the transition of cities to low-carbon, climate-resilient urban development: In Serbia,
the City of Belgrade joined EBRD Green Cities in August 2018 to develop a Green City Action Plan
(GCAP) and identify related green city needed investments. By committing to a GCAP, the city aims
to take a systematic approach to addressing its urban environmental challenges, including water,
air and soil issues
12
. The GCAP will establish a green vision for the city, including strategic
objectives, actions and investments
GCF-EBRD Sustainable Energy Financing Facilities (SEFF) Co-financing Programme (FP025)
Serbia, Georgia, Armenia, Republic of Moldova, Egypt, Jordan, Morocco, Mongolia, Tajikistan, Tunisia
EBRD and GCF co-financed programme to deliver climate finance to the private sector at scale through
Partner Financial Institutions across 10 countries. As part of the project, the EBRD’s Green Economy
Financing Facility in Serbia (GEFF Serbia Leasing) offers a credit line of up to € 40 million for
financing green economy in transition (GET) investments of businesses through participating Leasing
Companies. GEFF Serbia Leasing supports businesses in Serbia lease higher-performance equipment and
technologies that promote GET and reduce greenhouse gas emission and/or enhance climate resilience.
Source: the greenwerk. GCF Database, based on GCF Open Data Portal (2020)
The GCF follows six investment policies (see Figure 3) building the backbone of the Fund’s guidelines and investment
decisions.
13
Following these policies the projects and programmes shall promote “a shift away from practices that are
incompatible with the challenges of climate change” promoting paradigm shift in the respective sector or area of action.
14
In terms of mitigation, this means moving away from an economy based on fossil fuels, which implies major changes,
particularly in our energy, industrial and transport systems. For example, increasing the efficiency of a coal-fired
power plant would not be a paradigm shift, since the basis of the energy system (fossil fuels, centralised) would not
change. But a change in the entire system of electricity generation and distribution towards renewable energies would
represent such a paradigm shift.
15
Moreover, the grant-equivalent policy stipulates that funds channelled through the
GCF will be accounted for in ‘grant-equivalents’ to enable a precise comparison between the different financial instruments,
while the GCF provides the minimum concessional financing required to make projects and programmes viable. Intermediaries
such as financial institutions are encouraged to blend these concessional funds with their own financial resources as co-financing
in order to increase the level of concessionality. All this shall happen without ‘crowding out’ of other financing sources,
hence, the GCF funds should not replace existing or potential financing from other public or private sources. Finally,
with regards to loan investments, only revenue-generating activities that are financially sound are supported by the GCF.
This means that project developers need to demonstrate the reflows necessary to repay the concessional loans.
16
4.1.3 What are key characteristics and rationales of GCF projects?
Based on its policies the GCF derived six investment criteria (see Figure 5) to evaluate whether a project or programme
is eligible for funding according to its: 1) Impact potential, 2) Paradigm shift potential, 3) Sustainable development
potential, 4) Response to recipients’ needs, 5) Country ownership and 6) Efficiency and effectiveness. Those criteria
guide the development, evaluation and approval of GCF projects. Furthermore, related indicators facilitate the coherence
and transparency of the funding proposals and support the evaluation process. All programmes and projects have to
sufficiently meet the GCF investment criteria and respective indicators.
17
The investment criteria are further discussed later in the Guidelines under “What is a good GCF project?”.
The GCF supports projects and programmes in relevant result areas that meet the investment criteria with financial
and technical assistance provided through different instruments. The four basic financial instruments (see Figure 6)
are namely 1) Grants (can also be used for technical assistance and capacity building), 2) Equity, 3) Guarantees and 4)
Concessional loans. The financial instruments can be combined into a project financing structure ranging from simple
(e.g. project-based investment) to more complex structures (e.g. structured financial mechanisms). Funding can also
include debt swaps, advanced market commitments, results-based payments, public-private partnerships and a number of
other innovative schemes that involve leveraging resources on capital markets and co-financing.
18
In terms of funds allocation, grants are currently the prevailing financial instrument for adaptation projects,
while most (senior) loans were given to projects with a mitigation or cross-cutting theme. Currently,
45% of the total approved GCF funding of more than USD 5 billion is committed in the form of grants and 41%
through concessional loans.Nevertheless, also financial instruments that go beyond grants and concessional
loans are available. As of June 2020, the GCF has provide equity investments and risk guarantees amounting
to 9% and 1%, respectively, of the overall GCF funding.
19
Typical project sizes range from micro to large scale projects with regards to the total investment
volume
20
(see Figure 8). To date, most approved projects fall under the medium and small size
category; large scale projects are mainly developed for mitigation activities.
The GCF focuses with its intervention on additional costs of climate change-related investment.
21
The
fund applies a ‘least concessional’ approach, which means providing the minimum concessional funding
that is necessary to make a project viable.
22
In this regard, GCF funding should not result in the termination of
other public or private funding, e.g. from other development
finance institutions (DFIs). If applicable, project proposals may
rather seek to include an appropriate level of co-financing to
maximise the impact of GCF resources (crowding-in of
funds). In addition, it shall help mobilising the engagement and
facilitate investments from the private sector (e.g. through derisking
and blending of funds). Co-financing can play a crucial role
in ensuring country ownership by providing more effective support
for the practical implementation of national priorities. Potential
sources of co-financing could comprise additional funding from
national governments, AEs, other partners agencies and private
sector organisations. Hereby the GCF can play a crucial role in
catalysing and shifting the (private) financial flows into low-emission and climate-resilient investments
in a sector or an entire economy. The level of co-financing depends on the characteristics and needs of
the project and is arranged on a case-by-case basis.
23
Figure 9 shows the current co-finance ratios in
all 128 GCF programmes and projects as of June 2020. As mitigation projects often include revenuegenerating
activities, their average level of concessionality is lower while the co-financing ratios are
higher compared to adaptation projects.
Co-financing refers to the financial
resources required, in addition to the
GCF proceeds, whether public or
private, to implement a funded activity
for which a funding proposal has been
submitted (GCF, 2019).
The “level of concessionality refers to
a measure of the ‘softness’ of a credit
reflecting the benefit to the borrower
compared with a loan at market rate”
(Fayolle, V.; Odianose, S., 2017).
Revenue generating projects often
require lower levels of concessionality.
With their financial intervention, GCF projects should address existing root causes and barriers for mitigation activities or adaptation measures. The typical barriers related to the prevailing policy and finance situation in many countries are presented in
Figure 10. Proposed funding projects and programmes shall contribute to overcome these existing barriers.
24
4.1.5 What are the roles and responsibilities of different actors?
There are three main actors in interacting with the GCF: National Designated Authorities (NDAs), Accredited Entities (AEs) and Executing Entities (EEs).
National Designated Authorities (NDAs)
are government institutions that serve as an interface between each country and the Fund. In Serbia,
the Ministry of Agriculture, Forestry and Water Management as NDA is the first point of contact for
any enquiries about the GCF. The NDA provides comprehensive strategic oversight of the GCF's activities
in the country and communicates the country's priorities for financing low-emission and climate-resilient
developments in a GCF Country Programme. The NDA approves the selection of projects to be submitted for
financing by the Fund.
25
The Ministry of Agriculture, Forestry and Water Management serves as
Serbian National Designated Authority (NDA)
responsible for cooperation with the GCF in Serbia. For the purpose of communicating with stakeholders,
it has established a dedicated e-mail address: serbia-gcfteam@minpolj.gov.rs
GCF project funding is channelled through Accredited Entities (AEs) and intermediaries that work with the GCF to
implement projects (see Figure 11 below). They work closely with countries to develop project concepts and submit
funding proposals for approval by the GCF Board
26
. AEs can be either Direct Access Entities (DAEs) - subnational,
national or regional organisations - or International Access Entities (IAEs), including United Nations (UN)
organisations, multilateral development banks (MDBs), international financial institutions (IFIs) and
regional institutions.
27
To access GCF funding, potential AE institutions have to pass through an accreditation process to ensure that they are able to
closely supervise, manage and monitor projects. The institutions must demonstrate their skills to manage the projects
financially and to safeguard funded projects and programmes against environmental and social harm.
28
Institutions can
apply for different accreditation levels: They can apply to get funding for micro, small, medium or large projects as well
as for projects with low, medium or high environmental and social risks.
29
The GCF accreditation assessment determines the size and the risk category of projects the institution will be
allowed to implement. This also relates to the fiduciary functions and financial instruments they can use.
The project size, project risks and fiduciary standards define the project characteristics and requirements
for the implementation. For instance, not all entities comply with the fiduciary standards that are required
for large projects (with a total investment of USD 250 million or more) or others can only handle grants but no loans.
30
AEs do not necessarily have to act as direct implementer of funding proposals. Executing Entities (EEs)
responsible for project implementation can do this on behalf of AEs. The responsibilities of EEs are
defined in the funding proposal and implementation agreements. EEs can be different organisations ranging
from international institutions, ministerial subsidiary bodies to small NGOs - depending on the structure
of the project and the planned activities.
31
Table 2 below summarises the main functions of the NDA, AE, and EE.
Table 2: Roles and responsibilities of the National Designated Authority, Accredited Entity, and Executing Entity
Type of Entity
Role and responsibilities
National Designated Authority (NDA)
• Strategic oversight of a country’s priorities
• Convening national stakeholders
• Providing nomination letters for the accreditation of National Implementing Entities (NIEs)
• Providing no-objection letters for projects and programmes, and
• Approving readiness support
Accredited Entity (AE)
• Develop and submit funding proposals for projects and programmes
• Oversee project and programme management and implementation
• Deploy and administer a range of financial instruments (grants, concessional loans, equity and guarantees), and
• Mobilise private sector capital for blending with GCF and/or own resources.
• Measuring and evaluation of GCF project/programme results
Executing Entity (EE)
• Develop and submit funding proposals for projects and programmes through AEs
• Execute funding proposals
• No need for accreditation but work under the supervision and overall management of the AE.
Source: Adapted from Fayolle, V.; Odianose, S. & Soanes, M. (2017)
Further details and readings:
List of all GCF Accredited Entities with information on the accreditation status
www.greenclimate.fund/about/partners/ae
Website of the Ministry of Agriculture, Forestry and Water Management / NDA
www.klimatskepromene.rs
4.2 How to access the GCF?
The GCF does not implement projects directly itself, but through partnerships with AEs. Funding proposals can only be submitted to the Fund by AEs. Once programmes or projects are approved, AEs and/or EEs implement the project. The AEs are responsible for overseeing, supervising, managing and monitoring the projects and programmes.
32
GCF accepts funding proposals on a rolling basis. Prior to submitting funding proposals, there is a national process for generating project ideas, assessment and endorsement of project proposals by the NDA.
33
The procedures in Serbia are briefly presented in section “National procedures in Serbia – How to propose a GCF project?” below. Figure 12 summarises the detailed steps in each phase of the GCF proposal approval process.
GCF funding proposals go through a six-step process before they can be implemented. Ideally, proposals are developed and submitted jointly by an AE and the NDA. Prior to preparing a full proposal, it is recommended that the AEs develop a concept note. This is a voluntary but useful step, which allows AEs to obtain feedback from the GCF Secretariat on whether their proposal is in line with the objectives and mandate of the Fund. This may also to allow for a faster review process of the eventual full proposal. Each proposal must be approved by the NDA in the form of a no-objection letter. They are then evaluated by the GCF Secretariat and an Independent Technical Advisory Panel (ITAP) and finally approved by the GCF Board.
34
The GCF provides easier access to resources for smaller activities that have minimal environmental and social risks and impacts. Projects with a GCF contribution of up to USD 10 million and within the lowest project risk category can be approved through a Simplified Approval Process (SAP). The GCF launched the SAP to allow countries to access GCF funds as rapidly and efficiently as possible.
Simplified Approval Process (SAP) eligibility criteria
1) Ready for scaling up and potential for transformation to mitigate and/or adapt to climate change;
2) The GCF contribution up to USD 10 million;
3) Minimal environmental and social risks
The objective of SAP is to reduce the time and effort needed for the preparation, review, approval and disbursement procedures for certain small-scale proposals. Organisations accredited as DAEs are particularly encouraged to take full advantage of the SAP.
35
AEs can also respond to GCF Requests for Proposals to fill current gaps in climate finance. In issuing some Requests for Proposals, the GCF promotes particular areas of interest. In the past such calls for proposals have been related to projects and programmes in support of micro-, small- and medium-sized enterprises (MSMEs) in the climate space or pilot programmes for REDD+ results-based payments. In these cases, the GCF can also accept proposals from entities that have not yet been accredited. However, non-accredited entities must partner with AEs when they formally submit funding proposals to GCF.
36
GCF projects are designed in alignment with a Results Management Framework (RMF), which defines the elements of a paradigm shift towards low-carbon, climate-resilient, country-specific development pathways. The RMF contains two key elements: the logic model and the Performance Measurement Framework (PMF)
37
The logical model or framework follows the “theory-of-change” principle that shows how inputs, activities and results of the project are converted into changes in the country or a related sector. The AEs are primarily responsible for the monitoring and evaluation (M&E) of the project results under the PMF using a number of standard core indictors.
38
These core indicators do not correspond to any specific result area, but, depending on the type, apply to all GCF projects and programmes, also in the context of the six investment criteria. The core indicators inform the logic models and can be complemented by other indicators.
39
GCF Core Indicators:
For mitigation projects and programmes:
1) Tonnes of carbon dioxide equivalent (tCO2eq) reduced;
2) Cost per tCO2eq decreased; and
3) Volume of finance leveraged by fund lending, disaggregated by public and private sources.
For adaptation projects and programmes:
1) Total number of direct and indirect beneficiaries; and
2) number of beneficiaries relative to total population.
4.2.2.1 The six GCF investment criteria for project assessment
The GCF applies six investment criteria with which all projects and programmes need to comply. The criteria are assessed by corresponding indicators
40
Impact potential defines the potential of a project or programme to achieve the GCF’s objectives and results areas. The impact potential indicators consist of qualitative information about the possible effects of a project/programme, e.g. for mitigation tonnes of CO2e avoided or reduced, and adaptation the total number of direct and indirect beneficiaries and their share of the total population, as it describes how many people will be protected against the negative consequences of climate change.
41
In order to demonstrate the paradigm shift potential of the project or programme, the funding proposal should show to what extent the proposed activity can catalyse impacts beyond a one-time project/programme investment by highlighting and demonstrating the related paradigm shift factors.
42
Proponents must indicate how the project or its activities can be scaled up or replicated, and present plans for knowledge sharing and how the project contributes to national policies and strategies or legal frameworks. Innovative aspects of the project, e.g. the promotion of new business models should be emphasised as well as the creation of an environment for further climate-related activities.
43
Sustainable development potential: This criterion relates to the project’s impact on the Sustainable Development Goals (SDGs). The project or programme needs to demonstrate potential social, environmental and economic co-benefits, as well as gender impacts.
44
Proposals must identify at least one positive co-benefit, with an associated indicator, including baseline and target values that are disaggregated for men and women, if disaggregated data are available. For the inclusion of gender considerations all project proposals should include qualitative and quantitative gender indicators aligned with national gender policies and priorities. It is recommended that projects include a gender action plan (GAP) providing an overview of how gender equality is promoted.
45
The fourth investment criterion demonstrates the needs of the recipient. The project proponent should describe the extent and intensity of the vulnerability of the country and the recipient groups to climate change and explain in more detail how the project or programme responds to the identified needs.
46
Indicators for needs of the recipient include identifying vulnerabilities and exposure of target areas or population groups, highlighting funding barriers and the need to build institutional capacity. This information should be supported by solid evidence.
47
Country ownership is a core principle of the GCF. All GCF activities shall be aligned with the priorities of countries through their NDAs and national coordination mechanisms. To prove and demonstrate country ownership of the proposed programme or project, the project proponent should ensure that the activities to be funded by the GCF are consistent with national priorities and objectives (inter alia the achievement of the NDC). The project proponent should also help advance ambitious mitigation and adaptation measures in line with these national priorities.
48
The project proposals should also explain how they were developed in consultation with the relevant stakeholders (e.g. national ministries, AEs, NDAs, civil society, academia). The engagement with NDAs is required.
49
Efficiency and effectiveness: Projects and programmes need to conduct an economic and financial analysis to ensure financial soundness and cost efficiency.
50
The economic and financial viability of the project/programme should be explained by including such an economic and financial analysis in the funding proposal. The project shall establish a financial structure that corresponds to the objectives and planned activities. Co-financing and/or return on investment should be included, where appropriate.
51
How best practice or technologies are implemented should be illustrated in the funding proposal as well.
4.2.2.2 Justification for GCF involvement
In addition to the GCF investment criteria, proposed projects need to present the rationale for GCF involvement and the related added value through its intervention. Project proponents should provide a justification for the funding requested and the proposed financial instruments in order to close the funding gap and to complete the project/programme successfully. Furthermore, the proponent shall explain how the project/programme’s long-term sustainability will be ensured, after the project/programme is implemented and the support from the GCF ends.
52
Project proponents can illustrate the necessity of GCF involvement with the following aspects:
• Absence of alternative sources of financing: Barriers that have created the lack of alternative funding sources for the project/programme.
• Potential for crowding in alternative sources of financing: How GCF funding can help leverage domestic funding, in particular private finance, by improving the real and/or perceived risk and reward profile of climate investments.
• High potential for replication and scaling up: How GCF funding can help scale up past and/or existing investments with a high potential for scaling up or replication.
• Target highly vulnerable populations (for adaptation projects): How GCF funding will support activities that will remain unfunded through mainstream financial channels and targeting highly vulnerable populations.
Under its Readiness and Preparatory Support Programme (the Readiness Programme) the GCF supports Serbia with capacity building and technical assistance to enhance its institutional capacities, governance mechanisms and access to climate finance
53
. The Readiness Programme provides grants and technical assistance to NDAs and relevant stakeholders with the intention to promote the country ownership. Supported activities aim to strengthen the countries' commitment to the Fund and maximise the impact of funded projects or programs on the ground.
54
Besides the institutional strengthening, the Serbian GCF Readiness Programme
55
also assists the adaptation planning and developing the strategic frameworks for the interaction with the GCF under a Country Programme. Serbia’s Country Programme for the GCF until 2025 sets out national project and programme priorities for GCF funding. Projects and programmes falling under these priorities will be promoted preferential in the upcoming years (see below).
The following activities are generally supported under the Readiness Programme:
• Capacity building for climate finance coordination: e.g. establishing and strengthening NDAs or FPs; support direct access entities, executing entities, and civil society and private sector stakeholders.
• Strategic frameworks, incl. preparation of GCF Country Programmes; long-term low-emission strategies and action plans; update, enhance or implement NDCs; improve the enabling environment for climate finance
• Strengthened adaptation planning: Support the development of a national, subnational, or sectoral adaptation plan.
• Pipeline development: development of concept notes, pipeline metrics and indicators, and costed action plans for priority documents such as NDCs
• Knowledge sharing and learning: Information sharing, experience exchange and learning.
Besides the Readiness Programme, AEs can receive financial and technical support from the GCF Project Preparation Facility (PPF)
56
for project and program preparation. The PPF is intended in particular to support DAEs and small projects. Support is provided in the development of funding proposals and related activities such as the development of environmental, social and gender studies. Each request is limited to a maximum of USD 1.5 million.
57
To expand GCF's activities and support on private sector operations, GCF has set up the Private Sector Facility (PSF). The PSF funds and mobilises private sector actors, including institutional investors, and uses GCF's funds to encourage corporations to invest with the GCF. The PSF's mission is to involve both the local and global private sectors to support mitigation and adaptation projects in developing countries. Through active collaboration with the GCF’s AEs, PSF can act as a catalyst for funding high impact, transformative, and innovative climate projects and activities in developing countries. PSF aims to change the current paradigm by reducing the risk of private capital provision and increasing private sector investment flows for low carbon and climate resilient development.
58
Available support under the Project Preparation Facility:
• Pre-feasibility and feasibility studies, project design: Determining the impact of the project, incl, estimated GHG reduction calculations (for mitigation projects).
• Risk assessment: E.g. analysis on risk and hazards and mitigation instruments.
• Identification of programme/project-level indicators: Logical frameworks, including GCF relevant indicators, and project indicators, their baselines and targets etc.
• Pre-contract services, incl. the revision of tender documents, incl. Terms of Reference (TOR), Bidding Documents; Procurement Packages etc.
• Advisory services and/or other services to financially structure a proposed activity: e.g. for costing and budgeting according to GCF standards
• Other project preparation activities, such as workshops and consultations or translation of documents may be covered under the PPF
Further details and readings:
GCF’s Readiness Programme:
www.greenclimate.fund/readiness
Project Preparation Facility (PPF):
www.greenclimate.fund/projects/ppf
Readiness and Preparatory Support guidebook - A practical guide on how to prepare readiness proposals for the Green Climate Fund
Serbia’s Country Programme for the GCF sets out funding priorities until 2025. It indicates resulting reductions in GHG emissions and adaptation to climate change in the process of fulfilling obligations by Serbia under the UNFCCC and the Paris Agreement.
59
The national project and programme priorities for cooperation with the GCF until 2025 were identified based the country’s Nationally Determined Contribution (NDC), the draft Low Carbon Development Strategy (LCDS) and Action Plan and the draft National Adaptation Plan (NAP) as well as sectoral policy and legal documents (e.g. Energy development Strategy for the period up to 2025, National Energy efficiency Plan, National RES Plan, Forestry development strategy, Strategy for urban development, Strategy for agriculture and rural development, Law on energy, Low on forestry, etc).In addition, the priorities and requirements presented in the Country Programme resulted from consultations with a wide range of stakeholders and responsible institutions in Serbia, as well as a public call for submitting project ideas for GCF funding.
A GCF Country Programme is a living document that presents a country’s priorities and envisaged project pipeline development with the GCF. It includes an action plan that details how projects and programmes are going to be developed, covering the type of entity to partner with as well as the readiness and project preparation support required.
With the Country Programme, Serbia aims to further embark on a low-carbon development pathway, and to reduce its vulnerability to the adverse impacts of climate change through enhanced adaptation measures.
60
Based on the country’s context and building on Serbia’s NDC, draft NAP and draft LCDS, the following clusters of priority areas for the Country Programme have been identified: Energy efficiency and use of renewable energy sources; a NEXUS of Water Resources, Agriculture and Forestry; and Low-carbon transport. As an additional Industrial efficiency cluster, private sector initiatives in the Serbian cement industry has been highlighted for future GCF engagement.
GCF project/programme concept notes and funding proposals can be submitted to the NDA by AE in collaboration with ministries, local self-government units, state institutions, scientific and research institutions, public enterprises, private companies, NGOs and all other potential applicants. They however need to meet formal requirements, e.g. to be submitted using the required form and be presented in accordance with the GCF requirements. The different procedures for submissions and approval by the NDA for concept notes and full funding proposals are briefly illustrated hereafter.
4.3.2.1 Submitting GCF concept notes to the NDA
Before the AE submits a concept note to the GCF, the concept note applicant needs to obtain the written consent of the relevant ministry/competent institution, followed by obtaining the Concept Note Approval Letter
61
, signed by the National Focal Point designated for cooperation with the GCF.
If support from the PPF is required, the request shall be prepared using the prescribed PPF template and be submitted either together with the concept note or at a later stage. Whichever the case, it is necessary to provide a PPF No-Objection Letter form the NDA. Note that funding proposals must be submitted within 2 years after the PPF approval by the GCF.
4.3.2.2 Submitting GCF full funding proposals to the NDA
Funding proposals must be submitted to the NDA for verification and approval prior to its submission to the GCF. If the submitted proposal does not fall under the Regulation on Capital Project Management
62
, the NDA shall review the documentation and verify if the funding proposal meets formal requirements and if it is in compliance with the national legislation, national strategic objectives as well as the objectives and criteria of the GCF. Once the project/programme funding proposal is approved by the NDA, further application for GCF funding shall be performed by the AE .
Project proponents and AEs are encouraged to approach the Serbian NDA with any enquiries about the procedures and with proposed project / programme concepts via its dedicated email address for stakeholder communication at serbia-gcfteam@minpolj.gov.rs.
GCF is helping Chile move away from its dependence on fossil fuels by investing in an innovative combination of solar
energy and pumped storage hydroelectricity to generate 24-hour baseload power. This project, co-financed with Japan’s MUFG Bank,
addresses the inherent challenge with renewable energy of intermittent power supply. By investing up to USD 60 million in early-stage
equity, GCF de-risks the project and catalyses much larger private sector financing. This will help attract additional private sector
debt and equity investors to finance the remaining USD 1 billion.
Empowering energy poor in Africa and Asia
GCF is kickstarting new renewable energy markets through a novel type of finance facility incorporating two geographic regions.
GCF’s commitment to Climate Investor One covers 11 countries in Africa and the Asia Pacific that share a deficit of available
energy and an over-reliance on fossil fuels. GCF’s USD 100 million investment through the Dutch development bank (FMO) reduces
the complexity of project implementation by bringing together financing for the project development and construction stages,
negating the need to source different investors.
Opening new climate opportunities in agriculture
Lack of private sector capital inhibits developing country farmers from adjusting their agricultural practices to meet climate
challenges. GCF is working with the Inter-American Development Bank (IDB) to bridge this funding gap in Guatemala and Mexico.
GCF and IDB have pooled their financial resources to create the low emission, climate-resilient agriculture risk-sharing facility.
This new funding vehicle is unlocking innovative financial instruments for agricultural Micro, Small and Medium-sized Enterprises
(MSMEs) in these two countries, including essential long-term loans, equity and guarantees.
Boosting adaptation with private sector funds in African countries
GCF is collaborating with an impact investor in Africa to overcome barriers and attract private sector funding for initiatives that enhance climate resilience.
The Acumen Resilient Agriculture Fund (ARAF) is designed to shift investments in adaptation activities from grants to long-term capital,
enabling smallholder farmers to respond to climate change more effectively. ARAF supports entrepreneurs in micro-, small, and medium-sized
enterprises in Ghana, Kenya, Nigeria and Uganda by providing farmers with innovative financial services, including microinsurance and mobile payments.
Using blended financing to expand Egypt's renewables
GCF has rich experience in supporting funding arrangements that attract private investors in nurturing renewable energy markets. This includes
its collaboration with the European Bank for Reconstruction and Development (EBRD) in setting up Egypt’s Renewable Energy Financing Framework,
including financing for one of the world’s largest solar farms. Consisting primarily of tailored loans to finance greenfield investments,
this project’s potential to transform energy generation is shown by the early lowering of renewable production prices through reverse auctions.
INFO SHEET NO. 5
NATIONAL POLICY FRAMEWORK ENABLING PRIVATE CLIMATE INVESTMENTS
There are 134,602 registered companies and 291,047 sole proprietors in Serbia (SBRA, 2022). As per the recent survey
conducted by Nesic (2022), of the surveyed companies, 13 percent were in the energy sector, 9 percent in the
agriculture sector, 30 percent in waste management and 48 percent in other sectors, including HVAC. Although
71 percent of respondents stated that their company has invested in sustainable/climate/ environmental
activities, only 8 percent felt that they were addressing greenhouse gas reductions, while 2.5 percent said
they engaged in climate change adaptation activities (Nesic, 2022). Almost 14 percent of the companies surveyed
stated that they invested in renewable energy generation and 17.5 percent claimed that their biggest interest is
reducing the energy consumption (Nesic, 2022).
A list of potential private sector actors that could bring value-added in the implementation of mitigation
and/or adaptation projects within the country is provided in this section. However, before identifying
specific actors, it is important to determine the priority actions and opportunities, as well as the
potential role private sector actors could play to tackle such actions and seize these opportunities (see Table 1).
Table 1: Priority actions and potential private sector role
Priority actions and opportunities
Potential private sector role
Energy efficiency and use of renewable energy sources
Energy efficiency in public buildings, households,
transport, industry, services, mining, agriculture
[Priority identified by government]
Private investment into cleaner technology
Import, distribution, retail sales and installation
of energy efficient lighting, appliances, industrial equipment
ESCOs could provide installation in public buildings
Clean heating
[Priority identified by government]
Businesses could import, manufacture, distribute and sell/retail clean
heating solutions (e.g., pellets and pellet stoves)
ESCOs could provide installation in public buildings
Alternative and sustainable renewable energy sources
[Priority identified by government]
Build-Own-Operate under PPP scheme
Private solar or wind (commercial, cooperative, residential)
Decarbonizing industrial processes and mining
[Priority identified by government]
Private investment into cleaner technology
Co-generation and district heating
[Priority identified by government]
Build-Own-Operate under PPP scheme for district heating
Low-carbon transport
Transport (fuel-efficient vehicles, clean fuels, alternative fuels and e-vehicles)
[Priority identified by government]
Businesses could import, distribute and sell/retail
Businesses could invest in charging stations with user fees/subscription model
Water Resources – Agriculture – Forestry
Development of Serbia’s irrigation systems
[Priority identified by government]
Build-Own-Operate under PPP scheme
Fully privatised irrigation services
Cooperative-owned and farmer-operated scheme
Regeneration of degraded forests
[Priority identified by government]
Farmers and foresters could plant specific species with harvest rights on public lands
Integrated forest and ecosystem monitoring system
[Priority identified by government]
Provision of monitoring equipment and services
Modified crop varieties, manure and fertilizer management, soil improvements for carbon sequestration
[Priority identified by government]
Agriculture service providers could purchase and lease machinery,
provide technical assistance on a user-pays basis
Waste sector
Waste management
[Priority identified by government]
Build-Own-Operate under PPP scheme
Cross-cutting/Readiness
Improvement of the Monitoring, Forecasting and Early Warning System in the Republic of Serbia
[Priority project identified in pipeline]
Development of web and mobile-based applications for the use of data generated
by the Monitoring, Forecasting and Early Warning System
Demand and pay for tailored reports
Sponsorship/advertise on government meteorological website
Source: Author’s analysis
Emissions from the energy sector accounted for 79% of Serbia’s total emissions, of which electricity and
heat
generation
represented 70% of such emissions (Republic of Serbia, 2016b; USAID, 2016). Agriculture was the
second highest source of emissions at 11%, with synthetic fertilizer and enteric fermentation from livestock
accounting for 62% that sector’s emissions (Republic of Serbia, 2016b; USAID, 2016). Waste contributed 5% of
national emissions, as did industrial processes (Republic of Serbia, 2016b).
Large power utilities would be a key group to engage in order to determine their interest in reducing greenhouse gas emissions via significant
investments and international support. The national power utility EPS (Elektroprivreda Srbije – Power Industry of Serbia) owns all large
generating stations and supplies most consumers across the country (Bankwatch, 2020). The largest Serbian thermal power plant TPP Nikola
Tesla is located on the outskirts of the municipality of Obrenovac (population of 71,419) – this might be a good candidate for district heating.
As for the agriculture sector, small scale farmers are predominant, especially in the livestock sub-sector. For instance,
there are over 300,000 family pig farms and more than 2000 commercial farms (Ministerie van Landbouw Natuur en Voedselkwaliteit, 2020).
This fragmentation makes engagement more challenging, leaving alone the difficulty in designing technology diffusion projects at scale.
Focusing on the food processing (e.g., Bambi) and beverage industry (e.g., Apatin Brewery, BIP) may be more feasible.
Approximately 1500 permits have been issued to individual waste collection, transport and storage companies across the country.
In order to engage private sector actors in the waste sector, ASWA (Association of Serbian Waste Utility Companies) may be a pragmatic
starting point, as waste collection is decentralized in each municipality. Alternatively, engaging with the country’s largest
municipalities of Belgrade, Novi Sad and Niš could allow to have discussions about how best to encourage private sector investments
in greenhouse gas reductions in the waste sector.
Regarding industrial process emissions, the largest players in the automotive, steel, cement and mining, chemicals and pharmaceuticals, food and beverage,
electronics, and garment production could be targeted.
There might be significant potential to improve the energy efficiency of the operations for these five most important automotive industry players:
1. BIK – They produce gas-powered buses for municipalities.
2. FAP – Mostly produces vehicles for the military, with limited production.
3. FCA – Makes 85,000 Fiat 500L exclusively.
4. Ikarbus – Bus manufacturer in Belgrade.
5. Zastava TERVO – Based in Kragujevac, they produce vehicles for the military and for civilian use.
Serbia is a key steel producer, with is largest steel mill being owned by Chinese Hesteeland located in eastern Serbia. Metalfer, located in Vojvodina, is the second largest steel mill in the country (DNB, 2022). Other players in the steel production sub-sector are quite small, with under one million USD in annual revenues (e.g., Hidraulik, OBRT Doo Trstenik, Rial).
The cement industry also offers opportunities to reduce greenhouse gas emissions. There are three main players in this industry: LafargeHolcim, CRH and TitanCementara Kosjerić. LarfargeHolcim is a merger between Larfarge (who has international headquarters in Paris) and Holcim (headquartered in Switzerland), and is the largest player in Serbia’s cement industry. It has one cement plant, four concrete plants and one factory for aggregates. In July 2022, LafargeHolcim acquired Teko Mining Serbia, one of the country’s largest aggregates companies (Holcim, 2022). CRH is an Irish international buildings materials group and the second largest producer of cement in Serbia. CRH operates at their Popovac plant in Paracín in central Serbia (southeast of Kragujevac). TitanCementara Kosjerić is the newest and smallest cement factory in Serbia.
Serbia’s mining sector focuses mostly on coal, copper, gold and silver mining, with the presence of substantial lithium-borate deposits (World Bank Group, 2020). These lithium deposits could position Serbia as a leading supplier of this key component of batteries for electric vehicles (World Bank Group, 2020). Rudarsko Topionicki Bazen Bor, which was the largest mining operation in the country, was recently (2018) purchased by Chinese mining company Zijin Mining, who now own a controlling interest (over 63%) in this copper, gold and silver producer (World Bank Group, 2020). Severeal other international companies are present in Serbia’s mining sector, including Freeport McMoRan (USA), Nevsun, Mundoro and Dundee Precious Metals (Canada), Mineko (UK), and Rio Tinto (UK and Australia) (World Bank Group, 2020).
The chemical and pharmaceutical industry in Serbia is dominated by petrochemicals, followed by pharmaceuticals and rubber and tires (RAS, 2017). For petrochemicals, JSC HIP-Petrohemija Pancevo (HIPP) is the largest player in Serbia. The company is majority owned by the state of Serbia (RAS, 2017).
NIS is another key player. NIS is majority owned by Russia’S Gazprom Neft and has its head office is in Novi Sad. Several other large state-owned companies operate in the sub-sector (e.g., Hipol Odžaci, Methanol–Acetic Acid Complex/MSK), In the pharmaceuticals, Hemofarm, Galenika and Zdravlje and the three main players. Hemofarm is the country’s leading generics manufacturer, with Galenika and Zdravlje also producing generic pharmaceutical products (RAS, 2017).
Serbia has an important food and beverage industry, with multinationals such as PepsiCo, Nestlé, Coca-Cola, Heineken and Carlsberg having a presence in Belgrade, Novi Sad and Bačka Palanka. There are also other international companies, such as Germany’s Nordzucker (Europe’s second-largest sugar producer). Bambi Banat a.d. is a biscuit manufacturing company in Pozarevac, Serbia. Some of the largest local players include: Bambi Banat, a biscuit manufacturer based in Pozarevac; Mondi Foods, a fruit business in central Serbia; Arteska, which produced drinks and jams in Subotica; and Knjaz Milos, a mineral water producer and distributor based in Arandelovac (SEEIM, 2020).
Serbia's electronics industry also has significant international players, including Germany’s Siemens (producing wind turbines in Subotica), Japan’s Panasonic (producing lighting devices in Svilajnac), and Slovenia’S Gorenje (producing home appliances in Valjevo) (RAS, 2020).
The agriculture sector is one of the most vulnerable to climate change. As described above, the sector’s fragmentation makes engagement more challenging. For investments into climate change adaptation in the agriculture sector, it may be best to engage with the ministry of agriculture, cooperatives and agricultural credit institutions (e.g., Crédit Agricole Srbija).
To tackle vulnerabilities related to hydrology and biodiversity will require engaging private sector actors across various sectors. The hydrological challenges caused by climate change in Serbia will affect power generation, forestry and agriculture most directly. The thirteen hydro power plants in Serbia are owned by the state’s Elektroprivreda Srbije. In the forestry sector, engaging with Srbijašume and Vojvodinašume, the two state forest management enterprises, would be a key first step. As mentioned above, cooperatives and agricultural credit institutions, including Crédit Agricole Srbija, would be some of the fragmented sector’s largest organizations. For biodiversity, the forestry and agriculture sectors are the two sectors to engage, as they are the main land use sectors affecting species health, in conjunction with residential and commercial development, transportation infrastructure, mining and tourism (MESP, 2011). Residential and commercial development, as well as tourism are fragmented and without large private sector entities that could be targeted for engagement, whereas transportation infrastructure is dominated by state activity. As for mining, the top players are identified above.
With regards to the health sector, this is another state-dominated area, as the country has a universal healthcare system, with over 300 public healthcare institutions operated by the Ministry of Health (Eurostat, 2022).
Renewable power producing companies are an obvious target. Vetroelektrane Balkana or Wind Energy Balkan Group (WEBG) operates Čibuk 1, the country’s largest wind farm (158 MW) (Power Technology, 2019). New Energy Solutions, who partnered with Israel-based Enlight Renewable Energy, has gained crucial experience with its Kovacica wind farm, the country’s second-largest (105 MW). Fintel Energia Spa, MK Group, WindVision Belgium and Elicio are some of the other players involved in wind power generation. Engaging with the Association Renewable Energy Sources of Serbia (RES Serbia) could be a logical first step. RES is a business association founded in March 2021 and focuses on improving Serbia’s business environment for renewables (RES, 2021).
Energy service companies (ESCOs) may also be in a strategic position to promote greenhouse gas reductions in Serbia (CMS, 2015). Engaging with large ESCOs operating in Serbia (e.g., Resalta) would be important for fostering more investments in energy efficiency, especially in the public sector.
5.2 Key policy and strategic frameworks enabling climate investments from private sector in the Republic of Serbia
The Republic of Serbia has been a member of the United Nations Framework Convention on Climate Change since 2001, and ratified the Paris Agreement in 2017. With the ratification of the Paris Agreement, the requirements of this Agreement become an obligation for the Republic of Serbia, including the obligation to reduce emissions of greenhouse gases (GHG) and adapt to changed climate conditions.
Serbia submitted the first NDC to the Secretariat of the UN Framework Convention on Climate Change in 2015, identifying the goal of reducing GHG emissions by 9.8% by 2030 compared to 1990.
The first NDCs of Serbia contain a part related to vulnerability and adaptation. In the same NDC, it is stated that Serbia in the period 2000-2015. suffered damages of over 5 billion euros due to natural calamities and natural disasters, more precisely caused primarily by droughts (over 3.5 billion euros), floods (over 1.5 billion euros) and forest fires (about 300 million euros in the period 2000-2009). Among the most affected sectors were identified: agriculture, water, forestry, but also biodiversity and health.
According to the second or improved NDC, which Serbia submitted to the Secretariat of the Convention in August 2022, a 33.3% reduction in GHG emissions is expected by 2030 compared to 1990.
A more ambitious goal than the one in the first NDCs, based on the Draft Strategy for Low-Carbon Development of Serbia with an Action Plan, Serbia is in the process of drafting its first NECP, which it should submit to the EnZ Secretariat in draft form by mid-2023.
Serbia recognized the need to reduce methane emissions and in 2021 joined the global Initiative to reduce methane emissions launched by the EU and the USA. The initiative aims to limit methane emissions to 30% compared to emissions of this gas in 2020.
From the perspective of climate actions, the Declaration from Sofia should also be taken into account. The Sofia Declaration or Green Agenda for the Western Balkans is a regional development strategy that aims to respond to the challenges of climate change and the green transition and to help the countries of the Western Balkans harmonize environmental regulations with European standards and norms. The Green Agenda for the Western Balkans is based on the European Green Deal and the related Economic and Investment Plan for the Western Balkans.
By signing the Declaration from Sofia, Serbia undertook to comply with the European Climate Law and achieve climate neutrality by 2050, followed by the establishment of goals for 2030, further compliance with the EU ETS, i.e. the introduction of carbon taxes, but also the development of adaptation strategies and decarbonization.
Achieving climate (or carbon) neutrality requires decarbonization of the energy sector. This implies a significant increase in the share of renewable energy sources in the total energy mix, as well as an end to energy losses through an increase in energy efficiency in all sectors.
5.3 Legislative and policy framework
The legislative framework in the field of climate change is established primarily by the Law on Climate Change ("Official Gazette of the RS", No. 26/2021 of March 23, 2021), which entered into force on March 31, 2021.
The law stipulates that public policy documents must contain a quantitative assessment of the impact on the change in the level of GHG emissions from sources and removal by sinks calculated in accordance with accepted international methodology.
The law further prescribes the issuance of a permit for GHG emissions for stationary plants that fall under ETS plants. By the way, the Regulation on the types of activities and gases with the greenhouse effect established the list of facilities, so to speak. The essence of obtaining a permit is actually monitoring and reporting on GHG emissions, which enables the operators themselves to get a clear picture of their own GHG emissions and therefore more effectively plan options for reducing them, i.e. decarbonization.
According to the Law, planning documents in the field of climate change are:
Low-carbon development strategy
Action plan for strategy implementation
Adaptation program to changed climatic conditions (NAP)
The draft of the Low Carbon Development Strategy was prepared in 2019, while the preparation of the National Adaptation Program (NAP) is underway. The preparation of this document is financed from the funds of the GCF and is of exceptional importance for Serbia because it represents the basis for financing and identifying the necessary assistance in the field of adaptation.
At the same time, the preparation of the NAP is an obligation of Serbia according to the national legislation, i.e. the Law on Climate Change. Both policy documents should be adopted in 2023.
5.4 Opportunities for sector-specific climate investments with participation of the private sector
Following the key priority sectors for assessing funds from the Green Climate Fund, we present opportunities for climate investment by private sector or partnership between Government and the private sector.
Serbia has established a series of priorities for climate change adaptation and GHG reductions in its draft National Adaptation Plan, Biennial Update Report and GCF Country Program. In Serbia’s First National Adaptation Plan (still in draft form) (UNDP, 2015), the following sectors were identified as adaptation priorities:
1. Water resources2. Agriculture3. Forestry 4. Biodiversity
Serbia has established a series of priorities for climate change adaptation and GHG reductions in its draft National Adaptation Plan, Biennial Update Report and GCF Country Program. In Serbia’s First National Adaptation Plan (still in draft form) (UNDP, 2015), the following sectors were identified as adaptation priorities:
1. Energy – renewable energy sources and energy efficiency2. Industrial processes3. Waste management sector
More recently, Serbia identified three clusters of priority to “closely align with Serbia’s climate action objectives” in its GCF Country Program (Republic of Serbia, 2019): 1. Energy efficiency and use of renewable energy sources 2. Low-carbon transport 3. NEXUS Water Resources – Agriculture – Forestry
As such, several investment opportunities for private sector climate action have been identified in the following eight priority sectors: 1. Water resources2. Agriculture3. Forestry4. Biodiversity5. Energy efficiency and use of renewable energy sources 6. Industrial processes7. Waste management sector8. Low-carbon transport 9. Cross-cutting
There are two areas of focus that could be good candidates for investments under the water resources priority area: 1) water supply; and 2) flood control.
Improving the efficiency of Serbia’s water supply
Executing entity: Ministry of Public Administration and Local Self-Government (to be validated)
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: A water supply project could be designed to decrease water distribution system losses. This would require investments in upgrading water supply infrastructure to decrease leaks, as well as improving water metering. An updated water pricing scheme would also need to be put in place to ensure that water tariffs collected would be sufficient to cover ongoing water supply maintenance costs.
Financial instruments and funders: This projects decrease “non-revenue water”, which would be the source of revenue that could be used to reimburse an initial loan to undertake the system renovations (fixing leaks, replacing pipes, etc.). This could be done via an EBRD loan. In some municipalities, this might allow for the design of public-private partnerships (PPP).
Country Context: Approximately 80% of households in Serbia are covered by the public water supply, with significant regional differences in terms of coverage. Areas of higher population density have greater connection, such as Belgrade and in Vojvodina (90%), while in central Serbia it is significantly levels are lower, with the Nisava and Toplica districts being below 60%. Water shortages were identified in Čačak, Požega, Gornji Milanovac, Bor, Požarevac, Veliko Gradište, Lučan, Lazarevac. Losses account for one third of abstracted water. The price of water is low and in many cases does not cover the cost of system operation (UNDP, 2015).
Mitigation Impact: Not applicable.
Adaptation Impact: Climate change will negatively impact the water sector in the Republic of Serbia by increasing water shortages, increasing the intensity of droughts and the areas affected by droughts, and directly and indirectly increasing problems related to water quality. Making more efficient use of existing water supplies and reducing system losses will increase Serbia’s resilience to such climate change impacts.
Necessary Conditions: Putting in place a water metering, leak detection and repair program, as well as a sustainable water pricing scheme would ensure that the project would be able to self-sustain over time.
Co-Benefits: The project would help Serbia achieve Sustainable Development GOAL 6: Clean Water and Sanitation, as it would increase water-use efficiency and reduce the number of people suffering from water scarcity.
Flood control across Serbia
Executing entity: Ministry of Public Administration and Local Self-Government or Ministry of Agriculture, Forestry and Water Economy (to be validated)
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: This project would focus on flood control, including grey infrastructure (e.g., barriers, levees, dikes, dams, often made out of concrete, hence the “grey” label) and green infrastructure (e.g., replanting vegetation in headwaters and riparian zones, which reduce flash flooding and erosion). The project would also have a regulatory component, whereby new construction in flood-prone areas would be forbidden. Also, resources would be allocated towards emergency preparedness capacity building at the national and local levels.
Financial instruments and funders: The “grey” component would be more suitable for public sector financing (e.g., via an EBRD loan for the public works), whereas the “green” component could be designed as a Payment for Ecological Goods and Services project. Landowners, including households and businesses, could be paid for changing their land in a way that would reduce flood risk. This could include planting trees, shrubs and other ground cover, building retention ponds with native species as ground cover, etc. This could be paired with a parametric flood insurance scheme. Unlike traditional insurance, which specifies that the level of damage and its value need to be assessed after a flood, parametric flood insurance pays out as soon as an event happens, based on agreed-upon payout parameters (e.g., height of river water, the amount of rainfall).
Country Context: The current state of flood protection in Serbia is not satisfactory: it is estimated that about 18% of the territory of Serbia is potentially vulnerable to floods, primarily in the coastal area of the Danube, the Tisa and the Sava, then the rivers Morava, Drina, Kolubara, and Timok where the population and economic activities are concentrated.
Serbia has initiated activities for the implementation of the EU Directive on the assessment and management of flood risks. Hazard maps and flood risk maps, which are the basis for the evaluation of real or potential harm and making plans for flood risk management, have been carried out for significant floodplains along the Danube and in the Morava River Basin, and in the future these maps will be made for other major floodplains, during the initial phase of the preparation of a plan for the management of flood risks.
There is no systematic review of damages caused by earlier floods in Serbia. The catastrophic floods of May 2014 caused EUR 1.5 billion in direct and indirect damages and the Zaječar flood in 2010 caused 4.5 million EUR in damages.
Mitigation Impact: Not applicable.
Adaptation Impact: It is expected that climate change will contribute to increasing the threat of flooding through the occurrence of intense precipitation, as well as the frequent occurrence of high waters. More intense precipitation is anticipated to contribute not only to more extreme floods of the rivers, but also to the aggravation of the problem of flooding in cities. This project would help Serbia adapt and minimize the negative impacts of floods.
Necessary Conditions: Grey infrastructure maintenance will need to be allocated financial resources within the national and local budgets. Paying landowners for replanting vegetation in headwaters and riparian zones creates an incentive for ongoing maintenance of the green infrastructure. Building the capacity in emergency preparedness and improved planning stands to avoid economic losses due to floods.
Co-Benefits: The project would help Serbia achieve Sustainable Development GOAL 9: Industry, Innovation and Infrastructure, as it would establish quality, reliable, sustainable and resilient infrastructure to support economic development and human well-being.
Agriculture
The Green Climate Fund Concept Note being developed (“Nature-positive and Climate-resilient Agriculture Sector in Serbia”) provides most of the required coverage in the agriculture sector in Serbia. The following additional investment opportunity was identified: “Climate-proofing rural road infrastructure”.
Resilient rural roads for Serbia’s prosperity
Executing entity: Ministry of Construction, Transport and Infrastructure, or Public Enterprise “Roads of Serbia” (validation required)
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: This program focuses on the rehabilitation and climate proofing of rural roads in Serbia. This would help finance activities such as adapting road drainage system capacity to higher intensity and frequency of extreme rainfall, water retaining facilities (e.g., dams, reservoirs), structural protection measures (dikes, embankments), and permeable/reservoir pavements to store water in the pavement structure and ensure infiltration into the soil or its discharge by the drainage system (Climate ADAPT, 2020). Funding for capacity building, as well as for the cleaning and maintenance of the drainage systems would be sought. The Government of Serbia could also develop or revise and implement a climate-proofed road construction and design standard.
Financial instruments and funders: The rehabilitation and climate-proofing of roads could be built via PPP and a loan from the GCF and/or EBRD. In order for the PPP financial model to work, there would need to be revenue being generated via tolls, or an “adopt a road” program. Financing resources would also be provided by road authorities, with possible co-financing via European Commission sources or other European donors (bilateral or multilateral).
Country Context: Serbia has over 44,604 km of roads, with many in rural areas. The main impacts of an increased frequency of intense precipitation include water damage to asphalt, reduced bearing capacity of lower pavement layers and roads becoming impassable due to flooding. Climate change will also cause damage to bridge structures through flooding, higher river discharge, erosion and temperature fluctuations (Climate ADAPT, 2020). Road closures can have significant negative impacts on socially isolated populations, such as residents of remote and poorly connected areas (UNDP, 2019). The “Regular maintenance and retrofit of flood protection infrastructure and drainage systems” has been identified as an adaptation measure in Serbia’s Second National Communication (Republic of Serbia, 2017).
Mitigation Impact: Not applicable.
Adaptation Impact: The main benefits to be expected from this project are in terms of ensuring connectivity and operation of the rural road transport network during extreme weather events. Having uninterrupted road transport brings about avoidance of loss economic activity (income for businesses and labor), as well as increased safety and welfare. It is also expected that climate-proofed roads will bring about long-term savings in operating and maintenance costs (Climate ADAPT, 2020).
Necessary Conditions: If this project is implemented, capacity will have been built to integrate climate risk assessment into road infrastructure planning across the country. In addition, if the climate-proofed road construction and design standard is put in place, this will ensure that road infrastructure in urban and peri-urban areas across the country will be more resilient.
Co-Benefits: The project would help Serbia achieve Sustainable Development GOAL 9: Industry, Innovation and Infrastructure, as it would develop quality, reliable, sustainable and resilient road infrastructure to support economic development and human well-being.
Forestry
In addition to the forestry-focused FAO project being submitted to the GCF (“Enhancing the resilience of Serbian forests and the carbon storage potential of the country to support and boost the decarbonization process through adaptation and mitigation investments”), it may be possible to design a forestry sector project that is focused on planting new forests in the districts most endangered by climate change. This idea is based on information from one of the background studies produced in the context of the development of Serbia’s NAP .
Drought-resistant trees for vulnerable Serbian communities
Executing entity: Ministry of Agriculture, Forestry and Water Economy
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
• Budget TBD: Requires data on total area that could be covered by drought-resistant trees.
Description of the project idea: This forestry sector project is focused on planting new forests in the districts most endangered by drought caused by climate change. Increasing forest cover could be done using species more resistant to drought (e.g., turkey oak, downy oak, horn- beam, field maple, nettle trees, false acacia).
Financial instruments and funders: This could be done via Payment for Ecological Goods and Services, as described in the “Biodiversity” section above. The payments would be given to landowners in return for planting drought-resistant tree species suitable for the given region and landscape. UNDP and GIZ are two potential funders for this program, as they both have experience with Payment for Ecological Goods and Services and have a longstanding history of development cooperation in Serbia.
Country Context: Over the last two decades, droughts and fires led to the temporary loss of forest cover (about 2.2%) and diffuse forest degradation on over 60,000 ha of forests [GFA, 2019]. According to climate change scenarios, which predict a further rise in greenhouse gas concentrations, we can expect more frequent occurrences of extreme weather conditions, including droughts. A reduction in summer precipitation and increased number of dry days are also to be expected (UNDP, 2015).
It must be noted that the Serbia Orthodox Church is the largest forest owner (apart from the state), managing forests either through companies it has established, or via contracts with public or private forest management companies. There are no other private forest owners in Serbia besides the church (Milovanović et al., 2020).
Mitigation Impact: TBD – requires data on total area that could be covered by drought-resistant tree species.
Adaptation Impact: TBD – requires data on total area that could be covered by drought-resistant tree species.
Necessary Conditions: Providing landowners with payment for planting native ground cover or trees, creates an incentive for them to continue to manage their (marginal) land in a sustainable fashion on an ongoing basis.
Co-Benefits: TThe establishment of new forested areas will contribute to the economic empowerment of local communities, the improvement of human health, the reduction of the harmful effects of drought, wind and water erosion and the enhancement of the conservation of biodiversity. The project would help Serbia achieve Sustainable Development GOAL 15: Life on Land by restoring degraded forests in some areas, increasing afforestation and reforestation, reducing the degradation of natural habitats, and reducing the loss of biodiversity. The project would also help Serbia achieve Sustainable Development GOAL 6: Clean Water and Sanitation, as it would protect and restore water-related ecosystems (i.e., forests).
Biodiversity
Serbia’s biodiversity is at risk of significant negative climate change impacts. The following project aims to reduce such impacts via the planting of native vegetation, reforestation and afforestation in wildlife-rich areas.
Biodiversity conservation through Payment for Ecological Goods and Services in Serbia
Executing entity: Ministry of Environmental Protection or Ministry of Agriculture, Forestry and Water Economy. Institute for Nature Conservation of Serbia could be implementing partner, especially for the prioritization of areas for planting of native vegetation and tree species.
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
• Budget TBD: Requires data on total area that could be covered by native vegetation, reforested and afforested.
Description of the project idea: This project would encourage biodiversity conservation through financing activities such as the planting of native vegetation, reforestation and afforestation in wildlife-rich areas (e.g., wildlife corridors).
Financial instruments and funders: A Payment for Ecological Goods and Services (EGS) project could be developed to encourage biodiversity conservation. Activities could include the planting of native vegetation (see Figure 1 below for a more comprehensive list of services), as well as using REDD+ results-based payments for forestry-focused activities. The payment for ecosystem services is an approach whereby farmers or other types of land users receive financial compensation for adopting management practices on their land so that it provides a given, or a set of ecological services.
Figure 9: Ecosystem Services in Agricultural Systems
Source: (Forest Trends et al., 2008)
In practice, these schemes involve a series of payments (seasonal, annual or other agreed-upon frequency) to land or other natural resource managers in return for the ecosystem services they provide over-and-above what the ecosystem would have provided in the absence of adoption of sustainable land management practices. Payments are made by those who benefit directly or indirectly from the services produced (e.g., private individuals, local communities, businesses or government agencies).
UNDP is an GCF Accredited Entity with a presence in Serbia and experience with similar projects. For instance, UNDP received GCF funding for “FP137: Ghana Shea Landscape Emission Reductions Project” (GCF, 2020b). Similarly, Deutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ) received GCF funding for a REDD+ project entitled “FP117: Implementation of the Lao PDR Emission Reductions Programme through improved governance and sustainable forest landscape management” (GCF, 2019). International cooperation between Germany and the Republic of Serbia, including via GIZ, began in 2000 (GIZ, 2022).
Country Context: Over the past decades the reduction of biodiversity, among other things, is attributed also to a significant loss of natural habitat as a result of the expansion of agricultural land (especially in the Pannonian Plain), drainage of wetlands and marshes and irrigation of steppes for the purpose of growing agricultural crops, as well as the degradation and loss of forest cover. The complete destruction of natural habitats and their replacement by artificial habitats has created inadequate conditions for the survival of many plant and animal species. The colonization of habitats by invasive species and the introduction of exotic species in natural habitats leads to increased competition for resources and adversely affects the survival and productivity of native species. Possible future climate changes represent additional pressure on biodiversity in terms of reducing further loss. This project would contribute to Serbia’s National Action Plan for Biodiversity and Climate Change.
Mitigation Impact: TBD – requires data on total area that could be covered by native vegetation, reforested and afforested.
Adaptation Impact: TBD – requires data on total area that could be covered by native vegetation, reforested and afforested.
Necessary Conditions: By providing landowners a payment for planting native ground cover or trees, this creates an incentive for them to continue to manage their (marginal) land in a sustainable fashion on an ongoing basis.
Co-Benefits: The establishment of new forested areas will contribute to the economic empowerment of local communities, the improvement of human health, the reduction of the harmful effects of wind and water erosion and the enhancement of the conservation of biodiversity. The project would help Serbia achieve Sustainable Development GOAL 15: Life on Land by restoring degraded forests in some areas, increasing afforestation and reforestation, reducing the degradation of natural habitats, and reducing the loss of biodiversity.
Energy efficiency and use of renewable energy sources
From our consultations with private sector, the input received indicates that there are permitting challenges for the production and sale of renewables. This would require government to step in to create an enabling environment – set up infrastructure (roads, drainage, electrical connections to grid) and issue all permits for solar farms, etc. There is therefore the potential to receive readiness funding from the GCF to undertake an in-depth barriers study and potentially to design a national renewables program. In the meantime, a rural energy project is suggested for Serbia’s vulnerable communities, as described below. This could be done mostly by focusing on onsite renewables, thus not requiring significant investments in the enabling environment.
Rural energy self-sufficiency in Serbia’s vulnerable communities
Executing entity: Ministry of Agriculture, Forestry and Water Economy
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
• If 20% of rural households (i.e., 187,600) use a $5000 loan, then a minimum of $938 million in financing would be required.
Description of the project idea: The design of a Rural energy self-sufficiency program would present a greenhouse gas reduction opportunity and offer resilience benefits to farmers who would not have to rely on the electricity grid in times of extreme weather events. The project would provide rural households with access to solar and/or wind-powered mini-grids, as well as solar water heaters and heat pumps for geothermal heating/cooling. In addition, the project would incentivize wise use of these new renewable energy sources via energy efficiency for agribusinesses and rural households.
Financial instruments and funders: GCF, FMO, IFC or EBRD could provide the concessional financing needed to mobilize private sector participation. This could be undertaken using one of three models: 1) a public private partnership business model for investing and operating small scale green mini grids; 2) credit lines for standalone solar/wind/geothermal systems purchase; or 3) a rental program whereby farmers could afford the monthly rental fee for solar/wind/geothermal systems thanks to reductions in the electricity bill. Energy efficiency improvements could be financed via Energy Services Companies (ESCOs) and/or green credit lines.
Country Context: Based on the GHG inventory, in 2014 estimated total emissions in the Republic of Serbia without removals were 67,148.23 Gg CO2eq. Since 2000, total GHG emissions without removals have increased by 7.8%. In 2014, the total GHG emissions with sinks were 49,299.24 Gg CO2eq, which is a 2.4% increase compared to 2000. Emissions from the energy sector have the largest share (80.0%) in total emissions in 2014, which is a slight increase of 0.8 % compared to 2000.
This project would serve to decrease emissions associated with electricity production and improve the resilience of the agriculture sector from power outages due to extreme weather events.
Mitigation Impact: With over 60% of electricity production being coal-based in Serbia, the promotion of on-site and community renewable power offers an important greenhouse gas reduction potential.
Figure 10:Share of electricity by source, Serbia
According to a 2020 survey (Statistical Office of the Republic of Serbia, 2021), 38% of households (i.e. 938,000) were situated in rural areas. Rural households have on average 3.1 members and consume 5,032 kWh of electricity. Over 94% of rural households use electricity for water heating. Solar energy is present in 0.4% of rural households and used mostly for water heating. Geothermal energy is present in 0.1% of rural households and it is used for space heating in all of them.
If 20% of rural households participate and used on-site renewables for half of their electricity needs, this would represent a reduction of 429,521 tCO2e. Such a reduction would achieve close to 10% of the country’s 2030 GHG target.
Adaptation Impact: Agriculture is vulnerable to extreme weather events (e.g., storms) [NAP, 2015; SNC, 2017; TNC, 2020]. This project would allow any of the 938,000 rural households to become energy self-sufficient, therefore building their resilience to such weather events.
Necessary Conditions: By developing a financial model that de-risks and incentivises the purchase of onsite and community renewable power, this will ensure that the project will financially self-sustain. This approach could also be replicated in peri-urban areas, which represent 15% of the country’s population by some estimates (Gajić et al., 2021). Such scaling and replication would therefore achieve greater mitigation and adaptation benefits over time.
Figure 11: Urban, peri-urban and rural areas of Serbia
Co-Benefits: The project would help Serbia achieve Sustainable Development GOAL 7: Affordable and Clean Energy and GOAL 11: Sustainable Cities and Communities by reducing the adverse per capita environmental impact of communities, including air quality, by reducing the consumption of coal-based electricity. Renewable power can create jobs for the installation and maintenance of equipment, as well as renewable energy supply-chain jobs in manufacturing and specialised services (OECD, 2012).
Industrial processes
Recently approved FP140 (High Impact Programme for the Corporate Sector) already captures low-carbon technologies in the industrial sector (energy-intensive industries, agribusinesses, and the mining sector).
However, if a standalone project were to be developed, it could be similar to the one described in the GCF Country Program (i.e., “Low-carbon development project for Serbia’s cement industry”). Its scope would need to be for the entire industrial sector and could also include an adaptation component.
Green growth in Serbia’s heavy industries
Executing entity: TBD
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: A low-carbon, resilient and green growth development project for Serbia’s heavy industry sector could be developed. This would entail investments in: new energy efficient equipment, fuel-switching, adoption of new cleaner production processes, and reduction of wastewater effluents. This could be done in conjunction with phased-in regulations (or cap and trade system) to limit greenhouse gas emissions from heavy industries. An emergency preparedness component could also be included to build resilience in the sector. The scope of eligibility for this project would include key industry sub-sectors: cement production, automotive industry, mining, chemicals, tires, food and beverage, electronics, pharmaceuticals and garment production.
Financial instruments and funders: This would need to be discussed with the GCF officials who voiced interest in this sector in order to determine how an appropriate non-grant financial instrument could be developed and which Accredited Entity would be interested in championing the project. Much work would need to be undertaken to justify why GCF funding would be appropriate, considering that the parent companies for some of these industrial operations are well-capitalized (i.e., possess own equity) and have access to commercial loans with few if any barriers.
The instrument would likely not be very concessional, as the industrial sector generates revenues. The GCF Private Sector Facility may be able to help design a non-grant instrument. The GCF Private Sector Facility can: provide expertise to help assess the potential benefits and climate impact of project ideas; engage with a range of private sector investors, such as pension funds, corporates, local and regional banks and financial institutions; co-design concessional financing to de-risk high impact projects; encourage early-equity investment in underserved geographic regions where equity is not traditional (as is the case for Serbia); extend credit lines to local financial institutions to finance mitigation and adaptation projects; provide readiness support to green the financial sector by promoting sustainable finance; and even help establish green banks.
In terms of specific project design for heavy industries in Serbia, a loan guarantee or equity program could be developed, as described below.
Loan guarantee program
A loan guarantee program could be setup, providing capital to local partner financial institutions, with industrial sector companies borrowing from the local financial institutions to purchase the required equipment to reduce their greenhouse gas emissions.
Figure 12: Loan guarantee structure
SOURCE: (GCF, 2021b)
Equity program
An equity program could be put in place, whereby the GCF, donor government, or other international funder would provide first-loss capital to be blended commercial capital (taking the senior, less-risky tranche), thereby providing long-term financing via equity and/or debt (see Figure 5).
Figure 13: Private equity structure
SOURCE: (GCF, 2021b)
Potential funders for such a program might include GCF, EBRD and IFC.
Country Context: In 2014, emissions from the industrial processes sector amounted to 3402.20 Gg CO2eq, or 5.1% of total national GHG emissions. Since 2000, emissions from the industrial sector have increased by 10.9% in total, with some sub-sectors, such as the chemical industry, seeing a 2.7-fold growth in emissions. See Figure 6 for a breakdown of emissions by industrial sub-sector.
Figure 14: GHG emissions from Serbia’s industrial sector (Gg CO2 eq)
Source: (Republic of Serbia, 2017)
Industrial wastewaters are a key source of water pollution, with pre-treatment of industrial wastewater before discharge into the sewerage network being rare (UNDP, 2015). It is estimated that 15% of the total volume of wastewater discharged in 2013 came from industry (UNDP, 2015). The construction of wastewater treatment plants in industrial centers has been identified as an important adaptation measure (UNDP, 2015). This would alleviate pressure on the existing water supply infrastructure, which will be key in a future where droughts are more prevalent in Serbia.
Mitigation Impact: With the industrial sector emitting 3402.20 Gg CO2eq, a 10% reduction in emissions would represent 340,220 tCO2e. This reduction would make up 7% of the national target. The pre-feasibility study stage would allow for calculating the potential GHG reduction potential in a more robust fashion.
Adaptation Impact: Declining water quality can be an additional cause of climate change pressures on the health of the population and on health care system costs, as well as on economic development in general. The effects of climate change on water resources are reflected in a decrease in the quality and availability of water: to households, agricultural production and industry. These consequences can cause a drop in the GDP, both through the provision of water through purchases and the increase in prices of water, food and energy. By reducing industrial wastewater discharges, this stands to benefit downstream populations that will face water quality and water availability challenges associated with climate change.
By improving emergency preparedness and investing in disaster risk reduction in the industrial sector, this stand to increase the resilience of a sector that represents almost 25% of the country’s GDP.
Necessary Conditions: Putting in place a loan or equity instrument would provide the financial incentive for industrial actors to maximize the energy-saving benefits of their investment. By regulating or putting a cap-and-trade system in place for the sector’s GHG emissions, this would create incentives for continual improvement in terms of lowing the GHG intensity of their operations.
Co-Benefits: The project would help Serbia achieve Sustainable Development GOAL 9: Industry, Innovation and Infrastructure, as it promotes sustainable industrialization, via increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes. It also increases the resilience of industry. The project would also help Serbia achieve Sustainable Development GOAL 6: Clean Water and Sanitation, as it improves water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, and reducing untreated wastewater.
Waste management sector
EBRD’s GCF-funded “FP086: Green Cities Facility” (a multi-country program that includes Serbia), already captures solid waste management. However, there might be a compelling case to be made for funding a standalone national waste management program. As we have heard during the private sector engagement sessions, a key challenge in landfill gas capture is the need to have large enough landfill sites to make capture technically and financially viable. A pre-feasibility study would need to be undertaken to determine if there is indeed such potential in Serbia.
Clean and resilient waste management for Serbia
Executing entity: Ministry of Public Administration and Local Self-Government (to be validated)
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: A standalone national waste management program with a focus on climate proofing existing and new landfill sites, landfill gas capture and other GHG reduction opportunities from solid waste management. Local governments could put in place stronger compliance promotion, enforcement and penalties for illegal solid waste dumping.
Financial instruments and funders: This could be done via PPP and a loan from the GCF and/or EBRD and Agence Française de Développement (AFD). The Canada-IFC Blended Climate Finance Program could also be explored as an additional source of financing.
EBRD and AFD have supported the infrastructure sector with a significant regional waste management program, which aims to build sanitary landfills and increase the country’s recycling rate via a joint €150 million investment.
IFC and the Multilateral Investment Guarantee Agency (members of the World Bank Group) provided €260 million in financing and guarantees for a waste management project in Belgrade. The project involved the creation of a special-purpose vehicle formed by consortium between a global utility company, a Japanese company, and a European equity fund. The financing package also included a €20 million blended concessional loan from the Canada-IFC Blended Climate Finance Program. EBRD and the Development Bank of Austria provided co-financing for the project (IFC, 2020).
Country Context: Leachate waters from landfills are known to be a key source of pollution in Serbia, although comprehensive environmental monitoring is lacking in most municipal landfills in the country (UNDP, 2015). Some landfills are located near watercourses and lakes, and some are less than 500 m from existing water sources (UNDP, 2015). The risk of water pollution will likely increase with increased extreme weather events, including floods. With 50% of solid waste being illegally dumped in Serbia, including along waterways (UNDP, 2015), the improvement of solid waste management stands to alleviate water pollution and greenhouse gas emissions from this sector.
The sector was responsible for 3276.03 Gg CO2eq in emissions, with represents 4.9% of national emissions (Republic of Serbia, 2017). The GHG emissions from the waste management sector have only decreased by 1.3% between 2000 and 2014, leaving much room for reduction opportunities.
The country has existing experience to build upon. Construction of a new sanitary landfill, combined with a waste-to-energy and recycling plant, began in late 2019 in Belgrade. The site is at the Vinča landfill, which was the largest unmanaged open dump in Europe (IFC, 2020).
Industrial wastewaters are a key source of water pollution, with pre-treatment of industrial wastewater before discharge into the sewerage network being rare (UNDP, 2015). It is estimated that 15% of the total volume of wastewater discharged in 2013 came from industry (UNDP, 2015). The construction of wastewater treatment plants in industrial centers has been identified as an important adaptation measure (UNDP, 2015). This would alleviate pressure on the existing water supply infrastructure, which will be key in a future where droughts are more prevalent in Serbia.
Mitigation Impact: The sector was responsible for 3276.03 Gg CO2eq in emissions. If the program leads to a 10% reduction in emissions (via increased collection, landfill gas capture, etc.) from the waste management sector, this represents a 655.206 Gg CO2eq reduction, which is 7% of the 2030 national target. The pre-feasibility study stage would allow for calculating the potential GHG reduction potential in a more robust fashion.
Adaptation Impact: The project would reduce the risk of water pollution in waterways near landfill sites and where solid waste is illegally dumped. This has positive knock-on effects on water sector resilience.
Necessary Conditions: Putting in place PPPs could help decrease project costs and incentivise ongoing revenue generation, which would make the program self-sustaining. If the government put in place stronger compliance promotion, enforcement and penalties for illegal solid waste dumping, this would incentivise individuals to use (and pay for) waste collection services.
Co-Benefits: The project would help Serbia achieve Sustainable Development GOAL 11: Sustainable Cities and Communities, as it tackles municipal and other waste management. It would also help achieve Sustainable Development GOAL 6: Clean Water and Sanitation, as it would improve water quality and protect and restore water-related ecosystems, including rivers and lakes.
Low-carbon transport
One pragmatic solution for the short and medium term would be to focus on electric vehicle fleets that would be powered via on-site renewable electricity. This would align with Project #4 in the GCF Country Program (i.e., “Advancing sustainable mobility in Serbia’s transport sector”). In Project #4, there was the suggestion to “…instal(l) a charging network powered by renewables…” and “support to incentivize production, purchase and use of electric and hybrid vehicles…” There is some overlap with FP025 (EBRD Sustainable Energy Financing Facilities Co-financing Programme) and FP140 (High Impact Programme for the Corporate Sector), although this overlap would be minimized by focusing on SME and public sector fleets.
Renewable power charging stations for vehicle fleets
Executing entity: TBD
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: A program focused on solar and wind power fleet charging stations could be designed. Charging stations would be built to charge electric vehicles in commercial and municipal fleets. The charging stations would be powered by solar photovoltaic panels or wind turbines built onsite.
Financial instruments and funders: Financing could be provided via EBRD or FMO loans (either as GCF Accredited Entities, or directly with those organizations without GCF involvement). The loans would be for the purchase of the solar panels, wind turbines and charging station equipment. The loans would be reimbursed via fleet fuel savings. The procurement of electric vehicles would be undertaken by individual businesses and public organizations using their own equity/resources. Another model could include equity and a loan for the purchase of equipment and vehicles, and a rental program for the vehicles, although this is likely a less appealing investment opportunity.
Country Context: Seventy percent of Serbia’s electricity is coal-based. As such, mainstreaming electric cars is not a tenable option until the country’s electricity grid is decarbonized.
Mitigation Impact: TBD – requires data on number and types of vehicles in commercial and municipal fleets that could be replaced by battery-electric vehicles.
Adaptation Impact: Not applicable.
Necessary Conditions: If this project is implemented, capacity will have been built to build and maintain renewable power generation stations and electric vehicles. By electrifying vehicle fleets, this will provide fuel savings and lower vehicle maintenance costs (e.g., oil changes, transmission fluid flushes, other engine fluid replacements). These savings provide the ongoing incentive to replace internal combustion engine vehicles within the fleet to battery-electric vehicles.
In addition to the above priority areas, the following cross-cutting project is being suggested to encourage climate action by private sector actors across all sectors of Serbia’s economy.
Green and resilience bond for Serbia
Executing entity: TBD
Project Focus
Mitigation
Adaptation
cross-cutting
Estimated project budget (including co-financing)
USD 1-10 million
USD 10-50 million
> USD 50 million
Description of the project idea: This would be a broad program to encourage climate action by private sector actors across all sectors of Serbia’s economy.
Financial instruments and funders: This could be designed via the creation of a green and resilience bond, accompanied by a technical assistance grant. There has been an exponential rise in the development of green bonds, with over USD 1 trillion issued since 2007 (Climate Bonds Initiative, 2021). Green bonds are fixed-income instruments that support specific environmental projects. Bond issuers raise a fixed amount of capital and repay the capital (principal) and accrued interest (coupon) over a set period of time. This has been used in Panama, for example, where the issuance of a green bond served to compensate farmers who adopted siltation-reducing practices and bond owners, who included Sony and Walmart (Forest Trends et al., 2008). There is an almost limitless number of technologies that could be funded via such a program. For instance, see Figure 7 for a list of technologies supported by the GCF to date.
Figure 15: Technologies supported by the GCF to date
SOURCE: (GCF, 2021b)
Country Context: Although businesses (in Serbia and elsewhere) can borrow from banks, the issuance of bonds can sometimes be more financially attractive, as the interest rate requested by bond investors tends to be lower than commercial loans. International institutions, such as the World Bank and the GCF have supported developing countries in the issuance of green bonds to finance various climate-friendly activities (e.g., municipal bonds for recycled water in South Africa). GCF has even provided grants for developing countries to build capacity in their stock market to issue bonds (e.g., Caribbean green bond listing on the Jamaica Stock Exchange). The European Bank for Reconstruction and Development (EBRD) also has experience in the issuance of such bond. EBRD has issued Environmental Sustainability Bonds, Climate Resilient Bonds, as well as Green Transition Bonds (EBRD, 2022).
The Serbian Chamber of Commerce and Industry has indicated their interest in the development of a green or climate bond in Serbia and the Government of Serbia has even adopted a Green Bond Framework last year (Republic of Serbia, 2021). As such, a green or climate bond could be developed in collaboration with the Ministry of Finance, Serbian Chamber of Commerce and Industry, as well as Serbia banks, the World Bank, EBRD or the GCF.
Mitigation Impact: TBD
Adaptation Impact: TBD
Necessary Conditions: The creation and issuance of green and resilience bonds would attract capital to finance activities that would help decrease Serbia’s greenhouse gas emissions and make its economy and communities more resilient to the negative impacts of climate change.
Co-Benefits: The co-benefits will depend on the scope of the activities covered by the bonds. With a broad-ranging green and resilience bond, it is reasonable to anticipate that such a program would contribute to multiple sustainable development goals.
6.1 What are climate technologies and why they are relevant for the private sector?
Technologies that we use to address climate change are known as climate technologies. Climate technologies
that help us reduce greenhouse gas (GHG) emissions include renewable energies such as wind energy, solar
power and hydropower. To adapt to the adverse effects of climate change, we use climate technologies such
as drought-resistant crops, early warning systems and sea walls. There are also ‘soft’ climate technologies,
such as energy-efficient practices or training for using equipment.
Developing and transferring technologies to support national action on climate change has been an essential
element from the beginning of the United Nations Framework Convention on Climate Change (UNFCCC) process.
In 1992, when countries established the Convention, they included specific provisions on technology with
the aim of achieving the ultimate objective of the Convention. The Convention notes that all Parties shall
promote and cooperate in the development and transfer of technologies that reduce greenhouse gas (GHG)
emissions. It also urges developed country Parties to take all practicable steps to promote, facilitate
and finance the transfer of, or access to, climate technologies to other Parties, particularly to
developing countries. Furthermore, the Convention states that the extent to which developing country Parties
will effectively implement their commitments will depend on the effective implementation of their
commitments under the Convention related to financial resources and transfer of technology.
Over the years, technology development and transfer with regards to climate change adaptation has received
increasing attention. The Paris Agreement speaks of the vision of fully realizing technology development
and transfer for both, improving resilience to climate change and reducing GHG emissions. It establishes
a technology framework to provide overarching guidance to the Technology Mechanism.
Climate Change Mitigation technologies refers to reduction or prevention of greenhouse gas emissions. Mitigation means using new technologies and renewable energies, making older equipment more energy efficient, or changing management practices or consumer behavior. It can be as complex as a plan for a new city, or as simple as improvements to a cook stove design. Efforts underway around the world range from high-tech subway systems to bicycling paths and walkways.
Typical sectors where mitigations measures can be implemented are: energy, transport and industry.
6.2.2 Adaptation technologies
Climate change adaptation technologies refers to adjustment and reduction of the effect of current or future climate changes. This means society, flora and fauna should make adaptations to avoid harm, the humans have to take action to help natural systems to adapt to new circumstances.
Typical sectors where adaptation measures can be implemented are: health, agriculture, forestry and biodiversity.
INFO SHEET NO. 7
Ensuring gender equality in private climate financing
7.1 Gender Action Plans for Climate Action - a global perspective
The fact that women and men are disproportionally affected by the climate
change negative impacts, which at the same time accelerates gender inequalities and it is increasing the gender gap in the society, was recognized and
introduced in the modest beginning of gender mainstreaming through the United Nations Framework Convention on Climate Change (UNFCCC) process with the
Conference of the Parties (COP) 7 (2001) by urging bigger female representation of the Parties within the bodies established under the UNFCCC and the Kyoto Protocol.
Still, the significant step forward was done by the Lima Work
Programme on Gender (18/CP.20) in 2014, by acknowledging the importance of gender mainstreaming through all relevant targets and goals in activities
under the Convention as an important contribution to increase their effectiveness, followed by the Paris Agreement (2016) and recognizing the gender
equality principle as a substantial and crucial part that will lead towards increased transparency and effectiveness of the climate change policies and actions.
It is important to highlight that climate financing
without addressing gender inequality can undermine the effectiveness of the interventions. In that regard, private sector, as one of the
key actors in climate change policies and actions, should imperatively make their engagement in climate change efforts gender responsive
and gender proved.
7.2 Private sector climate change finance and gender
Gender constraints and gaps play critical roles in influencing women’s participation in financial markets, including the carbon market.
Effective participation requires proper understanding and the freedom to engage in transactions, which many women lack. Access and control over
capital and other economic resources further constrain wider participation.
Unfortunately, gender segmentation and disparate access to tangible and intangible resources impact women’s abilities and capacities to enter and exit
the market. The private climate change finance market currently exhibits the same gender dynamics as traditional financial markets: women are
under-represented and a high degree of gender biases and asymmetries inhibit their full participation. Further, actors with financial expertise
and historical attachment to the environmental field—typically men—have been the early participants in trading innovative financial products
(e.g. carbon credits). Early entry, experience and expertise in markets typically give these actors a range of advantages over newcomers.
Women also face challenges with access to credit. Reasons include lenders assigning a higher probability of default to small producers
(many of whom are women), high administrative costs of extending and recovering smaller loans, gender asymmetries in the flow of information
about credit markets and women’s general lack of access to collateral. In addition, many financial institutions, even for the same activity or
purpose, will usually offer women smaller loans than men. These factors often combine to exclude
or crowd-out women from existing credit markets.
Women are also discriminated against because credit institutions tend to assume that women borrow for consumption purposes and are therefore likely
to have trouble repaying. But, women’s apparent consumption goods frequently serve dual purposes and are often transformed into capital goods that
generate income in the informal and household economy. For example, women often utilize household refrigerators for cooling services for drinks
and juices, ice production and sale, and storage facilities either for their own activities or on a fee-based system for neighbourhood services.
Similarly, women may use stoves and other equipment to make and prepare foods for sale.
As a result of high transaction costs and frequent market failures, financial markets may actually increase or exacerbate the gap between men and women
in terms of access to other tangible resources in the economy. For example, in its
Diagnostic Study on Access to finance for Women Entrepreneurs in South
Africa
, the International Finance Corporation notes that in Kenya, 48 percent of business owners are women, yet they hold only 7 percent of formal credit
and own just 1 percent of land. Similarly, in Nigeria women own 25 to 30 percent of registered businesses, but access only 10 to 15 percent of bank credit.
And in Uganda women account for 39 percent of businesses with registered premises, but receive only 9 percent of commercial bank credit. This situation has
serious implications for women’s abilities to engage in the climate finance arena or to start or scale up initiatives aimed to respond to climate change.
In the Republic of North Macedonia, in terms of access to credit, women account for 45 percent of the total number of individual borrowers, compared to
55 percent of men, and in terms of the volume of loans, even less, i.e. only 38 percent of the total approved loans belong to women.
7.3 Why is gender relevant for private sector engagement in climate action?
Engaging private sector is an imperative for effective climate change actions, and at the same time, including gender responsive actions within the private sector`s
response will secure a real efficiency and effectiveness of that response.
Still, there are two sides of gender inequality in climate financing, as well as the private sector engagement in climate action.
The existing social gender-based inequalities and differences, as well as gender-related barriers, which disable women from taking equal
participation in the decision-making processes and financial resources must be recognized by the private sector.
Women’s Entrepreneurship Report 2018/2019 (GEM) states that when it comes to Factor-Driven and Factor-to-Efficiency-Driven Economies: women are 21 percent less likely than men to start a business,
for Efficiency-Driven and Efficiency-to-Innovation-Driven Economies women are 30 percent less likely than men to start a business, and when it comes to Innovation-Driven Economies, women are
41 percent less likely than men to start a business. This shows that in general, women are less likely than men to start their own business, and the entrepreneurial gap is increasing with
the higher stage of economic development. On the other hand, real climate change action will be achieved when both men and women will take the same advantages of the activities as final
beneficiaries in both mitigation and adaptation activities. Data in the Figure 22 shows that women as agents of change have remained neglected in climate policy and finance circles at the global level.