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17.12.2010

Denmark gets involved in the Global Climate Partnership Fund established by Germany

Initiative for mobilising private capital for climate protection in developing countries gains support

The Danish government will contribute around 5 million euros to the risk tranche of the Global Climate Partnership Fund established in 2009. Federal Environment Minister Norbert Röttgen expressed his delight in Cancún to the Danish Climate and Energy Minister Lykke Friis about Denmark's willingness to support this pilot project on mobilising private capital for climate protection. 12 months after its establishment, the Fund already totals around 250 million US dollars. Within five years the successive increase in the Fund to at least 500 million US dollars will be striven for. 

Minister Röttgen commented: "In my view, the Global Climate Partnership Fund is a prime example of intelligent deployment of limited public funds. We need more of these innovative financing mechanisms for climate protection, and we must take further action swiftly. Climate protection needs private engagement." 

The Global Climate Partnership Fund is the world’s first structured fund to provide credits for climate investments via banks in developing countries. The Fund will be fed by public donors, development banks such as the KfW and the World Bank, and especially private banks. In contrast to many existing credit programmes, the public money will not be consumed by the Fund, but used in a revolving fashion. This means that repayments of credits are being reinvested on a continuous basis. The Fund is privately organised and is administrated professionally by the Deutsche Bank. 

The special feature of a structured fund consists in its different risk tranches. The public funds, such as those from the German Environment Ministry, serve as a risk buffer for private capital. They are allocated to the so-called first loss, or junior tranche. The Danish contribution will be allocated to this first loss tranche. This risk hedging structure creates incentives for private investors to pay into the Global Climate Partnership Fund - even though the Fund invests in high-risk regions (developing countries, countries in transition and emerging economies) and in innovative sectors (funding of climate protection projects). 


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