CTF and the private sector

CTF strongly focuses on private sector engagement.  Private capital, expertise and commercial discipline can make a big difference in implementing clean technology strategies. Increasingly, governments are recognizing that a combination of appropriate public sector policies and private sector action can achieve sweeping, transformational change to climate resilient development that minimizes the output of greenhouse gas emissions.

CTF offers a mix of financial incentives, risk mitigation tools, technical assistance, and knowledge transfer that can help make adaptation and mitigation investments more attractive to private investors.

Examples of how the CTF is working to help break down barriers to private investments in energy efficiency and renewable energy projects include:

  • Many financial institutions hesitate to develop energy efficiency or renewable energy lines of credit when there is a steep learning curve and new loan procedures that have not yet established revenue potential and loss performance records.  Using CTF funds to absorb losses that could exceed losses in other typical business lines provides the comfort level needed to encourage new investment while a track record is being established.
  • Perceived risks inhibit investors from financing renewable energy projects in markets where the sector is not yet developed and there is no track record.  To address the barriers to early entrants, CTF funds can be used to cushion the risks (through subordination, guarantees, or equity gap coverage), off-set the upfront costs (through lower pricing on investments), or both.

Early results are encouraging. The private sector is involved in all approved CTF investment plans in Africa. Moreover, private sector representatives participate in CIF governance, serving as observers to the various fund committees.