Investing in renewable energy in developing countries

[Music]

if i told you

that a traditional pension fund can

achieve a solid financial return

by having a real positive impact on

climate would you believe me

what if i also told you that this

pension fund can venture into markets

that often are considered too risky

would you believe that is possible

it is possible in fact this is the case

with our investments in renewable energy

in developing countries

and that is very good news because we

need to turn

billions of investments into trillions

in order to reach the goals in the paris

agreement and what klp has done can

hopefully inspire other investors

to do something similar i’ll share with

you today

the benefits of private sector

investments

going hand in hand with public sector

investments

or blended finance as it is called i

want to show you some of the projects

that we are proud to be a part of in

order to describe the impacts of what we

are doing

let us start in mozambique which is one

of the poorest countries in the world

where only 31 percent of the population

have access to electricity

here we helped finance mokuba

mozambique’s first large-scale solar

plant

it provides enough electricity to serve

the equivalent of 175

000 households besides reducing

emissions

by around 80 000 tons annually

it helps to stabilize the grid and the

energy supply in

northern mozambique at the peak of

construction

the project employed 1500 people

which most were hired locally and

although it currently

employs only a handful of people

the wider impact on the economy is

significant

as people and businesses get a better

more stable access to energy

productivity improves and new businesses

are established

leading to more jobs and economic growth

now let us turn to the lake turkana wind

farm in kenya

this provides almost 17 percent of

kenya’s installed energy

generation capacity thereby avoiding

production from fuel oil plants

and providing reliable and low cost

electricity

also the project this has had additional

positive impacts

a new road has reduced time and costs of

travel and has helped to increase trade

in the region these are investments that

we have done

with north and the norwegian investment

fund for

developing countries we have started an

investment

company together which make direct

investments in projects

and although northland is publicly owned

it is commercially oriented and thanks

to their expertise

operational setup and thanks to their

way of structuring projects

klp found a way to enter these markets

that wasn’t feasible

before and wasn’t feasible on our own

the return

has also been attractive a 12 annual

return so far

this has eased our initial hesitations

and has

encouraged us to continue building this

portfolio

we all know that renewable energy plays

a critical role

in achieving the goal in the paris

agreement

we must reduce the use of coal as an

energy source

at klp we have already become coal free

and have focused more of our attention

uh on the opportunities that comes with

fighting climate change

according to the oecd we need 6.9

trillion

u.s dollars in infrastructure

investments every year to 2030.

to meet the goals of the paris agreement

contrast this to about 300 billion

dollars which is the figure for the

current annual investments in renewables

there is absolutely no doubt that we

need more renewable energy

especially in developing countries where

we expect

the largest growth in needed capacity

and where we now have the chance

to replace the coal plants

the question is how this can be financed

at the pace and

the scale needed again we must turn

billions into trillions

in order to bridge the financing gap for

renewables and private institutional

investors

can and should take a bigger role so my

message today

is that klp and other institutional

investors

can fight climate change while at the

same time harvesting competitive returns

and managing the risks that are involved

by establishing new partnerships and

using new tools

we can accelerate the spread of

renewable energy

i already told you about klps and

orphans

co-investments but there are also other

ways

that private and public investments can

play together

let’s dig deeper in the blended finance

toolbox

the beauty of blended finance is that

both parties benefit

public money can be used as an effective

risk cushion

which means that investors dare to make

investments

that previously was too risky as the

risk is now lower

the government on the other hand can do

more

while spending less as it becomes a

catalyst

for mobilizing private capital the

blended finance mechanisms

have the potential to unlock private

money

that otherwise hadn’t been there it can

be done in many ways

but i’ll show you another example from

klps investments

this is the innovative fund climate

investor one

that financed the whole life cycle of a

renewable project

this fund consists of several components

with three different financers public

donors

state guaranteed loans and commercial

investors

the public donors are essentially giving

a very cheap loan to the project

they are however the last ones to get

their money back meaning that

in the case the project fails

the initial loss will be covered by the

donor

this is what is called a first loss

mechanism the

state guaranteed loans help reduce the

credit risk in the project

and combined with a first-last mechanism

it creates

a risk and return profile that also fits

a commercial and traditional pension

fund

like klp for kelp blended finance has

been a blessing

it lowers risk and we have found the

operational partners

that we need to do it in short it has

given us the chance

to get involved in these markets and

directly in projects

it has created a win-win situation where

we can ensure a responsible and

sustainable

management of pensions while at the same

time fighting climate change and having

a positive

impact on society institutional

investors manage a vast sum

of money the asset owners that have

signed

the pri which is a network of investors

and the world’s

leading proponent of responsible

investing control

90 trillion us dollars if these pri

asset owners were to direct one percent

of their assets under management

to renewable energy this would mobilize

financing

around a thousand and three hundred

gigawatt of new capacity

that is over seven times more than what

what was installed

last year a recent article in the

economist shows that blended finance

struggle has struggled to grow despite

its attractive merits

in order to reduce the barriers for more

blended finance

public and private sectors need more

dialogue

on how structures can be developed to

suit both parties

needs and objectives so my call to

action is

stop financing coal public and private

investors

partner up in blended finance solutions

and finally

steer capital to renewable energy

we can make this happen and in the

meantime

we in klp we are committed to continue

increasing the green investments year by

year

for the benefit of the financial returns

and the climate