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Every day public banks are developing new and innovative ways of financing a green transformation. This issue brief explores the lessons from two public banks, one in Costa Rica and the other in Germany.
The current global context is favourable to raise the potential for public banks to support a green energy transition. Both the 2015 UN Sustainable Development Goals (SDGs) and Paris Agreement on climate change (COP21) stress the need for massive new investments in sustainable infrastructure. The global demand for new infrastructure is estimated to be in the range of US$90 trillion. The World Bank and other international financial institutions have financed relatively little energy efficiency projects (only 14% of their energy portfolio from 2012 to 2014, or 3% of total investments) and private sources of capital are lacking because financiers prefer shorter term, lower risk, and more conventional investments.
Public and cooperative banks – owned and controlled by state authorities, by public enterprises or owned collectively under public law – may hold the key to the future of a just global green transformation and energy democracy. They are already doing much in that regard, and there is potential for public banks to do more in the current context:
Mainstream understandings of a ‘well-functioning’ public bank share little with the needs of energy democracy. Such understandings focus on securing higher and more stable returns on investment for private investors with public finance strictly serving to ‘wrap’ private green infrastructure projects in public guarantees that socialize risks.
To illustrate how public banks can provide green financing in a public way, this briefing explores two cases:
Is owned by workers and perhaps the most democratic bank in the world; it prioritizes working with coops and public institutions, as well as with people typically excluded from financial services.
Is owned for 80% by the Federal Republic of Germany and for 20% by the German federal states, has developed a strong green lending portfolio.
These two banks are not perfect, but they do offer important lessons in the struggle to equitably finance a just energy transformation.