Legal Assessment for Three Proposed Blended Finance Vehicles as De-Risking Instruments for Green Project Financing

About Climate Policy Initiative (CPI)

Climate Policy Initiative (CPI) works to improve the most important energy and land use policies around the world, with a particular focus on finance. CPI supports decision makers through in-depth analysis on what works and what does not. CPI works in places that provide the most potential for policy impact, including Brasil, Europe, India, Indonesia, Kenya and the United States. Our work helps nations grow while addressing increasingly scarce resources and climate risk. This is a complex challenge in which policy plays a crucial role. CPI is a small but dynamic organization, with a global reach and an entrepreneurial culture. We work hard to maintain an idea-driven, collaborative environment across all our teams.

CPI’s Climate Finance program guides decision makers who are working to ensure economic growth while addressing increasingly scarce resources and climate risk. Enough capital exists to transition the world into a low-carbon, climate-resilient economy. However, current investment in climate-friendly development falls far short of the need. CPI works to redirect finance from high- to low-carbon activities and helps decision makers use their resources wisely. We provide much-needed information on climate finance flows, apply in-depth analysis to guide decision makers on their efforts, and support innovation in finance to address investors’ needs and lower costs.

Project Summary

Sustainability projects are in favored, supported by portfolio data of Green Climate Funds, which has 129 projects worldwide as of May 2020. Comparing to data as of May 2018, the number of projects increased by 70% for the past 2 years. CPI partners with a local state-owned financial institution (“Partner”), PT Sarana Multi Infrastruktur (“PT SMI”) will develop a study in de-risking instruments to facilitate green funding mobilization on inclusiveness of all potential green projects.

There are currently four de-risking instruments presented in PT SMI, i.e. first loss mechanism, cost overrun, interest subsidy, and innovative equity mechanism, to support mainly renewable energy and energy efficiency projects. PT SMI also has launched SDG Indonesia One as one of its blended finance vehicles to support green infrastructure project. To ensure inclusivity of other potential green projects, PT SMI is exploring on:

  1. de-risking instruments to well-fitted its purposes as potential cost reduction and risk management tool,
  2. the associated blended finance vehicles to facilitate green funds distribution, and
  3. the convertibility of the current de-risking instruments to tap on, not only renewable energy, energy efficiency, and infrastructure projects, but also, other green investment opportunities.

Innovative blended finance vehicles need to be developed as de-risking tool and to attract global investments. Further, public funds act as catalyst to improve risk/return profile of green projects to attract private sector participation (OECD, 2015). Three options for blended finance vehicles are assessed as starting point, from both Business and legal perspectives.

Background of the Study

Indonesia set sustainable development budget of approximately USD 400 Bn for period 2015 to 2019. However, government funding could only cover 67% of the total cost and green infrastructure is representing almost third of total annual budget in 2018, while the remaining 33% investment gap can be filled using, public, private, or blended financing to achieve Indonesia’s ambitious target (OBG, 2018).

Supporting Indonesia’s SDGs and integrating sustainability into its culture and mission, PT SMI showed its commitment to practice development activities that prioritize sustainable development aspects. In terms of sustainability performance highlights, it is showed positive year-on-year sustainability performance for all five economic indicators[1]. Moreover, it is contributed to socio-economic benefits by providing better access to electricity, clean water, natural gas networks, as well as infrastructure and community service improvement.

Further commitment is also expressed by PT SMI through its current instruments to cater mainly on energy efficiency, renewable energy, and infrastructure projects. Looking into more variety of green projects, the development of financial instrument/vehicle could potentially contribute to achieve Indonesia’s sustainability goals by tapping greater green investment flows. Addressing the development challenges of financial instrument/ vehicle may contribute to Indonesia’s target to achieve Sustainable Development Goals.

Prior to the financial vehicle development, these options have to meet local and international law and regulations, as well as the best-practice requirement that is legally sound. Business and legal review is necessary, particularly to confirm that these can be applied to PT SMI and potentially replicated to other institutions and green industries. The exercise aims to develop a set of recommendations for public and private financial actors to better incorporate green financing into their portfolio without compromising economic, sustainability, legal, and legislative perspectives.

Position Summary

CPI is currently working on a preliminary study to help accelerate green funding mobilization in Indonesia Under this study, CPI partners with a local state-owned financial institution (“Partner”), PT Sarana Multi Infrastruktur (“PT SMI”) to develop blended finance vehicles as de-risking tools to attract private sectors, while public funding can play a role as catalyst on the green investment.

An exciting opportunity exists for a Legal Consultant Team to join CPI’s Climate Finance team working on the study to identify blended finance vehicles most appropriate serve its green funding purpose to cater green investment from the perspective of business, legal, and legislative (law and regulations) of Indonesia and international. Based in Jakarta, Indonesia, the Consultant is expected to provide the deliverable on July 31, 2020 and be part of the team supporting our Partner in evaluating investment opportunities. The Consultant will be contracted for 20 days, effective working day, with opportunity for extension.

Key Responsibilities

  • Work closely with CPI’s Partner and CPI’s team in carrying out the study;
  • Perform analytical works (legal, laws, regulations applicable for Indonesia and international) to help our Partner make investment decisions;
  • Produce high-quality materials/report on short deadlines;

Scope of Work

  • Review three proposed blended finance vehicles in mobilizing green funds in Indonesia and international
  • Identify risk and barriers (legal, laws, and regulation, etc.) of blended finance schemes in Indonesia
  • Explore potential solutions to address risk and barriers of three proposed blended finance vehicles for green funding for CPI’s Partner
  • Deliver the findings in legal analysis report to support CPI analysis and business review for the selection of proposed vehicles



Qualification

The Consultant shall have proven expertise and demonstrable experiences in:

  1. Performing legal review for investment structure or working in financial institutions, or advisory firms (i.e. investment bank, development financial institution, corporate finance advisory firm, credit rating agency or management consulting company).
  2. Having exposure in the renewable energy sector is a plus.
  3. Ability to communicate methods, results and recommendations to expert and non-technical audiences
  4. Superior written and verbal communications skills

To Apply

Interested Consultant candidate shall submit following documents:

  1. Covering letter
  2. Offering proposal, covering proposed methodology, implementation schedule and financial proposal
  3. Curriculum vitae
  4. Sample of previous work in English.

Visit this link to submit an application by 17 July 2020. Only short-listed applicants will be contacted.


[1] Laporan Keberlanjutan 2019 Sustainability Report ([...]

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