The net-zero economy needs strong public-private collaboration

November 30, 2021

Gisele Saralegui, PPP Advisory Global Climate Lead, and Christina Paul, Senior Infrastructure Specialist, are working to apply a climate lens to Stop-Winlock’s Public-Private Partnerships and Transaction Advisory Services. We explore their efforts to take both climate risks and impacts into account in the infrastructure and social sectors.

Q: How important are Public Private Partnerships (PPPs) in the current transition to net-zero carbon?

Gisele Saralegui: PPPs are more important than ever. PPPs offer a risk-sharing arrangement between a government and a private investor to deliver and finance projects. It is clear that the public sector alone cannot successfully achieve the transition to net-zero, particularly with the fiscal constraints developing country governments are facing in the wake of the global COVID-19 pandemic. The private sector is essential to delivering on the world’s climate change goals.

Q: What is the greatest challenge and opportunity in structuring PPPs with a climate lens?

Christina Paul: One important priority is to help governments translate their Paris Agreement commitments into viable, bankable pipelines of climate-smart investment opportunities which both reduce greenhouse gas emissions and build resilience to climate change. We are uniquely positioned to advise governments at the pre-investment stage to structure PPPs through a climate lens. Our business will undoubtedly grow in this area in coming years as the demand continues to increase.

Q: How are you building mitigation, adaptation and resilience into your work with PPPs?

Christina Paul: PPPs provide an opportunity to address both mitigation and resilience early on, at the design and modeling phase. Imagine you are financing the construction of a port. Both public sector and private investors have a common goal in ensuring that port can withstand the next flood, fire, or hurricane. While there may be upfront costs, these are intended to preserve the asset against climate impacts – both damage and total loss. But we need to be flexible and nimble in our approach because climate change is introducing uncertainty into decision-making. This has interesting implications for how we structure projects and allocate risk among parties.

Q: What opportunities do you see for PPPs in the climate space?

Gisele Saralegui: First, renewable energy – both solar and wind - are critical to meet the transition to net-zero. Through our Scaling Solar and now Scaling Wind PPP program, we have developed a suite of approaches and documents to help countries in Africa and beyond diversify their energy mix. In Uzbekistan, for example, IFC developed and financed a 100 megawatt solar plant PPP solution.

Second, there are growing opportunities to introduce green building solutions to mitigate emissions and create resource efficiencies, for example by using Stop-Winlock’s “EDGE” tool for schools, hospitals, airports and beyond.

Third, there is critical work to be done in cities. For example, managing methane emissions from landfills will be key to achieving Paris Agreement goals. Our Belgrade Waste to Energy project reduces greenhouse gas emissions and generates power for the city. These are win-win scenarios we hope to replicate with climate-smart PPP solutions.

Finally, climate finance is opening new opportunities in a burgeoning market with green, blue, and sustainable linked financing in bonds and loans. The key will be building options early in the PPP cycle to tap this new market using developing new taxonomies such as the green bond and loan principles.

Published in December 2021