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Concessional financing to scale up our clients’ impact and support their risk-taking
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PROPARCO - SUSTAINABLE DEVELOPMENT REPORT
To accelerate transitions, private sector and investors’ access to concessional resources is increasingly integrated into international donors’ strategies, and their resources devoted to these activities are growing. For some years, Proparco has been mobilizing this opportunity: it has been using concessional resources blended with market instruments. The goal is to diversify and adapt its instruments to project and company needs and risk levels that it wishes to finance and support in the search for additional and transformational impacts. Provided that they are well used and in compliance with the principles stated in the AFD Group positioning notes, concessional financing opens real opportunities of additionality in certain operations.
The management of four delegated funds, a sign of recognition for Proparco
With the “7 pillars” accreditation, Proparco has been able to manage delegated European Commission funds since 2015. Today it manages 4 delegated funds, directly or in partnership with AFD and the EDFIs, in the form of facilities which can be used for several financial operations. The accreditation received from the European Commission is recognition of Proparco’s work. It testifies to Proparco’s capacities for appraisal, implementation and effective management of EC financing for a wide range of operations, instruments, risk-sharing and amounts. It also highlights the relevance of its many institutional capacities (banking institution, manager of international mandates) and technical capacities (fiduciary, control, human and logistical) as well as its global, thematic and geographical know-how.
Proparco, partner of the Green Climate Fund
Furthermore, Proparco has been accredited since 2016 to mobilize funding from the GCF. Approved by Proparco’s board of directors on October 5, 2018, the partnership with the GCF was signed in the form of a Framework Agreement in April 2019. This partnership is a strategic opportunity for Proparco: it reinforces its capacity to support the private sector in its low-carbon transition. Access to the GCF moreover opens possibilities for Proparco to manage grants or to become a manager of subsidized loans or capital investments with a risk profile. These tools are complementary and make it possible to round out the attractiveness of Proparco’s own financing thanks to the mixing of resources.
Stronger links with its partners
In order to deepen the partnerships with these entities, in 2016 Proparco allocated specific resources to its TA unit, which—tasked with a new role—became the “TA and Resource Blending” unit. This new arrangement has facilitated the mobilization of funds via capitalization and feedback on experience, and it has enabled better compliance with the stringent accountability demands imposed by these delegators.
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Since 2019, Proparco has also been able to mobilize French government funds: it uses grants and subsidized interest rates to provide differentiated financing to projects generating additional positive impacts. The operations using these concessional resources follow the usual appraisal and decision process of other financial operations, with a specific analysis produced to justify their use for private actors. The mobilization of these resources is regulated by the positioning note on the use of concessionality approved by the AFD Group board of directors at the end of 2018. This positioning note complies with international principles and best practices in terms of resource blending as expressed by the OECD and the DFI and MDB Working Group on Blended Concessional Finance. Between 2020 and 2022, as part of its new strategy, Proparco is targeting an increase in its capacity to mobilize concessional resources. These will be prioritized for:
Reorientation of investment flows and financing toward the sectors, products and services that are part of economic, social, environmental, territorial and digital transitions. These flows will be backed up with bonuses and subsidies to reward the additional effort and impact carried out.
Support for our clients in the form of technical assistance and support funds, to assist with: - their evolution toward better social and environmental responsibility practices; - and their capacities to innovate, implement and support transitions.
Fostering the actors and solutions of tomorrow (venture capital, social economy, etc.), particularly in fragile countries, where access to concessional resources would be more helpful for taking on the risk or innovative character of their operations.
PRINCIPLES OF THE PROPER USE OF CONCESSIONALITY
GROUP
DATE OF CREATION OECD-DAC has blended finance principles for unlocking commercial finance for the sustainable development goals
2017
DEFINITION OF BLENDING “Blended finance is the strategic use of development finance for the mobilization of additional finance towards the sustainable development goals (SDG) in developing countries”
PRINCIPLES Serve development Increase the mobilization of private finance Be adapted to the local context Strengthen transparency and impacts Strengthen partnerships between private actors and development actors DFI enhanced principles for blended concessional finance in private sector projects
2013 (principles) then 2017 (enhanced principles)
“Combining concessional finance from donors or third parties alongside DFIs’ normal own-account finance and/or commercial finance from other investors, to develop private sector markets, address the SDGs, and mobilise private resources”
Additionality Minimum concessionality Business sustainability Markets strengthening High standards
