TA-6930 REG: Accelerating Climate Finance Investments through the Financial Sector in Bangladesh and Nepal - 01 Climate Finance Study (56009-001)

TA-6930 REG: Accelerating Climate Finance Investments through the Financial Sector in Bangladesh and Nepal - 01 Climate Finance Study (56009-001)

Date Published: 26-Aug-2023

Deadline of Submitting EOI: 24-Sep-2023 11:59 PM Manila local time

SELECTION PROFILE

Consultant Type: Firm

Selection Method: Quality-Based Selection (QBS)

Selection Title: Accelerating Climate Finance Investments through the Financial Sector in Bangladesh and Nepal

Package Number: 01

Package Name: Climate Finance Study

Engagement Period: 18MONTH

Consulting Services Budget: USD 300,000

Source: International

Technical Proposal: Simplified Technical Proposal (STP)

Approval Number: 6930

Approval Date: 20-Jul-2022

Estimated Commencement Date: 02-Oct-2023

ADDITIONAL INFORMATION

Country of assignment: Bangladesh; Nepal

TERMS OF REFERENCE

Primary Expertise: Climate Finance, Market Analysis, SMEs, Renewable energy

TOR Keywords: Climate Finance, Market Analysis, SMEs, Renewable energy

Objective and Purpose of the Assignment

I. Scope of Work

1. A consultant or firm with relevant market expertise and skills will work with ADB to conduct upstream market development work to build a comprehensive diagnostic framework that enables investment in energy efficiency (EE) and non-utility scale renewable energy (RE) technologies, but also adaptation and resilience, through financial institutions (FIs) by corporates and SMEs in Bangladesh and Nepal. First, the consultant will develop a comprehensive review of the current market potential for investment in EE and RE technologies and adaptation and strengthening resilience by firms, including a baseline of investment till date and technologies in force. The study will also identify barriers and opportunities to drive demand for further investments in such measures by corporates and SMEs and include identification of technologies most suitable for each of the respective markets, as well as develop proposed financing products and de-risking solutions through FIs. The report will be presented to potential partners including FIs, policymakers, and equipment vendors/technology partners and disseminated as an ADB knowledge product to the market. As a subsequent phase, selected private sector FIs will be supported by ADB in preparing investable project pipelines, processes, and financial products with a gender lens for such investments and by integrating climate finance systemically by developing a transition path towards alignment with international commitments (e.g., the Paris Agreement) for FIs that are willing to go this way.2. The ultimate goal of the proposed scope of work is to devise energy, climate and/or financial sector policy recommendations as well as financial sector product and technical solutions that can support increased gender-inclusive private sector investments in EE and RE and adaptation through Financial Institutions in each country and that contribute to the Nationally Determined Contributions (NDCs) and commitments under the Paris Agreement and national strategies (e.g., Nepal's Long-term Strategy for Net-zero Emissions and Bangladesh’s five-year plans and long-term plans like the Perspective Plan 2041, etc.).A. Detailed Tasks and/or Expected Output3. The services to be provided by the Consultant or Firm will cover, but will not be limited to, the following tasks:(i) Phase 1: Market Analysis and FI EngagementPart I: Baseline Research and Analysis for diagnostica. Map physical climate risks, energy consumption and emissions by corporates and SMEs in various sectors across Bangladesh and Nepal and investment potential at a market level for each country. The analysis will include a review of historical data and prior studies; b. Identify attractive segments for investment in EE and RE and adaptation by corporate and SME firms, including diagnostic of relevant technologies and associated financial, regulatory, and practical viability for firm level investment; elaborating for instance, cost and benefitsand by distinguishing sectors that are “hard to abate” and would benefit from a transition plan (in stages) and sectors that provide the “low-hanging” investment opportunities; c. Diagnose existing baseline of investments by corporate and SME firms in target technologies, including sources of finance utilized to fund; d. Identify gaps relative to levels of investments required in each sector to achieve national policy priorities, NDCs and other country level objectives; e. Identify key aspects of policies and/or regulatory frameworks for the target technologies that act as barriers and/or incentives in each of the respective sectors, including through consultations with government and regulatory bodies; suggest ways to address these barriers including through identification of key policy initiatives, and review of best practices from global/regional experience which could be considered; f. Identify other barriers (technical, financial, social, incl. gender or other) that prevent firms from investing in relevant technologies and Financial Institutions from designing appropriate products for same. Suggest ways to address these barriers; g. Segregate identified funding gaps for potential investments that could be expected to be made through investments by corporates and SMEs through FI intermediation.Part II: Market Survey and Consultation with Financial Institutionsa. Conduct wide ranging market consultations with key stakeholders including global and regional FIs, technology providers, regulators / policymakers, corporate and SME firms, and other industry participants to understand the challenges in financing and other challenges associated with undertaking investments in these EE and RE as well as adaptation projects. b. The consultation must focus on identifying, analysing and developing recommended approaches to address: • Opportunities for policy reform or regulatory incentives to drive further investment; • Best practices used in the financing structures to facilitate undertaking of existing private sector firm investments in EE, RE and adaptation technologies, including through references to global or regional experience; • Potential client types to be financed with EE/RE or/and adaptation investments by sector, and estimated requirements from corporates and SMEs for (i) loan tenor, (ii) interest rate concessions and (iii) other solutions to overcome barriers to investment; • Barriers to increasing female participation in the EE, RE and adaptation projects as key stakeholders (Corporate or SME owners/managers, technology/service providers or other); • Baseline of existing portfolios in EE/RE and adaptation investments by Fis. Identification of potential interest from Fis and that are inclined to develop further EE and RE and adaptation financing products and undertake financing; • Key challenges for the financial institutions in undertaking such financing and likely incentives and support desired by the financial institutions, including through de-risking instruments, internal process support mechanisms or tailored funding solutions; • Equipment, service and other technology providers to act as FI partners, including detailed assessment of the optimal partnership models that could be forged to overcome technical and financial barriers to financing EE, RE and adaptation solutions for firms and that can assure sustainability of technologies (incl. product guarantees, after sales services, battery recycling, etc.); • Size of the proposed portfolio potential to be achieved by the FI. Any potential specific product financing or other technical requirements by the FI; • Technical tools that can easily support Fis in the i) measurement of cost benefit of investing in the proposed EE, RE and adaptation technologies; and ii) measurement of EE savings, GHG or CO2 savings and positive impact indicators for measuring the strengthening of resilience. Recommend opportunities for deployment of relevant EE or carbon reducing certification programs to track clear outcomes; • Other “tool kit” approaches to implement, assuming interest by private sector FIs in addressing the gaps and increasing investments for target high potential EE, RE and adaptation projects, which includes but is not limited to credit considerations, internal process/systems changes and segment distribution strategies and that enable FIs to integrate climate finance systemically. c. The consultation with key stakeholders to focus on understanding and validating the findings regarding potential demand, key applicable technologies, key barriers to undertaking investments and proposed solutions (any of a range of product, technical and/or policy) to assist where firms and FIs can increase investment to improve sustainability of their business. Part III: Draft Report and Financing Solutionsa. Submit a report on the findings covering each of the elements addressed in Part I and Part II. The report will also summarize the financing modalities available and the key challenges in undertaking the financing. b. The report will further identify the key areas of regulatory, technical, and financial barriers and provide suggestions on proposed mitigants for such challenges, including drawing on applicable regional or global best practices, and by reflecting capacity building needs for FIs and SMEs (such as pipeline development support). c. The consultant will also develop actionable “toolkit” for implementation for Fis interested in expanding their portfolio of loans to EE, RE and adaptation investments, including cost benefit models, recommended process changes, and financing structures and de-risking instruments that can enable increased firm level investment in identified technologies. The design to include a plan to potentially develop or procure expertise to assess technologies and identify potential technology partners, design financial products, and work with male and female equipment and service vendors as well as create associated credit and distribution criteria for prospective implementation by interested FIs. d. Consultant to also develop models that enable firms and FIs to monitor and measure the climate benefits of investments (incl. gender-sensitive metrices) in line with national and international standards. (ii) Phase 2: Capacity Building and Knowledge Sharinga. Prepare a working-level industry meeting (draft agenda and invite list, coordination of event logistics including venue, invitations, convening of speakers etc.) and solicit participation from a relevant stakeholder mix, including FIs, policymakers/ regulatory authorities, technology vendors / OEMs, ESCOs, relevant industry associations, and other select public / private sector stakeholders for a gender-inclusive knowledge sharing event. b. At the event, present findings and disseminate knowledge on key market areas studied to inform and support investments in target sectors in Bangladesh and Nepal. c. Engage all key market stakeholders in a comprehensive dialogue around the findings of the study to validate findings and incorporate informed feedback. d. Publish final report as a knowledge product to the market. e. Develop detailed recommendations for ADB’s action to address technical and financial needs of interested FIs and develop tailored follow-on project support with selected FIs for preparing climate project pipelines, processes, and responsive financial products and for integrating climate finance systemically by developing a transition path towards alignment with international commitments (e.g., the Paris Agreement) with a gender lens.B. TimelineSl. No. Activity Timeline Submissions 1. Phase I 12 months from the issuance of contract Final Report 2. Phase II 6 months from the issuance of contract Knowledge sessionC. Milestones1. Baseline research and Analysis, and Market Survey and Consultation with Financial Institutions done. Report accepted by ADB. (30% of payment) 2. Draft Report and Financing Solutions accepted and acknowledged by ADB. (40% of payment) 3. Final Report and Recommendation for publication and Knowledge sharing done (Phase 2) (30% of payment)