Unbalanced Investments: Accra’s Informal Settlements

Canada, like other G7 countries, has set an ambitious greenhouse gas emissions reduction target for 2030, and a goal of net zero emissions by 2050. However, while other G7 countries’ emissions levels have declined over the last decade, Canada’s emissions have risen. Despite government policies and public financing to counter this trend, there remains a financing gap for low-carbon investments that support the 2030 target. Public financing is insufficient and private financing can be constrained by barriers such as policy uncertainties, undesirable financial risks, and high capital demand for project investments. Green Investment Banks (GIBs) are designed to finance low-carbon economic development by mobilizing private financial capital towards low-carbon investments. This paper describes and analyses GIBs as institutional tools capable of addressing the low-carbon financing gap in Canada. I identify the main characteristics of GIBs (governance structure, capitalization method, asset vehicles, and performance measurement) and show how GIBs are being used to catalyse low-carbon investments and build institutional capacity to support low-carbon economic development. GIBs focus on long-term financing instruments and innovative financing mechanisms to reduce the barriers between private capital and low-carbon investments. GIBs help scale up private investments and reduce dependence on limited and inconsistently available public financing. GIBs can also support institutional capacitybuilding by aiding low-carbon policy development and supporting environmental awareness and low-carbon transition education. This paper looks at four well-established GIBs – Australia’s Clean Energy Finance Corporation (CEFC), the UK Green Investment Bank (UKGIB), the Connecticut Green Bank (CTGB), and the New York Green Bank (NYGB) – and describes some of their achievements. The paper then discusses the potential for municipal GIBs in Canada, and highlights The Atmospheric Fund (TAF) in Toronto and the Low-Carbon Cities Canada (LC3) Network, which will establish institutions similar to TAF in six other Canadian cities: Vancouver, Calgary, Edmonton, Ottawa, Montréal, and Halifax. While TAF operates like a GIB, there is more focus on grantmaking than is typically observed in other notable GIBs. TAF operates as both a grant-making and an investing institution. TAF’s grants, however, are funded from investment returns on its endowment capital, protecting its capital from being eroded. In general, grants reduce capital recycling potential and limit capital growth. While capital growth may not be an intended part of TAF’s mandate, a more standard GIB approach would reduce grants in favour of commercial financing that can attract private investment. GIBs have been increasing in the United States, but are absent in Canada. The emerging LC3 Network could implement the GIB model across Canadian cities to leverage the catalytic financing capabilities that GIBs bring to low-carbon investments. To support this outcome, the LC3 Network should focus on building coalitions with financial institutions to identify barriers between the sources and destinations of financial capital, and develop effective mechanisms to reduce these barriers and accelerate private financing for low-carbon investment projects in Canadian cities. Through the GIB model, cities can also further leverage institutional capacity-building for low-carbon economic development.