(Bloomberg News) A global financial institution similar to the U.S.'s Overseas Private Investment Corp. may help create a new type of bond, boosting funds for climate protection as it cuts costs and risks for investors, said a Citigroup Inc. executive.
A global, climate-focused version of the U.S. government-owned development finance organization would evaluate risks such as the theft of solar equipment or a lack of wind to power turbines, Michael Eckhart, global head of environment finance and sustainability at the bank, said today at an Environmental Finance conference in London. "We have to put a global team on doing that job."
OPIC in Washington helps mobilize private capital and insure against political risk in developing nations, according to its Web site. The "global OPIC" would serve developed and developing nations, excluding no one, Eckhart said.
The institution would rate renewable energy and other climate-protection projects and undertake due diligence, potentially bundling projects together in a similar way to mortgage markets, Eckhart said in an interview.
"This is not a fund, it's a new bond category," he said. Better oversight could help ensure the funding system avoids the bad debt in mortgage markets, he said.
Should a project miss a loan repayment, for instance, the global OPIC may make the payment and take control of the asset, providing a first-loss guarantee, he said.
New York-based Eckhart is in London seeking support for the idea from other banks. Depending on levels of support, a detailed plan could be presented at the United Nations-overseen Rio earth summit in June, he said.