The Energy Savings Insurance program has just received a donation of 130 million kroner from the Green Climate Fund.

The program aims to address energy-efficiency investment barriers by paying out if energy savings are not sufficient to pay back the project investment. The insurance instrument is the core element of an innovative “package” of interventions that together help build energy efficiency markets. It does so by addressing technical and financial risks and building confidence among SMEs, technology providers and local banks.

The project, which targets small and medium businesses in Latin America, aims to provide them a measure of certainty that their investments in green energy pay off through lower energy bills.

“I am very pleased that the Green Climate Fund has given its undivided support to the Danish Energy Savings Insurance program. The project is a prime example of how Denmark deploys climate finance in a way that mobilises large private sector investments. We do so, because private sector support is crucial to solve the climate challenge,” says Danish Minister of Energy, Utilities and Climate Lars Christian Lilleholt.

The Energy Savings Insurance approach includes a 
package of measures that address financial and 
technical risks confronting companies considering 
an investment in energy efficient equipment.

The main components of the ESI package include:

• An insurance that technology solutions providers purchase to back their contractual guarantees to SME clients relating to the performance of their energy efficiency products.
• Standardised contracts that transfer part of the risk of underperformance to the technology solution provider.
• Third party verification that ensures the quality of energy service providers and their projects. 
• Access to finance on appropriate terms from local banks, made possible through credit lines and/or guarantees by national development banks.

“It is an innovative project where we provide companies in developing countries a security, and thus an incentive, to invest in energy-efficient equipment. The financing model is in line with the proposal for our new development strategy. We must deploy climate financing to raise capital from pension funds, foundations and companies for energy projects in developing countries. This is pivotal in order to meet the 17 new sustainable development goals, not least goal 13 on climate action. The Green Climate Fund’s engagement confirms that we on the right track (…),” says Minister for the Ministry of Foreign Affairs of Denmark Kristian Jensen.

The ESI model has generated substantial international interest. It has been reviewed and endorsed by the Global Innovation Lab for Climate Finance as a promising instrument to mobilise private climate-friendly investment. The Lab has estimated that if replicated on a global scale, the ESI could drive USD 10-100 billion (DKK 65-650 billion; EUR 9-90 billion) in investment and provide annual emissions reductions of 27-234 MtCO2 by 2030.

- Read more about Denmark's Climate Financing Initaitives in our white paper: 

Source: Danish Ministry for Energy, Utilities and Climate (in Danish) / State of Green's White Paper on Climate Financing