Venice, Italy – New analysis by Climate Policy Initiative (CPI) finds that there are gaps in coverage of risks for renewable energy investments. Such gaps can discourage investment in these projects. New and existing risk mitigation instruments help to make investments more viable, but are not fully adequate for the task.

“Our analysis shows that rapid and unexpected policy changes around the world, the immaturity of financial markets in emerging countries, and the relative newness of clean technologies are not sufficiently covered by risk instruments and can discourage investors,” said Barbara Buchner, director of CPI Europe. “Development Financial Institutions and the public sector have the opportunity to fill these gaps in risk coverage.”

In a series of three studies, titled Risk Gaps, CPI maps the availability of risk instruments against demand and analyzes several new, potential instruments designed to address the biggest gaps: first-loss protection instruments and policy risk insurance.

The European Commission – European Investment Bank Project Bond Initiative, in pilot phase, and a proposed institution that would provide first-loss protection, called the Sustainable Development Bond Assurance Corporation, both would attempt to shield investors from a pre-defined amount of financial loss, thus enhancing the credit worthiness and improving the financial profile of an investment. While these new first-loss protection instruments are a step in the right direction, CPI finds that it will be challenging to offer these at a price that project investors can afford while simultaneously meeting emissions-reduction goals.

Similarly, new and existing instruments that address policy risk have room for improvement. Specifically, expropriation coverage instruments offered by the Multilateral Investment Guarantee and Overseas Private Investment Corporation (OPIC) only provide partial coverage: Significant uncertainties limit how much they have been used, and have made credit rating agencies reluctant to fully acknowledge their effectiveness in enhancing projects’ credit ratings. A new instrument offered by OPIC, a feed-in-tariff insurance product, fills some of these gaps by providing direct policy risk coverage in developing countries. Still, gaps remain, especially in developed countries.

As new risk mitigation instruments become available to investors, CPI plans to continue to refine the Risk Gaps analytical framework and use it to assess these new instruments.

For more information and to download all three Risk Gaps studies, visit

Climate Policy Initiative (CPI) is a global analysis and advisory organization focused on the effectiveness of policies and strategies for low-carbon growth. An independent, not-for-profit organization with long-term support from George Soros, CPI has offices in San Francisco (headquarters), Berlin, Beijing, Rio de Janeiro, and Venice.

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