When looking to finance a NAMA, the identification of the financing value chain is the starting point. Having established the chain, the exercise must focus on identifying options for intervention, as far back in the value chain as possible. That means following the arrows in Figure 14, moving away from the centre and the support of the asset, towards the guarantee that supports the cash flow, which, in turn, supports the loan that supports the asset. Moreover, there is also a differentiation between the provision of a financial instrument (or in extreme cases, the provision of the asset) and the support of an existing one – hence, there is another movement from the bottom to the top in Figure 14.

Following this logic, it is clear that the immediate interest should concentrate on the guarantees, and the institutions that provide them. Guaranties are at the core of any project investment – climate related, or otherwise. The Export Credit Agencies (ECAs) already play an important role, bringing about the financing for projects that would otherwise not materialize. The ECAs are a natural place to look for enhanced risk coverage, either from existing guarantees of products or possibly through expansion of coverage – within the limitations dictated by the OECD rules, or potentially by calling for a loosening of these rules. These rules are not easily changed, however. They are ‘consensus rules’, or ‘gentlemen's agreements’, that ensure that all ECAs operate on the same basis, offer the same type of basic products, and assess (country) risks in a uniform manner. Changing the rules requires a unanimous agreement. While there are other shortcomings in the ECA system, in order to respond to market needs, the more fundamental challenge are the mandates that govern the ECAs – and many other institutions with them, including the donor institutions. Mandates are discussed later in this chapter.

It is a fundamental task and a common approach in policy development advice to identify the barriers that prevent desirable things from happening and the financing from flowing. A common, but very simplistic, barrier is a high up-front cost – the price of the asset – and the immediate temptation to reduce the price of the asset through a grant. According to Figure 14, this is the least efficient way to apply the financing. Furthermore, it has no transformational qualities either.