Finance Case Studies With Solutions
Jennifer Curtis
This book presents new research on innovative financial instruments and approaches available to implement nature-based solutions (NBS) at various scales and in different contexts. Despite knowledge of the multiple benefits NBS provide, a key barrier to their wide-spread adoption is a lack of knowledge over their financing, in particular, who should pay for an NBS and how it can be financed. The book explores a variety of public, private, and blended finance models and their applicability in developing NBS across terrestrial and marine ecosystems, involving multiple stakeholders, and in jurisdictions of varying climates and income levels. Furthermore, the book provides case studies of the innovative financing of NBS with best practices identified. This book is of interest to environmental planners, resource conservation managers, policymakers, international companies and organizations, environmental NGOs, researchers, and graduate and undergraduate students interested in NBS.
This case study shows how Accounts Receivable Financing can be used to solve the cash flow issues of a staffing company, highlighting the receivable financing problems and solutions process. To protect client privacy, we have changed some details (including their name) in this business case. Also, the numbers have been simplified to make the case study easy to understand, but the key facts and lessons remain.
American Staffing, Inc. (ASI) is a staffing company that matches large corporate clients with qualified candidates to fill open positions within the corporation. Although ASI is a small company with just a few employees, they have secured three large contracts. However, between start-up costs, payroll, and operating expenses, the company only has $10,000 left in the bank.
AR Finance can solve the problem by financing slow-paying invoices from credit-worthy commercial clients. This solution allows ASI to turn a portion of their slow-paying receivables into immediate cash, usually up to 90% of outstanding invoices is advanced to the client. The remaining 10% is held as a reserve until the invoices are paid in full. At that time, the transaction settles.
The biggest benefit from this transaction is not immediately obvious from the post-AR Financing snapshot. ASI previously had been unable to take on new clients, even though demand for their services were high. They simply could not afford to offer commercial credit terms to their new clients, mainly because it would require an increase in employees and associated general expenses. Unfortunately, growth was not an option, and even survival was questionable.
ASI also worked with three large corporate clients, all well-known, brand-name companies who had great commercial credit. This simplified the process of financing their invoices because the collateral was excellent.
The one challenge for ASI was that the cost of Accounts Receivable Financing was higher than the cost of more traditional financing options, like a business loan. This was not an issue when they had a cash flow emergency and AR Financing was their only option. However, management was smart and used their receivables financing line as a stepping stone to traditional financing. Within two years, ASI was able to meet the underwriting requirements of a bank and secured a sizable line of credit. They used the line of credit to replace the AR financing line, which further increased their profitability.
Also included on these pages are resources for funding and financing green and circular infrastructure, financing large national infrastructure programs, and more. We invite you to explore the resources and contact us with any questions.
In late 2021, we prepared a compendium for the G20 that examined how the decarbonisation agenda is being funded and financed worldwide, and which approaches hold the most promise for progress. Our work also presents global case studies of funding and financing of green and circular infrastructure, which reveal important lessons about how to make new infrastructure more circular and the role of infrastructure in supporting a lower-carbon and more circular economy.
The framework will help you better understand the factors that support and drive private sector investment. This work was created by the GI Hub for the wider industry as well as the G20 Infrastructure Working Group. The accompanying G20 Infrastructure Working Group Reference Note provides additional insights and background analysis
This report presents a variety of cases in which the private financial sector is supporting nature-based solutions in emerging markets and developing countries. These include investment projects, funds, and insurance vehicles across a variety of ecosystems, including mangroves, coral reefs, and agricultural systems. Building on in-depth interviews with the case owners, the case studies provide a deep understanding of the underlying business models and financial structures and highlight key social and environmental impacts
The case studies collected in this report illustrate how the financial sector is already supporting the scaling of NbS and where it sees business cases. This includes solutions such as leveraging public finance, pooling projects, diversifying business models, and involving local communities to maximise project impact and longevity. At the same time, the financing structures seen across cases, which combine debt and equity instruments with blended finance instruments, are not particularly complex.
Carefully constructed financial tools called coal transition mechanisms (CTMs) can help generators, electricity customers, and the public overcome these complications and realize the benefits of cheaper clean energy. In the past few years, the first wave of FIs has begun to capitalize on the opportunity to enable early coal plant retirement through the use of CTMs in various markets globally. The continued deployment of CTMs to accelerate the energy transition is especially critical in emerging markets and developing economies (EMDEs), as a significant amount of financing will be needed to enable a managed and just coal transition. Although we have seen billions of dollars committed to coal transition globally, most of that finance has not yet been deployed (and not at scale).
With these case studies, RMI highlights lessons learned from the first few successful transactions and the enabling factors they relied on to promote increased awareness and use of such factors for managed phaseout transactions moving forward. Specifically, we have showcased managed phaseout transactions that enabled the early retirement of coal plants:
These case studies demonstrate innovative and potentially replicable approaches to utilizing CTMs that could apply in diverse geographies and market structures, most notably in emerging and developing economies.[1]
These case studies highlight the key factors that enabled early retirement as examples so that others can carry over these learnings and contextualize them for new markets and future transactions. Across all these case studies, we identified the following enabling factor themes:
Over the past few years, the first wave of financial institutions (FIs) has begun to capitalize on the opportunity to enable early coal plant retirement using innovative financial mechanisms in markets like Chile, the United States, and the Philippines. As early-stage pilots, each of these mechanisms were designed to meet the needs of specific market and grid conditions.
The transaction has three key elements, which interact with and reinforce each other: 1) Renegotiated PPAs allowed for early coal retirement, which enabled Starwood to 2) refinance from institutional investors as an attractive investment opportunity, which then enabled Starwood to 3) utilize the site and its favorable interconnection grid position to develop battery storage.
The above pilot along with others that can be found here have laid the blueprint for how well-designed, specific financial mechanisms can help accelerate the coal-to-clean transaction and unlock the benefits of clean energy. However, scaling from a few pilots to the effort required to meet ambitious climate targets requires more easily replicable models for early coal asset retirement. These case studies highlight lessons learned from past transactions and the enabling factors they relied on to promote increased awareness and use of such factors for managed phaseout transactions moving forward. Across all highlighted case studies, we identified the following enabling factor themes:
By analyzing the carefully constructed financing mechanisms that enabled these pilots, we have identified replicable formats that can serve future transactions in diverse geographies with coal capacity that can be retired. Given the speed with which such transactions must scale, it is crucial to continue iterating on and sharing best practices of innovative managed phaseout.
The Integrated Financing Solutions report, which we are launchingalongside the Development Finance Assessment Guidebook, presents over 40 casestudies of innovation in public and private financing for the SDGs.
This website was created and maintained with the financial support of the European Union. Its contents are the sole responsibility of the United Nations and do not necessarily reflect the views of the European Union.
This book presents new research on innovative financial instruments and approaches available to implement and mainstream nature-based solutions (NBS) at various scales and in different contexts. This book explores various public, private, and blended financing tools available to develop NBS across terrestrial and marine ecosystems, involving multiple stakeholders and in jurisdictions of varying climates and income levels. Furthermore, the book provides case studies of the innovative application of financing to scale up NBS, with best practices identified.
Catalyzing private finance for climate action is essential to achieving goals for limiting global warming. Global climate financing currently available is insufficient to meet the minimum USD 1.6 trillion annual target needed to keep warming within the 1.5-2C range.
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