The Global Innovation Lab for Climate Finance (the Lab) launched eight innovative finance solutions to drive private resources to climate action in developing economies. After a thorough process of analysis, development and stress-testing, these solutions are ready to provide investment opportunities for a post-COVID, green economic recovery.
The Lab, an initiative of over 60 public and private investors and institutions, accelerates investment solutions to support sustainable development goals in emerging markets. Created in 2014, the Lab has now launched 49 instruments that have collectively mobilized over USD 2 billion. CPI serves as the Lab’s Secretariat.
Lab members gathered virtually last week to endorse the financial instruments from the Lab 2020 class, which target four main areas: nature-based solutions, sustainable agriculture, sustainable cities, and sustainable energy access. This Lab cohort also includes instruments with a regional focus on Brazil, India, and Southern Africa.
This year, the COVID-19 outbreak required an additional focus from this year’s instruments to incorporate elements that help overcome the pandemic’s economic distress for the most vulnerable, while also building long-term resilience.
One example is the Conexsus Impact Fund, which has already secured and started disbursing a USD 2 million emergency credit line to mitigate the effects of the slowdown among rural, forestry-based enterprises in Brazil.
Similarly, GreenStreet Africa addresses the energy access gap of public buildings in Sub-Saharan Africa, including hospitals in need of more reliable electricity during the pandemic.
The full list of instruments, including their goals and COVID-19-related elements, are:
Climate Adaptation Notes is a funding structure for water and wastewater climate adaptation projects in Southern Africa, designed to catalyze the flow of institutional capital and lower the financing costs for these projects. The COVID-19 crisis intensifies the need for improved water infrastructure, and has exacerbated the public funding gap for those projects, which this instrument helps address.
Conexsus Impact Fund is the only fund in Brazil designed to make federal subsidized credit lines greener, providing financial products and facilitating access to loans for cooperatives and SMEs that support sustainable production systems that keep forest standing. The fund has already deployed a USD 2-million emergency credit line for sustainable enterprises impacted by the COVID-19 pandemic.
GreenStreet Africa develops portfolios of distributed solar projects for hospitals, healthcare clinics and other public facilities in Sub-Saharan Africa. Its novel approach provides an attractive private investor opportunity while addressing operation and maintenance support to ensure such projects remain online. COVID-19 has increased the demand for reliable electricity at healthcare facilities, making this energy access gap even more urgent.
GROVE: FSL is the only platform to connect community mangrove projects with corporate and individual donors to scale up private finance for restoration and preservation. The instrument is implementable and can generate economic, environmental, and social returns amidst the COVID-19 crisis.
Monetizing Water Savings is the first instrument to address agricultural water efficiency in Latin America by using “pay for performance” to accelerate the funding and adoption of water-efficient sustainable agriculture practices, improving smallholder farmer incomes, economic resilience and food system security in the region’s most water-stressed agricultural areas.
The Rural Prosperity Bond is a unique debt instrument that will scale-up restoration efforts from WRI’s Land Accelerator. It provides credit and tailored capacity building to land restoration enterprises too small for commercial banks and too large for microfinance. This could increase agriculture yields by 40%, improving incomes and mitigating food insecurity coming from the COVID-19 pandemic.
The Sub-national Climate Finance Initiative combines private equity and technical assistance to build local capacity for climate adaptation and mitigation projects, while also certifying them for SDG impact prior to investment. COVID-19 has made sustainable urban development even more important as hard-hit cities need private investment to support job growth, yet must build sustainably to strengthen resilience to future crises.
Sustainable Agriculture Finance Facility is the only credit vehicle tailored to scaling up the adoption of integrated crop-livestock-forest (ICLF) systems in Brazil, with the potential to improve livelihoods and support the country’s NDCs. ICLF allows for livelihood enhancement in safe, outdoor settings which are much needed to restart the Brazilian economy after the COVID-19 pandemic.
“This year’s Lab instruments address the climate emergency while providing much-needed sustainable recovery opportunities for overcoming the COVID-19 pandemic economic shock,” said Barbara Buchner, Global Managing Director of Climate Policy Initiative, the Lab’s secretariat.
Lab members, during the annual endorsement meeting, echoed similar themes, while also committing to support for these instruments.
Julia Feeney, Assistant Secretary, Australian Government Department of Foreign Affairs and Trade – “The Australian Government welcomes the Lab’s call to action in support of nature-based solutions to address climate change. The inclusion of nature-based solutions in this years’ Lab cycle is consistent with our COVID-19 development response, which includes helping developing countries maintain healthy populations that are food and water secure and resilient to threats such as climate change.”
Alex Liftman, Global Environmental Executive, Bank of America – “We cannot reach our climate change goals without a significant increase in the flow of private capital to such efforts. The work coming from The Lab, including this year’s class, demonstrates there is ample pipeline for private capital investors to put their money to work.”
Gustavo Fontenele, Coordinator of Green Economy, Brazil Ministry of Economy – “Both instruments from Brazil’s program indicate promising paths towards the country’s goals to halt deforestation and add value to supply chains that are profitable and sustainable at the same time. This is strategic for an economic recovery with socio and environmental impacts.”
Paul Currie, Chief Investment Officer, DBSA – “The Lab’s new class of financial instruments provide innovative alternative investment mechanisms facilitating greater access to sustainable finance. This has the potential to accelerate and support a greener post-COVID recovery for African countries. Additionally, it provides an avenue to bridge critical needs like water resilience and sustainable reliable power delivery to the health sector and communities in general.”
Idsert Boersma, Director of Partnerships for Impact, FMO: the Dutch entrepreneurial development bank – “Investing in a green recovery to protect jobs while greening the economy at the same time is a necessity to cope with the COVID-19 fall out. The Lab bridges the creative ideas of entrepreneurs for climate solutions with private investors as well as donor governments, resulting in mobilized climate funding for emerging markets. Now it is time to further scale up and replicate these climate solutions!”
Karsten Sach, Director General International and European Policy, Climate Policy, Germany Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) – “Private sector mobilization remains a critical aspect of financing zero-carbon and climate resilient development. The Lab continues to provide innovative ideas that help to unlock the potential for private sector resources for climate action. With the challenge to enable a green recovery from the Covid pandemic around the world, trying to find innovative instruments as the Lab does, becomes more important than ever.”
Barbara Schnell, Head of Sector Policy Department, KfW Development Bank – “Like KfW’s own mission, this year’s class of Lab ideas is ambitious in addressing tough issues across regions and climate sectors. The creative ideas proposed this year address crucial barriers that will help leverage development aid into sustainable, inclusive economic opportunities in emerging markets and can contribute to transforming climate finance.”
Lab 2020 Demo Day
The Lab will host a virtual Demo Day on October 22 to present this year’s instruments to potential investors, funders, and implementation partners.
Information on all 49 endorsed Lab instruments, including investment opportunities, is available on the Lab’s website: innovative climate finance ideas.