Largest approval by GCF to a single-country equity fund for a private sector climate mitigation program.
The Board of the Green Climate Fund (GCF) has approved Dutch development bank FMO’s proposal to accelerate private and public sector investment in India’s green infrastructure projects. Through the Green Growth Equity Fund (GGEF), managed by EverSource Capital, the Dutch development bank will invest USD 137mln in the energy value chain, water, waste and transport sectors that promote low carbon and climate-resilient initiatives in line with India’s climate objectives and Sustainable Development Goals. The project is FMO’s second collaboration with the GCF, following the USD 100mln that the GCF invested in Climate Investor One in 2019.
India faces major climate change challenges largely due to greenhouse gas (GHG) emission-induced warming. The country faces increasingly extreme weather events and natural hazards, putting pressure on critical natural resources such as water, while damaging infrastructure and threatening the livelihoods of its population. There is a clear need for far-reaching mitigation and adaptation measures, since GHG emissions in India are the third-largest in the world, contributing to 7% of global emissions and temperature rise.
The total investment needs to ensure low-carbon and climate-resilient pathways for India is estimated at USD 2.5 trillion over 2016-2030. An upcoming study by Climate Policy Initiative (CPI) finds that India is mobilizing less than 25% of the investment needed to reach this target (CPI, 2020). These mitigation and adaptation gaps are especially evident in the infrastructure sector, with the government facing budgetary constraints and limited capacity to structure and deliver green infrastructure projects.
That is why the EverSource Capital managed GGEF targets raising equity capital up to USD 940mln for India’s green infrastructure sectors such as renewable energy, transport, resource efficiency and energy services. The program is innovatively structured, blending concessional equity and grant capital to mobilize significant amounts of commercial equity to accelerate investments in these sectors, while providing the necessary USD 4.5 mln in technical assistance support to create an enabling environment.
By investing across the energy sector value chain, transport and waste sectors, the program reduces GHG emissions and increases access to alternative water resources in India through investments into wastewater treatment and desalination plants. The total emission reduction expected from the equity investment of the program is the equivalent of 166 million tons of CO2, while treating and generating an additional 5,700 million cubic meters of water from alternative resources for use by households, farmers and businesses.
