climate finance
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The Global Innovation Lab for Climate Finance (the Lab) has selected six new climate finance ideas for its 2021 acceleration programme.

The Lab is an investor-led initiative that identifies, develops and launches promising solutions to drive critical public and private investment to action on climate change in developing economies. Each year, the Lab competition selects promising, early-stage ideas for sustainable investment and rapidly develops these ideas into fundable, scalable investments and business models.

In the 7th year of its annual competition, this Lab class of instruments will address barriers that can unlock investment to sustainable development challenges and opportunities for a post-COVID, green economic recovery. For 2021, the Lab chose one idea for each of its thematic streams: food systems, energy access and cities, two for its Brazil programme and one for its Southern Africa programme.

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Dr Barbara Buchner, Global Managing Director of Climate Policy Initiative, the Lab’s secretariat: “The 2021 class put the Lab over the 50th instrument mark and closer to mobilising $3 billion in sustainable finance in emerging markets. We’re proud to look back at what we’ve accomplished but our drive is looking forward to enabling a true transition as the world recovers from the pandemic.

“The new Lab class presents a set of innovative instruments capable of driving private resources to rebuild an inclusive, sustainable and resilient economy.”

This year’s six selected ideas will now undergo a 7-month period of analysis, stress-testing, development and preparation for launch later this year. Winning ideas will receive guidance and support from high-level leaders from the public and private sectors, who contribute their expertise, political capital and financial capital to the instruments.

Lab members chose the 2021 class of ideas out of a highly competitive shortlist of 13 finalists, narrowed from a field of more than 160 initial proposals submitted by leading development finance institutions, global NGOs, prominent project developers, asset managers and financial services firms and entrepreneurs.

Stefanie Fairholme of the Rockefeller Foundation: “The Rockefeller Foundation is committed to supporting sustainable, equitable development where it is needed most by unlocking private capital for impact at scale, especially in the area of reliable, renewable energy access for all.

“The Lab’s track record of bridging this investment gap is impressive, and its contribution to closing the global energy access gap through innovative approaches is more critical now than ever. We are eager to see this work continue and for this year’s selected ideas to come to fruition.”

Lab Member Gustavo Fontenele of Brazil’s Ministry of Economy: “The Lab, as we see it, is a crucial institution for developing new financial instruments that address climate and sustainability challenges in the country.

“The Ministry of the Economy of Brazil expects the instruments selected today to contribute to attracting private resources to foster a green sustainable economic recovery after the COVID-19 pandemic. The exceptional work the Lab performs helps expand Brazil’s engagement of stakeholders towards achieving our NDCs.”

Chosen climate finance ideas

Sustainable food systems: The Smallholder Resilience Fund (SRF) deploys ‘synchronised investments’ to SMEs across entire value chains of high-value, climate-friendly crops allowing them to manage larger volumes. This equips smallholders to achieve higher incomes, greater climate resilience and carbon sequestration.

Investments will be de-risked and accelerated via support and capacity-building from the One Acre Fund. SRF will initially target Kenya and Rwanda to prove the concept.

Sustainable energy access: Data-driven energy access for Africa expands lending for renewable energy while reducing lending portfolio risk by using data-driven technology to better assess end-user credit risk. The technology allows for segmented pooling of loans to better match lender risk appetite and replace physical assets with cash flow as collateral. The proponent, Nithio, is looking to pilot the instrument in several African economies, with potential to scale the model in other regions.

Sustainable cities: Sustainable urbanisation for West Africa aims to scale up climate infrastructure investment in West African cities. The instrument is a unique blended-currency fund vehicle with credit enhancements and will refinance initial USD equity with local-currency debt after projects are operational to offer stable long-term returns to institutional investors, recycling the equity into new project development. The proponent ARM Harith has a $100 million pilot is planned for Nigeria.

Brazil Programme

  • Amazonia sustainable supply chains provides upfront finance for input providers in sustainable value chains in the Brazilian Amazon, based on offtake agreements. The idea was submitted by Maua Capital.
  • Guarantee fund for biogas projects is a fund to provide financial guarantees required by private and public banks for biogas projects. It’s the first guarantee mechanism to support investments needed to expand biogas projects in Brazil. The idea was submitted by the Brazilian Biogas Association (ABiogás).

Southern African Programme

  • P-REC aggregation fund will aggregate Peace Renewable Energy Credits (P-RECs) and sell them to investors to provide equity capital for renewable energy projects in conflict-affected regions. The idea was submitted by Energy Peace Partners (EPP).