Today, the Global Innovation Lab for Climate Finance launched seven innovative financial instruments for climate-related projects in emerging economies. Combined, the new deals seek over USD 1 billion from commercial, concessional, and philanthropic investors for climate adaptation, food systems, zero-carbon buildings, sustainable energy, and high-integrity carbon projects.
The Lab’s member institutions met last week at the margins of the New York Climate Week. They voted to endorse all seven financial mechanisms and enterprises that completed the Lab’s 2022 six-month acceleration program. The Lab will host a virtual Demo Day on October 19 to present this year’s instruments to potential investors, funders, and implementation partners. Registration is open here.
“The financial instruments the Lab develops are unique because they have enormous potential to generate market-rate financial returns for investors while delivering the social and environmental benefits the world so desperately needs,” said Barbara Buchner, Global Managing Director of Climate Policy Initiative, the Lab’s secretariat. “The 2022 class addresses barriers in some of the most difficult sectors to decarbonise. We are proud of the Lab’s proponents and confident in their ability to mobilise billions of dollars for climate action soon.”
The 2022 Lab class leverages a broad range of financial instruments such as guarantees, insurance, and investment funds to increase the pipeline of bankable opportunities for challenging sectors like methane abatement, green steel, climate-smart shrimp farming, and sustainable housing (full list below). Pilots are planned across several emerging markets, such as Brazil, Ecuador, India, Indonesia, Kenya, Sierra Leone, South Africa, and The Philippines, with the potential of catalyzing billions of dollars to address the climate crisis.
“We are living through the decisive decade in tackling the climate crisis – to decarbonise and build a climate resilient economy, it’s crucial that we unlock investment at scale across sectors. The ambition, depth, and breadth of this year’s Lab class are striking, and we look forward to supporting their journey to market and impact,” said Ben Broché, head of the Lab program.
The Lab, an initiative of over 70 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 62 instruments that have collectively mobilised over USD 3.3 billion. More information, including investment opportunities, is available on the Lab’s website: innovative climate finance ideas.
The complete list of instruments:
Climate Insurance Linked Resilient Infrastructure Financing (CILRIF) is a novel offering of long-term (>10 years) municipal climate insurance, with known premiums dependent on municipal resiliency measures and a unique linked financial product to access capital for climate resilience. The United Nations Capital Development Fund (UNCDF) leads the idea.
Climate Smart Shrimp Fund provides loan packages, supported by a technical assistance facility, that enable shrimp farmers to transition to more sustainable and efficient production systems while simultaneously restoring mangrove ecosystems. Proponent Conservation International intends to pilot the idea in Indonesia, Ecuador, and the Philippines.
Financing Steel Decarbonisation combines technical assistance, low-cost patient capital, and implementation stage support to prepare, invest in, and de-risk decarbonisation technology projects for low-carbon steel production while supporting the development of the broader industrial ecosystem. Proponents Smartex and the U.S. National Renewable Energy Lab (NREL) plan a pilot in India.
Green Affordable Housing Finance deploys construction and mortgage loan guarantees alongside targeted enabling interventions to foster a locally driven and self-sustaining affordable housing finance ecosystem. Proponent Reall will pilot the instrument in Kenya.
Green Guarantee Company is the first specialist guarantor for emerging market climate adaptation and mitigation projects, unlocking access to global investors by de-risking green bonds and loans. The Development Guarantee Group will launch the instrument in South Africa.
Reservoir Methane Capture Mechanism is the first of its kind methane-as-a-service structure with blended funding to unlock investments into emerging methane capture technology in hydropower reservoirs to produce cleaner energy. Proponents Bluemethane and Open Hydro target the Brazilian market.
The Fund for Nature is Africa’s first debt fund for high-integrity, nature-based carbon projects. Proponent CrossBoundary aims to increase the supply of high-quality nature-based carbon projects to meet the growing demand from corporate off-takers while increasing the economic benefit to project implementers and local communities.
Quotes
Lab members gathered last week to endorse the financial instruments from the Lab 2022 class, echoing similar themes while offering input for their implementation pathways.
Christina Chan, U.S. State Department, Senior Adaptation Advisor, U.S. Special Presidential Envoy for Climate – “Mobilizing private finance is key for the President’s Emergency Plan for Adaptation and Resilience – PREPARE, and the Lab is instrumental in generating innovative in financial mechanisms capable of doing so. The U.S. is a Lab founding member and we are proud to see the results achieved since we started this partnership in 2014.”
Dr Jeanne d’Arc Mujawamariya, Rwanda’s Minister of Environment – “The climate finance innovation the Lab provides is essential because you cannot address the climate crisis unless you use every tool at your disposal. When it comes to these tools, we need to empower countries like Rwanda so they can be players and managers in the carbon market, not just providers of credits.”
Lori Kerr, FinDev Canada, CEO – “The Lab is unique in joining public and private investors with entrepreneurs advancing innovative projects in climate finance. FinDev Canada is proud to join the Lab as a funder for the upcoming cycle, as this long-standing initiative aligns with one of our key impact goals of promoting climate action.”
Nawar El-Abadi, Swedish International Development Cooperation Agency (Sida), Program Officer – “For Sida, the goal has been to find a way to identify innovative sustainable finance ideas within food systems in a market that hasn’t been as mature and lacks investible opportunities. That’s where the Lab has come in, with their method to both identify and develop innovative finance instruments connecting them to the vast array of actors they need to achieve their impact.”
Sergio Gusmão, Desenvolve SP, Chief Executive Officer – “After watching the Lab’s entrepreneurs present their innovations here today, we were impressed by the quality and creativity to solve problems in such complex sectors. We are confident that these innovations will soon be available to investors and contribute to the much-needed net zero transition.”
Vera Rodenhoff, German Federal Ministry of Economic Affairs and Climate Action (BMWK), Head of Division of General Issues of International Cooperation, Implementation Initiatives – “Germany has been supporting the Lab since its beginning, and we have witnessed an impressive growing complexity of the projects the Lab move forward. It reinforces the truly innovative nature of the Lab as it embraces the most difficult sectors where barriers for private finance are higher.”
About the Lab
The Global Innovation Lab for Climate Finance identifies, develops, and launches innovative finance instruments that can drive billions in private investment to action on climate change and sustainable development. The Lab is funded by the American, German, Swedish, and UK governments. Climate Policy Initiative serves as Secretariat.
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