ImpactAlpha, Sept. 29 – Innovation in climate finance is critical; with a global COVID pandemic raging, it’s doubly so.
Eight new financial solutions to be showcased today by the Global Innovation Lab for Climate Finance “address the climate emergency while providing much-needed sustainable recovery opportunities for overcoming the COVID-19 pandemic economic shock,” says Barbara Buchner of the Climate Policy Initiative, which hosts the lab.
The models include climate adaptation notes to fund water infrastructure, rural prosperity bonds for sustainable agriculture, and portfolios of distributed solar projects for schools and health clinics in Africa. Buchner estimates that nearly $7 trillion per year will be required through 2030 to meet sustainable infrastructure needs.
The eight models were endorsed by the Lab’s 60 public and private partners after a 10-month process of analysis, development, and testing. Since 2014, the Lab has launched 49 instruments that have mobilized over $2 billion, including $800 million in private investment. It has added regional programs for South Africa, India and Brazil.
This year’s innovations:
The Sub-National Climate Finance Initiative has created a blended investment vehicle that brings the economics of large scale infrastructure funding to mid-size ($5 million to $75 million) sustainable urban projects such as wastewater treatment, rapid electric transit, and renewable energy.
The World Resources Institute and FEMSA Foundation are deploying pay-for-success models more commonly used for energy to reward water conservation and sustainable water infrastructure. In Southern Africa, GFA Climate & Infrastructure and Ashburton Investments have created Climate Adaptation Notes aimed at attracting private investors to water and waste-related infrastructure projects.
Conexsus Impact Fund helps Brazil’s small-scale farmers and forest dwellers pursuing deforestation-free sustainable agriculture access low-cost government-run credit programs. The Global Restoration Objective Virement Ecosystem, or GROVE uses satellite imaging and a blockchain-based forestry smart ledger to improve tracking, measurement, and verification of reforestation and unlock funding for reforestation and regeneration activities.
Off-grid schools and clinics
GreenStreet Africa and Nigeria Rural Electrification Fund are are bringing private capital to solar installations in public facilities by aggregating and de-risking portfolios of off-grid projects at schools and health clinics.
The World Resources Institute has developed a Rural Prosperity Bond that would enable graduates of its sustainable agriculture Land Accelerator to sell to smallholder farmers on credit. WRI estimates that it can unleash more than $35 million in new lending to restore degraded landscapes while supporting hundreds of small businesses.
The Sustainable Agriculture Finance Facility, meanwhile, creates a low-cost, flexible credit facility for Brazilian farmers who pass a Sustainable Agriculture Certification.