Which financial innovations will grow from billions to trillions? (podcast)



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By finding inventive ways to make social inclusion and environmental regeneration pay, innovative financing models are “internalizing positive externalities.”

Too wonky? Just say “impact alpha.”

In Indonesia, for example, the Tropical Landscapes Finance Facility has issued a $95 million bond that will pay for wildlife-friendly, socially inclusive and climate-sensitive rubber production in two provinces. The bond was supported by a design grant from Convergence, which has provided $5 million in funding for the design of 15 such blended finance vehicles. Three of the projects have now raised a total of $116 million.

>>MORE: New financing facilities blend capital to meet the 2030 Global Goals

The Climate Finance Lab, a private-public partnership, has launched more than two dozen financial vehicles that have mobilized more than $1 billion. New candidates include the Green Aggregation Tech Enterprise to streamline renewable energy mini-grids in sub-Saharan Africa and the Residential Rooftop Solar Accelerator to lease systems to Indian households that lack the credit history to purchase them. Financing for Low-Carbon Auto Rickshaws will lend money for low-carbon and electric rickshaw drivers, lowering emissions and helping drivers gain independence from renting.

>>MORE: Mobilizing billions, then trillions, for climate solutions and energy access

The Rockefeller Foundation, through its “Zero Gap” portfolio, is on the hunt for SDG unicorns, innovative financial structures that can mobilize at least $1 billion each for sectors key to meeting the Sustainable Development Goals. It has funded the design and testing, as well as the sharing, of more than 30 new financial structures, including the Extreme Climate Facility and Land Degradation Neutrality Fund, which have each mobilized more than $300 million for climate solutions.

>>MORE: Here come the SDG-finance unicorns

As Returns on Investment’s blue-sky optimist, I’m betting that the best of the new models can scale up to attract real dollars. In our roundtable discussion, resident curmudgeon Imogen Rose-Smith was skeptical that many of the impact investment pilots can graduate from the kiddie table and join the adults in the “real world” of finance.

As always, our host Brian Walsh keeps it lively. Have a listen:

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This episode of Returns on Investment was sponsored by Wunder Capital, an easy way to invest in solar energy projects across the US. Visit WunderCapital.com/roi​.

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