SB'24 San Diego is open for registration. Register early and save!

Finance & Investment
Public-Private Partnerships Foster Solutions for Climate-Resilient World

The Global Innovation Lab for Climate Finance has launched six new financial instruments for climate-related projects in developing countries; while the World Economic Forum has convened public and private partners to launch the Coalition for Climate-Resilient Investment.

Investors launch climate solutions targeting carbon, clean energy, agriculture in developing countries

Image credit: Global Innovation Lab for Climate Finance

The Global Innovation Lab for Climate Finance has launched six innovative financial instruments for climate-related projects in developing countries.

The Lab — an initiative of over 60 public and private investors and institutions, launched in 2014 — accelerates much-needed investment solutions to support developing countries to meet their climate change and sustainable development goals; the Lab has now launched 41 instruments that have collectively mobilized nearly US$2 billion for action on climate change and sustainable development.

Lab Members — high-level leaders from both the public and private sectors who contribute expertise, and political and financial capital to selected instruments — drive the Lab’s activities, including selection, development and endorsement of the solutions.

“Sustainable investment is critical as we tackle the key global challenges of the 21st century — and the Lab is a leading force in successfully mobilizing investment to accelerate climate action,” said Antha Williams, Head of Environment at Lab Member Bloomberg Philanthropies. “At Bloomberg Philanthropies, we support initiatives that bring to life Mike Bloomberg’s vision of harnessing data to ensure better, longer lives for the greatest number of people. The Lab embodies this mission, and we’re excited to watch as these innovative finance instruments help drive action on climate change and sustainable development.”

After a 7-month period of analysis, stress-testing and design, the six enterprises in the Lab’s 2019 class are ready to launch their pilots and have the potential to drive significant investment for sustainable development.

The solutions target four focus areas in climate mitigation and adaptation:

Blue carbon in marine and coastal ecosystems

Restoration Insurance Service Company (RISCO), led by Conservation International, is a social enterprise that invests in mangrove conservation and restoration in areas with high-value coastal assets, protecting blue carbon and reducing coastal flooding and property damage risk. Insurance companies will pay an annual fee for these services and blue carbon credits will be sold. The initial pilot project will protect 4,000 hectares of mangrove forest in the Philippines. At scale, RISCO has the potential to achieve avoided emissions and sequestration of 16 million tonnes of CO2, equivalent to the annual electricity use of over 2 million homes.

Sustainable agriculture for smallholders in west and central Africa

Blockchain Climate Risk Crop Insurance (led by Sprout Insure) is a standardized, digital index insurance platform for smallholder farmers in sub-Saharan Africa that increases resilience in the face of climate change and extreme weather events. It increases access to crop insurance by making the instrument more available and scalable through standardization; and by increasing demand through lower premiums, and faster and more transparent payouts. The pilot targets 1.2 million farmers in Kenya.

The West African Initiative for Climate-Smart Agriculture is a blended finance fund to support the uptake of climate-smart agriculture by providing technical assistance and subsidized-rate loans or guarantees to smallholder farmers in West Africa. At scale, it has the potential to reach 90,000 smallholder farming households, and convert 185,000 hectares to climate-smart agricultural lands. Led by the Economic Community of West African States (ECOWAS), which has already pledged US$16 million to the fund, and to be implemented by the ECOWAS Bank for Investment and Development (EBID), which has pledged US$10 million to the fund.

“IFAD has partnered with the Lab because we know how business solutions are important for addressing issues related to the increasing climate impacts on smallholder farmers and agriculture in Africa,” says Margarita Astralaga, Director of the Environment, Climate, Gender and Social Inclusion Division at International Fund for Agricultural Development (IFAD). “The Lab’s innovative mechanisms show how big of an opportunity there is for the private sector to take a more central role in accelerating sustainable agriculture, particularly in West and Central Africa, home of many of the world’s fastest-growing economies.”

Sustainable cities

Cooling as a Service aims to decrease energy consumption and greenhouse gas emissions from cooling use in cities through a pay-per-service model for more efficient cooling systems. The model could save customers more than 20 percent in lifetime spending on cooling equipment and could provide up to 30 percent more profit for technology providers than the sale and operation of low-efficiency cooling systems. CaaS is led by Basel Agency for Sustainable Energy and the Kigali Cooling Efficiency Program, which have made significant progress towards initial implementation in the Dominican Republic and Jamaica, and are pursuing three to four larger flagship implementation projects, likely including South Africa, India and Mexico.

The Breathe Better Bond Initiative is a bond, paired with technical assistance, for city governments in developing countries to fund sustainable infrastructure projects that reduce both air pollution and greenhouse gas emissions. If deployed in just 10 cities, it has the potential to mobilize over US$4 billion for sustainable infrastructure, significantly improve health related to air quality, and reduce CO2 emissions by an estimated 35 million tons — equivalent to removing 7.4 million cars from roads for a year. These numbers can grow significantly if the bond is deployed in 50 or more emerging-market cities.

Sustainable energy access

Solar Securitization for Rwanda, led by the Development Bank of Rwanda, is a tradable solar asset-backed security that can accelerate the deployment of solar home systems in East Africa, by helping solar developers reduce their leverage and access capital for expansion. At scale, it can provide clean energy access to two million households in Rwanda and neighboring countries, translating into a US$100 million instrument.

“Financial innovation will be crucial in accelerating clean energy access for the hundreds of millions who still lack a reliable source of electricity,” said Lorenzo Bernasconi, Managing Director of The Rockefeller Foundation. “The Lab is helping to develop and deploy marketable solutions to fill this gap, helping to overcome one of the greatest barriers to universal energy access.”

Later this month, the Lab will open a call for ideas for next year’s cycle, where it will be targeting more ideas to drive investment for climate action in developing countries.

The Lab is funded by the Australian Department of Foreign Affairs and Trade, Bloomberg Philanthropies, the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU), GIZ, the International Fund for Agricultural Development (IFAD), the Netherlands Ministry for Foreign Affairs, The Rockefeller Foundation, Shakti Sustainable Energy Foundation, and the UK Department for Business, Energy & Industrial Strategy. Climate Policy Initiative serves as Secretariat.

Coalition for Climate Resilient Investment convenes companies across infrastructure investment value chain with assets totaling US$5T

Image credit: Mariamichelle/Pixabay

The World Economic Forum has partnered with the governments of the United Kingdom and Jamaica; global advisory, broking and solutions company Willis Towers Watson; and the Global Commission on Adaptation to launch the Coalition for Climate-Resilient Investment, a financial-sector led initiative that aims to transform infrastructure investment by integrating climate risks into decision-making and driving a shift toward a more climate-resilient global economy. The Coalition brings together more than 30 organizations across the investment value chain.

Climate change will impact on all aspects of society and will pose the biggest challenges to the world’s most vulnerable. In a warming and unstable climate, events such as the recent California wildfires and Hurricane Dorian are more likely to occur and will gain in power. Extreme weather poses an existential threat to the world's most vulnerable nations, but also to the world’s most advanced economies’ critical infrastructure.

The first-of-its-kind, financial-sector-led initiative brings together over 30 organizations across the investment value chain to address climate resilience challenges. Chaired by Willis Towers Watson CEO John Haley, the coalition aims to transform infrastructure investment by integrating climate risks into decision-making, driving a shift toward a more climate-resilient economy for all countries, including the most vulnerable.

"This new coalition realizes that current efforts to adapt to physical climate risks and deliver resilience for exposed communities and assets across the globe are severely lacking and need to be addressed urgently,” Haley said. “The conditions for success are ripe; the coalition will be able to harness a unique combination of the rapid advancement of climate risk analytics coupled with ambitious regulatory and investor-led initiatives. Pricing the risks posed by climate change will create opportunities to build a network of resilient infrastructure in high, medium- and low-income countries, enabling us to better prevent future human and financial disasters.”

There is a crucial need to develop new sources of data and analytical tools to better understand the risks posed by climate change to our societies and economies. This will enable us to better address these risks, preventing future human and financial disasters. Infrastructure enables the flow of goods, services and people which allow societies to thrive. Properly pricing climate risk in financial decision-making will align investment flows towards infrastructure capable of withstanding a changing climate. Providing a methodology to quantify the economic and financial benefits will provide a substantial and critical incentive for financial markets to embed resilience upfront.

As Andrew Steer, President and CEO of the World Resources Institute, and Commissioner of the Global Commission on Adaptation, pointed out: “Making infrastructure resilient to climate change has been regarded for too long as a burden and a cost. In reality, it’s a high-return investment, yielding on average a 4-to-1 return. It also saves lives, reduces risks, and encourages further investment. This dynamic new coalition will help make climate risks visible, leading to better decisions and smarter investments for the future. The Global Commission on Adaptation is proud to be part of it.”

The Coalition will develop a common approach to assessing climate risks, which will enable them to ensure all their investments are resilient, and will unlock additional private finance for resilient infrastructure investment.