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 $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,” a statement read.
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 decarbonize and build a climate resilient economy, it’s crucial that we, 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 mobilized over $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 Decarbonization combines technical assistance, low-cost patient capital, and implementation stage support to prepare, invest in, and de-risk decarbonization 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.