The Global Climate Finance Innovation Lab (the Lab) is launching seven new instruments to accelerate climate finance across several key sectors in emerging economies, many of which are in Africa. These solutions are being announced as Africa struggles to mobilise the finance needed to adapt and make its people more resilient to climate change.
A few weeks before the 27th United Nations Climate Change Conference (COP27) in Sharm el-Sheikh, Egypt, new ideas have been announced for mobilising climate finance in emerging countries, particularly in Africa. These are seven financial instruments recently launched by the Global Climate Finance Innovation Lab (the Lab). These financing mechanisms aim to unlock $1 billion through insurance, guarantees, credit assessment and other financial tools.
These instruments will cover several key sectors in Africa, including the energy transition of businesses. To this end, the Lab is launching the Nature Fund for “high integrity natural carbon projects”. This facility will be operated by CrossBoundary, a well-known energy investor on the African continent through the financing of solar power plants for commercial and industrial (C&I) customers, as well as electrification via solar mini-grids.
An eco-friendly housing finance facility
The Nairobi, Kenya-based investment company will open the fund in Africa to meet the growing demand for green energy from businesses. The Lab’s ready-to-use mechanisms also include the Green Guarantee Company, an insurer specialising in climate change mitigation and adaptation projects in emerging markets. This instrument, to be launched in South Africa by the Development Guarantee Group, will allow international investors to access adaptation and mitigation projects by reducing the risk of green bonds and loans.
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Another climate finance solution is Green Affordable Housing Finance. This mechanism will allow the deployment of construction loan guarantees and mortgages. Reall is responsible for the implementation of this instrument. In Kenya, the Punjab-based property developer in India will use the mechanism to foster a locally driven and self-sustaining affordable housing finance ecosystem. The Lab is also launching the Climate Smart Shrimp Fund, which will provide loans, backed by a technical assistance facility, that enable shrimp farmers to switch to more sustainable and efficient production systems while restoring mangrove ecosystems. The steel sector decarbonisation instrument combines technical assistance, low-cost patient capital and implementation support to prepare and invest in decarbonisation technology projects, including through renewable energy.
Climate insurance in municipalities
The reduction of methane emissions is not left out with the establishment of a dedicated mechanism to finance emerging technologies for capture and hydroelectric reservoirs to produce cleaner electricity. And as a stakeholder in the Lab, the United Nations Capital Development Fund (UNCDF) has also proposed the establishment of Climate Insurance Linked Resilient Infrastructure Financing (CILRIF), a climate insurance offering for municipal resilience.
“We are living in a decisive decade in the fight against the climate crisis. To decarbonise and build a climate-resilient economy, it is crucial to unlock large-scale investments across all sectors. The ambition, depth and breadth of this year’s Lab proposals are striking, and we look forward to supporting their journey to market and impact,” says Ben Broché, Head of the Global Innovation Lab for Climate Finance programme.
The African continent is lagging behind in climate finance. In 2020, Africa received only $30 million in climate finance, according to the latest Climate Policy Initiative report. Yet Africa needs $277 billion for climate change adaptation and resilience. The Lab’s instruments should enable institutional and private investors to accelerate their contributions to climate action in Africa. As a reminder, the Global Innovation Lab for Climate Finance is an initiative of over 70 public and private investors and institutions that aims to accelerate investment solutions to support the Sustainable Development Goals (SDGs) in emerging markets. Since its inception in 2014, the Lab has launched 62 instruments that have mobilised 3.3 billion in climate finance.
Jean Marie Takouleu
