Accelerating climate finance

Lab leads innovation in finance with 7 new deals from methane to affordable housing to climate-smart shrimp

LONDON – The Global Innovation Lab for Climate Finance (the Lab) has selected seven new climate finance ideas for its 2022 acceleration program. The Lab will develop cutting-edge financial concepts that tackle barriers to investment and unlock sustainable private financing in emerging economies. Pilots are planned for Brazil, India, Kenya, South Africa, and Southeast Asia.

“The 2022 Lab class shows that a broad range of financial instruments such as guarantees, mortgages, insurance, and bonds can be leveraged to increase the pipeline of sustainable opportunities, even in challenging sectors like methane, steel, shrimp farming, and housing. It is uplifting to see such a diverse and innovative cohort of climate finance ideas with the potential of catalyzing billions of U.S. dollars to address the climate crisis,” said Dr. Barbara Buchner, Global Managing Director of Climate Policy Initiative

The Lab is an investor-led initiative that identifies, develops, and launches promising solutions to drive critical public and private investment in climate change in developing economies. Each year, the Lab competition selects promising, early-stage ideas for sustainable investment and rapidly develops these ideas into fundable, scalable investments and business models.

In 2022, the Lab received over 150 applications from leading asset managers, development finance institutions, global NGOs, prominent project developers, financial services firms, and entrepreneurs. The seven ideas clearly meet all Lab criteria: innovation, actionability, financial sustainability, and catalytic potential. The winners will undergo seven months of analysis, stress-testing, development, and preparation for launch later this year.

Now in its 8th annual cycle, the Lab program has become a leader in accelerating investment where needed most, having accelerated 55 instruments so far. In 2021 alone, Lab instruments mobilized USD 816 million in total, making it the best Lab year so far for total mobilization figures. Since the Lab’s inception in 2014, Lab instruments have surpassed the USD 3.2 billion in climate investments, with roughly USD 1 billion coming from the private sector.

Also, in 2021, the Lab was presented with the UN Global Climate Action Award at COP26, an acknowledgment of the success achieved by all climate finance entrepreneurs that went through the acceleration program and launched their financial instruments.

2022 LAB WINNERS

Climate Insurance-Linked Resilient Infrastructure Financing (CILRIF) is a concept to drive long-term climate insurance to cities at pre-arranged and below market rate premiums, linked to a financial product that would allow municipalities to invest in resilient infrastructure. The United Nations Capital Development Fund (UNCDF) leads the idea with a working group of insurers, DFIs, investors, climate experts, and engineering firms.

The Climate Smart Shrimp Fund is a USD 100 million revolving loan facility supporting SME shrimp farmers to adopt controlled intensification and other responsible aquaculture practices to increase shrimp yields and profits while contributing to ecosystem restoration that offers mitigation and adaptation benefits. Proponent Conservation International plans to pilot the idea in Southeast Asia.

Financing Steel Decarbonization proposes blended financing for adaptable steel decarbonization technologies in a comprehensive money-to-market approach. The goal is to decarbonize horizontal processes from energy feed to product manufacturing and the vertical supply chain ecosystem. Proponents are Smartex, a technology company, and the U.S. National Renewable Energy Lab (NREL).

The Green, Affordable Housing Finance mechanism is a mortgage instrument that provides data-driven alternative credit assessments for IFC-EDGE certified green homes to underwrite borrowers with low and informal incomes. In piloting the idea in Kenya, proponent Reall aims to demonstrate green building market viability, precipitating a transformation of the building sector while facilitating the creation of new green jobs.

The Green Guarantee Company is a specialist guarantor that will provide guarantees to mobilize climate finance from global credit and capital markets to support climate mitigation and adaptation projects in emerging markets. The proponent Development Guarantee Group selected South Africa as a pilot country, with the instrument is expected to roll out globally after that.

Project Finance for Nature-Based Solutions aggregates high-integrity nature-based carbon projects with pre-purchase offtake agreements from high-integrity carbon credit buyers. The idea also proposes to include a technical assistance facility as a de-risking mechanism. By doing so, proponent CrossBoundary addresses the mismatch in supply and demand of carbon credits for NBS. A pilot will target Kenya.

The Reservoir Methane Capture Mechanism is a facility that finances methane capture technology in the turbined waters of hydroelectric plants. The methane then feeds biogas energy generators, providing multiple sources of revenue. The instrument will front the costs of these structures and be compensated in fixed and variable fees, according to the energy generated. Proponents Open Hydro and Bluemethane will pilot the idea in Brazil.

Quotes

“The Lab plays a significant role in attracting and supporting a pipeline of innovative finance solutions that address barriers to climate investment in middle and low-income countries. Such innovation is crucial for delivering the investment flows required to meet the Paris Agreement’s goals. Given the importance of this agenda, it’s not surprising that we receive a lot of interest from other UK government departments to help review the Lab proposals. There is cross-cutting interest in climate finance innovation.”

Alice Caravani, UK Department for Business, Energy and Industrial Strategy (BEIS)

“The IFC has been involved with the Lab for several years now, and we continue to be impressed because the quality of the ideas is maintained. We stay engaged because these are truly new ideas, unlike anything we have seen before. I was impressed by the ideas to scale adaptation, a difficult gap to fill, and thankfully the Lab is addressing it.”

Anup Jagwani, International Finance Corporation (IFC)

“Overall, the quality of the proposals that were brought forward is outstanding. The selected idea for the Southern Africa program is relevant to the whole continent. For me, the critical piece is sustainability, the ability to develop and evolve further than just Southern Africa, and we have seen it today.”

Mike Peo, Nedbank CIB

“Climate finance is not only about addressing climate issues but also about tackling poverty and reducing inequality. We have supported Lab ideas from Brazil in the past, and we know they can contribute to achieving the country’s goals towards carbon neutrality. We do hope to see the ideas selected today having an impact on the ground soon.”

Nabil Kadri, Brazilian National Development Bank (BNDES)

“Sustainable food systems have been a high priority on the development agenda, not the very least in its intersection between climate environment and poverty reduction. And for us at SIDA it is a priority to help mobilize and scale private investments for sustainable development in emerging economies. And to do this, it is vital to identify and develop instruments that can help find investment opportunities and improve coordination between donors, DFIs, private investors, and practitioners. This is where the Lab comes in. We’ve seen over the years the Lab’s ability to identify innovative instruments with catalytic potential and t bring together a broad range of actors.”

Nawar Al-Ebadi, Swedish International Development Cooperation Agency (SIDA)

“As one of the largest and longest donors to the Lab, we are convinced that there is still much to do in the space of mobilizing private finance for climate action. The Lab has helped get many successful projects off the ground, delivering impact. I see a need to strengthen further private sector engagement in different areas regarding the USD 100 billion climate finance goal. It is encouraging to see that there are several proposals in this cycle further promoting private and public sector engagement.”

Nicole Wilke, German Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (BMUV)

“The DBSA has learned over time that climate finance innovation is hard. It takes a long time; it takes resilience, and blended finance will be crucial. It requires sophisticated financial engineering to set the bar. The Lab is unique because it creates a platform for global innovation leverage. And in that sense, this cohort’s immense diversity represents how the Lab has evolved over the years. Being a learning program, it continuously steps up, allowing for better and better solutions to come forward.”

Paul Currie, Development Bank of Southern Africa (DBSA)

Seven additional ideas made it to the finalist stage of the Lab. They are:

• Blue-Bird Properties’ Green Housing Framework – DODS SPECTRA and CHB Capital
• Catalyze adoption of solar water pumps through aggregation – EESL/CESL
• Facility for Scaling Regenerative Agriculture in the Brazilian Amazon – reNature
• Innovative Finance for the Hardest-to-Reach – Acumen
• Integrated Resource Efficiency & Renewable Energy Fund (iRERERF) – Mahlako a Phahla
• SUTTI (Scale Up Training Traceability Impact) AGRI ASIA Investment Fund – KSAPA
• Transforming Capital for Adaptation – ADAPTA.EARTH

About the Lab

The Global Innovation Lab for Climate Finance identifies, develops, and launches innovative finance instruments that can drive billions in private investment to climate change and sustainable development. The Lab won the 2021 UN Global Climate Action Awards and is funded by Germany, Sweden, and the United Kingdom. Climate Policy Initiative serves as Secretariat.

Media contacts

Rob Kahn, Head of Communications
Climate Policy Initiative
rob.kahn@cpiglobal.org
+1 650-516-7136

Júlio Lubianco, Senior Communications Associate
Climate Policy Initiative
julio.lubianco@cpiglobal.org
+55 21 96463-7061