Four new financing instruments aimed at driving billions of dollars for climate change mitigation and adaptation in developing countries are to be tested.
The Global Innovation Lab for Climate Finance is a public-private finance initiative founded in 2014 to incubate, develop and pilot climate finance projects.
According to a statement from the Climate Policy Initiative, which serves as the organisation’s secretariat, the Lab has so far catalysed over $500m in seed funding for projects in Colombia, Mexico, Rwanda and other countries.
Members of the Lab include the governments of the UK, Germany, the US, Denmark and the Netherlands, as well as Bank of America Merrill Lynch, Willis Group, development finance institutions, and other public and private investors.
Backed by its members, the Lab has announced four instruments which are now ready to pilot. They are:
- the Climate-Smart Lending Platform, which aims to reduce climate risk in lending portfolios and scale up lending to smallholders across the world, a market the statement says is worth $200bn; the platform will be piloted in Rwanda
- The Water Financing Facility, which will build climate-resilient water infrastructure in developing countries; the Netherlands government, which proposed the idea, is committing $3m in anchor funding to a pilot in Kenya
- The Energy Efficiency Enabling Initiative, which aims to mobilise equity finance and deploy technical assistance for energy efficiency in target countries, including Mexico and Columbia
- The Oasis Platform, which will provide transparent and standardised analytics to improve understanding and management of risks in regions vulnerable to extreme climate-related events.
It is hoped these financial tools will unlock greater financial investment for climate initiatives in their target countries. For example, the Lab has estimated that $100m invested in the Energy Efficiency Enabling Initiative could mobilise $3-9bn in energy investment in Mexico and Colombia.
Lord Bourne, a minister in the UK’s Department of Energy and Climate Change, said: “Climate change threatens development gains made in water, agriculture, energy and infrastructure around the world.
“Previous Lab interventions quickly mobilised resources for low-carbon energy. The new instruments offer the same promise for new sectors, helping communities meet development needs today and in the future.”
Projects that have already been launched by the Lab include the Long-Term FX Risk Management Instrument, which is being applied to projects in Sub-Saharan Africa to unlock billions in hedging potential, and Energy Savings Insurance, which guarantees the financial savings of energy efficiency projects.