3rd Cycle Global Lab & Fire Awards Selection Meeting

A meeting organized by Climate Policy Initiative on behalf of The Global Innovation Lab for Climate Finance

Secretariat Summary

On 5 December in London, Lab Advisors selected three ideas to undergo analysis and stress testing under The Lab’s Third Cycle. In addition, the Fire Awards Advisory Board selected four early-stage pilots and businesses to pitch their innovations at the BNEF Future of Energy Summit in April.

The selected Global Lab Instruments include two focused on enhancing climate resilience, ‘Climate Resilience & Adaptation Finance/Transfer Facility’ and ‘Cloud Forest Blue Energy Mechanism’ and one mitigation-focused instrument, ‘Renewable Energy Scale-up Facility’.

Advisors unscored the strengths of the Lab finalists, and welcomed progress on First & Second Cycle Instruments which have attracted nearly USD $600 million in seed funding. In selecting the three instruments, Advisors emphasized the need for proposals to demonstrate a clear value-add from The Lab, strength based on Lab criteria, and strong potential to catalyze private investment. The instruments voted in by advisors will now proceed to analysis and stress testing in the Instrument Design phase, which will conclude with a mid-Cycle meeting to review progress in April 2016.

In addition to the three ideas selected to move forward in the Third Lab Cycle, four initiatives were selected by the Fire Awards Advisory Board and Lab Advisors to move forward as finalists in the first cycle of the Fire Awards under the Global Lab. The four finalists selected were: Electric Bus Battery Service Agreements, Global Fleet of Modular Moveable Mega-watt Scale Solar Assets, Online Financing of Clean Energy Projects, and Solar Agro-Processing Power Stations. Two focus on the issue of energy access, which emerged as a key theme. Lab Advisors and Advisory Board members also emphasized the greater importance of team track record and initiative scalability within the context of Fire Awards.

SELECTION MEETING: THE GLOBAL INNOVATION LAB FOR CLIMATE FINANCE (December 5, 08:00 – 13:00)

Meeting Objectives

The first face-to-face Advisors Meeting of the Third Lab Cycle took place in London, hosted at Lab member Willis Group’s headquarters, on 5 December 2016. The purpose of the meeting was to allow Advisors to explore the pros and cons of the top 8 ideas, previously selected by Advisors from 125 submissions received, and to identify the most promising three instruments to then undergo intense analysis and stress-testing through the Lab process. The meeting also provided an opportunity to discuss progress, updates & strategic direction.

Introduction

Dr. Barbara Buchner of Climate Policy Initiative introduced meeting host David Simmons, Managing Director, Willis Capital, Science and Policy Practice, who expressed the Lab was moving ‘from strength to strength’ and provided key updates on Second Cycle instrument the Oasis Platform, which Willis Group was closely involved in developing.

In addition, Ben Broche of Climate Policy Initiative provided a brief overview of the successes of the Third Cycle call for ideas and the launch of the CliamteFinanceIdeas.org platform, noting significant developing country participation, and the high quality and record number of ideas submitted. He also provided an overview of the screening process to refine the top ideas which Advisors voted to further narrow in the weeks leading up to the meeting.

Lab Third Cycle Instrument Overviews

Chiara Trabacchi and Donovan Escalante, representing The Lab Secretariat, outlined the top four adaptation/resilience instruments and top four mitigation instruments shortlisted by Advisors. Advisors were then invited to join a roundtable discussion, which focused on the specific added value of The Lab, alignment of each idea with Lab criteria – innovative, actionable, catalytic, and financially sustainable – and the overarching transformative potential of each instrument for generating private-sector investment as in climate finance.

Proponents for each of the top 8 ideas were invited to participate in the selection meeting, to answer Advisor questions, and clarify points which were not explicit in their initial submissions.

Following the discussion, Advisors voted to select three total instruments which, based on collective votes and discussion of relative strengths and weaknesses, resulted in two adaption / resilience ideas, and one mitigation-focused idea.

Adaptation / Resilience

Final 3rd Cycle Lab Instruments Key Comments
Climate Resilience & Adaptation Finance/Transfer Facility (CRAFT)

A commercial investment vehicle that blends private and public finance to provide growth capital and technical assistance for companies managing climate risk, proposed by the Global Adaptation & Resilience Investment Working Group

Strengths: Advisors underscored the promise of this idea with respect to the innovative structure, the replicability, the clarity and actionability of the proposal, the strength of the pipeline, potential to build resilience across the value chain, and the significant scale the Facility could achieve in a relatively short amount of time.

Challenges: There were some concerns expressed with respect to technology transfer, the role of the public sector, as well as the technical aspects of the Facility’s structure. These will be explored in Phase 2 of the Lab process.

Cloud Forest Blue Energy Mechanism

A fund for restoration and conservation of cloud forests in Latin America, which can improve the productivity of hydroelectric plants, proposed by Conservation International and The Nature Conservancy

Strengths: Advisors noted cloud forests as being a key priority in Latin America, the highly innovative nature of the idea, the strong case made in the proposal for actionability & financial sustainability, and the mutual adaptation/resilience & migitation benefits of the idea.

Challenges: Advisors raised concerns about the difficulties establishing PPAs in the target countries, and that there was little proof of concept, potential for displacement of communities & other negative externalities, and questions about the financial structure & viability. These will be explored in more depth in Phase 2 of the Lab process.

Mitigation

 

Final 3rd Cycle Lab Instruments   Key Comments
Renewable Energy Scale-up Facility

A platform to drive private institutional equity into the riskier, earlier stages of renewable energy projects in emerging markets, to expand project pipelines, proposed by Baker McKenzie and Get2C

Strengths: Advisors expressed broad consensus that this idea represented a strong, and Lab-worthy concept. They noted how it addressed a clear barrier, and that the utilization of equity options as both innovative and promising. They also expressed the idea was highly scaleable and replicable.

Challenges: Advisors expressed that the market demand for the idea will need to be proven, while there were also concerns around the complexity of the structure, and uncertainty about geographic context. These will be explored in more depth in Phase 2 of the Lab process

 

Past Instrument Updates

Following votes for the Third Cycle instruments, Dr. Barbara Buchner, provided a brief update to report on the progress of The Lab’s First & Second Cycle instruments.

Lab 1st Cycle Instruments Instrument Progress 
Agricultural Supply Chain Adaptation Facility

A value chain finance platform where multilateral development banks partner with agribusiness companies to provide technical assistance and finance for climate-resilient investments to the farmers in their supply chains.

  • Ongoing piloting of the ECOM Coffee Renovation Facility in Nicaragua
  • Proponents are developing a number of promising proposals, which are due to be finalized in the coming months
  • Strong interest from potential corporate partners
Climate Investor One

Combines three innovative investment facilities into one to finance early-stage development, construction, and refinancing in order to fast-track renewable energy projects in developing countries.

  • USD 400 million in funding commitments
  • Contracts signed for large-scale projects in the Philippines, and sub-Saharan Africa, with one solar-hydro facility set to provide grid-connected electricity to just under 1 million Rwandan citizens
Energy Savings Insurance

An insurance product that covers the expected value of savings generated by energy efficiency investments for energy service providers and equipment providers.

  • ESI received USD $21.7M in funding from the Green Climate Fund to launch in El Salvador, a huge milestone, this summer
  • Launched successful pilots in 2016 in both Peru and Brasil
  • Received endorsement from the India Lab to expand the pilot into the Indian marketplace
Long-Term Foreign Exchange Risk Management

The Long-Term Foreign Exchange Risk Management instrument provides tools to address currency and interest rate risk for climate relevant projects in developing countries, by locking in long-term finance in local currencies.

  • Since December 2015, the instrument has supported USD 52M in hedging transactions in sub-Saharan Africa under the SE4All program
  • As it continues to scale it could support USD 1.5 billion in clean energy investment projects over the next several years

 

Lab 2nd Cycle Instruments Instrument Progress 
Climate-smart Lending Platform

Brings together the tools, actors, and finance necessary to help lenders incorporate climate risk in their loan portfolios while incentivizing the adoption of climate-smart farming methods by smallholders

  • CSLP team submitting promising proposals to private and public sector funders
  • Netherlands announced interest in funding CSLP at the December 2016 Lab meeting
  • UCN committed supporting development of climate-smart lending plans in Rwanda

 

Energy Efficiency Enabling Initiative

A private equity fund that relies on donor-backed equity capital and risk mitigation instruments to crowd in private investment in energy efficiency.

  • Initial USD $5M funding provisionally approved by IDB
  • First fund has made 13 investments totaling USD $41M
  • ·Pipeline of interest of over USD $80M
  • IDB team working closely with fund manager MGM Innova to assess market opportunities & continue to fundraise for first & second fund
  • Conducting outreach to pension funds and other investors in Europe and Japan
Oasis Platform

Provides open access to data and open source modeling tools that enable risk assessments as well as the transparent evaluation of economic and financial losses associated with extreme climate-related events.

  • Platform received formal endorsement from high-profile international and local actors for pilot
  • Team has made significant progress in advancing development of the Platform, including a launch of the E-Market ‘HUB’, a web-based marketplace that will link the demand and supply for risk analytics
Water Financing Facility

A national level pooled bond facility providing long-term, local currency loans to public or private water utilities for projects to enhance climate resilience.

  • USD $5M in initial funding from the Netherlands
  • Kenya pilot progressing rapidly
  • Proponents have submitted several promising proposals and are testing the concept in other geographies in Africa

Strategic issues related to the 3rd Cycle & Beyond

Next Steps

Dr. Buchner gave an overview of the Lab process and timeline, specifically plans to establish working groups with cross-sector experts (including Lab members) by mid-January, after which time the Instrument Design phase will kick off in full to develop the instrument mechanics, with a focus on the innovative and financially sustainable aspects of the instrument. An interim Advisor meeting to review instrument progress will be planned for April 2017 (Advisors discussed several potential dates at the meeting), after which the Lab’s analysis will focus on the Implementation Design and pilot support, with a focus on the actionability, and catalytic nature of relevant instruments. The Secretariat then plans to host a meeting to discuss and endorse the final instrument designs in July 2017.

Update on India & Brasil Labs

Dr. Buchner also presented updates on the regional applications of the Global Lab’s work – the India & Brasil Labs.

The India Lab just completed its first cycle, endorsing three instruments: A rooftop solar financing facility, a new lending platform for green investments, and a currency exchange instrument.

In addition, the Brasil Lab was officially launched at COP22, has confirmed a strong panel of experts on the climate finance needs and opportunities of Brasil, and has planned its inaugural selection meeting for February 6, 2017.

Lab Membership

Advisors expressed the need to expand the Lab membership to improve the Lab’s diversity, expertise, and network. Dr. Buchner took the chance to re-introduce a participant from FONERWA, Rwanda’s national climate fund, who attended the meeting as an observer, noting a recommendation for Rwanda to join the Lab to further improve developing country representation in the membership. The Secretariat plans to discuss additional recommendations for expanding the membership with Advisors in early 2017.

Closing remarks

Lab funders gave closing reflections on the meeting, which included: optimism about The Lab’s growing maturity, the strength of the all the Lab finalists and the need for continued engagement with all proponents who submit to the Lab, the importance of prioritizing both mitigation and adaptation, and an eagerness to being a part of the Instrument Design phase. Dr. Buchner then closed the meeting by thanking the Advisors for their commitments to The Lab, and their active participation in the Meeting.

 

FOR A FULL SUMMARY OF THE FIRE AWARDS SELECTION MEETING, DOWNLOAD THE ATTACHED PDF MEETING SUMMARY