How it Works

CONTEXT

Private investors – often supported by public policy and finance – are already channeling significant amounts of money into the low-carbon economy in countries around the world, but much more investment is needed in order to tackle the climate challenge.

Well-designed financial instruments and appropriate public support that reduce private investors’ risks and improve their financial returns could play a central role in global efforts to address the adaptation and mitigation needs of developing countries.

The Global Innovation Lab for Climate Finance catalyzes this process by drawing on experience and expertise from around the world to identify, design, and pilot the next generation of climate finance instruments. These instruments provide concrete solutions to financing challenges faced in real projects, and can build new markets, attract new investors, and help to unlock billions of dollars in new climate-friendly investment in developing countries.

The Lab is part of broader government and private sector efforts to scale up climate finance. It aims to respond to the urgency of the climate challenge by accelerating promising climate finance proposals so that they are ready to implement. By quickly developing project-ready solutions that can be implemented in the short term it aims to complement existing processes. The Lab stands out for its goal of moving quickly from talk to action.

PROCESS

The Lab runs in annual cycles to identify, develop, and support the latest climate finance ideas.

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When an idea is selected for development and support by Lab members, proponents work with a working group of analysts, key stakeholders, and experts to:

  • Develop or refine the mechanics of their idea
  • Survey similar instruments, ensuring the final instrument is innovative and impactful
  • Develop financial sustainability
  • Assess and document potential social and environmental impacts
  • Map risks and risk mitigation strategies
  • Develop a detailed implementation plan
  • Produce promotional content
  • Present their idea to donors and investors
  • Potentially receive endorsement from the Lab

CRITERIA

The Lab criteria for idea selection and development are the following:

Actionable

An instrument is actionable when it identifies (1) the type of entity(ies) that could implement it, (2) the pathway towards implementation, including the timeframe, activities, and key milestones, and (3) possible challenges to implementation and related management strategies.

Innovative

An instrument is innovative when it demonstrates the ability to address, directly or indirectly, barriers to private climate finance that (1) have not yet been addressed or (2) that will be addressed more effectively compared to other instruments in the market.

Catalytic

An instrument is catalytic when it demonstrates potential to (1) mobilize private climate capital within a sizeable market, (2) be scaled up or replicated in other contexts and, (3) achieve socioeconomic, development, and environmental impacts.

Financially Sustainable

An instrument is financially sustainable when it identifies (1) a strategy to phase out public financial support, thereby achieving market viability and (2) possible challenges to achieving its intended objectives and related management strategies.

RELATED PROGRAMS

The Lab also operates and presents the Fire Awards, a related initiative that seeks to build momentum for primarily private-sector-led interventions that are ready to expand. The Global Lab also coordinates closely with the India Innovation Lab for Green Finance, which focuses on the unique barriers to financing green infrastructure in India.

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