CALL FOR IDEAS
The 2023 Lab call for ideas is now closed. The new class will be announced in March.
The Lab is looking for innovative finance solutions that can unlock investment to tackle some of the most difficult climate and sustainable development challenges and investment opportunities for a net zero economy.
Proposed sustainable finance vehicles should offer returns for private investors, create jobs and other local economic benefits, sustain biodiversity, improve climate resilience, and decrease emissions.
WHAT IS THE LAB LOOKING FOR?
In 2023, the Lab will develop six climate finance ideas from two thematic streams and three regional programs, plus one open idea.
Scaling up investment in climate adaptation is critical to building global resilience to worsening climate impacts. While adaptation investment is growing, it is far from what is needed. In 2019-2020, of the total USD 632 billion annually tracked to climate finance, USD 46 billion was committed to climate adaptation, a fraction of what is needed to address accelerating climate risk. There is an urgent need to create opportunities in developing countries that will attract public and private investment in adaptation.
With the support of the U.S. Department of State, the Lab is seeking proposals for innovative financial instruments and solutions that channel investment into building systemic climate resilience and respond to growing climate risk. There is a critical need to develop and scale a broad array of financial solutions – including project finance, insurance, bonds, and guarantees – that enable capital to flow to adaptation.
Submissions should focus on climate-stressed regions in developing countries, and should identify how the proposed financing approach would address specific physical climate risks and overcome barriers to mobilizing finance for climate adaptation. Submissions should also include a plan to phase down public financial support while offering attractive risk adjusted returns to investors, in order to scale private investment. Lastly, ideas should demonstrate potential to avoid maladaptation, support improved livelihoods, and strengthen the broader financial ecosystem in the implementation country(ies).
The Government of India has made it a national priority to drive development and access to electricity through cleaner growth, such as renewable energy and energy efficiency, including through an ambitious target of 40% of its electricity generation capacity from non-fossil fuel sources by 2030. However, India needs more capital, and at more attractive terms, to build the green infrastructure required.
Increasing investment from the private sector is essential to driving the country’s infrastructure growth. Currently, high risks and other poor financing terms may be limiting India’s investment potential.
With support from Bloomberg Philanthropies, the Lab is seeking innovative solutions to finance infrastructure for renewable energy and other channels for green growth, providing concrete solutions to the unique financing challenges to investment in green infrastructure in India.
East and Southern Africa
The Lab’s East and Southern Africa program seeks innovative finance instruments that address issues unique to the Southern Africa Development Community (SADC) and the East Africa Community (EAC) regions. Due to a combination of exposure to climate change stresses and low adaptive capacity, they include some of the most vulnerable countries to climate change.
National budgets can cover only a fraction of the required investments. International public and private financing, as well as capacity-building support, are needed for these countries to reach their targets.
There is growing consensus that women act as benefit multipliers for climate change mitigation and adaptation, playing an important role in their businesses, communities, and homes. Women are a catalytic force for the adoption of sustainable land use practices as well as for clean cooking, heating, and lighting. Women have also been found to be more concerned about climate risks than men, and companies with women in leadership positions are more likely to adopt sustainability practices and lower carbon emissions.
While leveraging women’s unique roles as consumers, workers, and borrowers is increasingly being recognized as imperative to advancing climate goals, climate finance has not sufficiently tapped into women’s potential. Worldwide, women receive only 7% of total agriculture investments, while 80% of women-owned business struggle to access finance. Furthermore, since climate change disproportionately impacts women, climate finance that does not consider women’s specific needs can severely undermine the sustainability of climate investments. More gender-responsive climate finance can not only address impact inequalities and catalyze women’s empowerment but can also ensure effective and “smart” climate finance.
Aiming to fill these gaps and with support from FinDev Canada and Global Affairs Canada, the Lab is seeking proposals for financial solutions that have both the advancement of gender equality and addressing climate change mitigation or adaptation as core objectives. Ideas must directly impact and specific outcomes for gender equality and women empowerment. This could include (but is not limited to) financial instruments that:
- Facilitate access to finance for women entrepreneurs, producers, or women-led SMEs delivering climate solutions
- Promote diverse leadership and inclusive employment practices in climate mitigation and adaptation investments
- Promote the design and uptake of goods and services targeted to the needs and disproportionate climate risks faced by women, such as insurance tools
- Target women as end users, consumers, and borrowers, for example, in climate-resilient infrastructure investments
- Are founded on strong gender analysis and use this to identify a project pipeline and mainstream gender equality in investment processes
Brazil aims to reduce greenhouse gas emissions by 37% below 2005 levels by 2025 and 43% by 2030. To this end, the country intends to achieve zero illegal deforestation in the Brazilian Amazon and to restore 12 million hectares of forests while also increasing the use of renewables to 45% of the energy mix, among other measures. However, like in many emerging economies, funding to meet these targets remains challenging.
The Lab seeks transformative investment solutions that can drive funds for Brazil’s national climate priorities.
The United Kingdom Department for Business, Energy, and Industrial Strategy funds the Brazil program.
Alongside the five ideas that will be developed in the Lab’s 2023 specific sectoral or regional streams, the Lab will also develop one climate finance idea that targets any climate-relevant sector in any developing country. Submissions to this open stream should explain clearly why the target sector and geography identified should be priorities for climate finance mobilization. Ideas could cover a variety of sectors, including, but not limited to, nature-based solutions, renewable energy, food systems, or land use.
Webinar in English
On November 29th, the Lab hosted a webinar covering the 2023 application process.
The session presented case studies from previous cycles and a Q&A segment.
Webinar in Portuguese
There was also a webinar on November 30th, hosted in Portuguese.
It covered the same topics and focused on Brazil, one of the targeted geographies for the 2023 Lab cycle.
WHO IS INVOLVED?
The Lab comprises over 70 expert institutions in government, development finance, philanthropy, and the private sector. The complete list of Lab Members can be found here. The funders for the Lab’s 2023 cycle are included below. Climate Policy Initiative serves as the Lab Secretariat.
HOW ARE IDEAS SELECTED?
Successful ideas are selected by Lab Members and other experts based on the following criteria.
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.
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.
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.
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.
WHY SUBMIT AN IDEA?
Selected ideas will receive guidance and support from high-level leaders from both the public and private sectors, who contribute expertise, political capital, and financial capital to the instruments. See the full list of Lab Members here.
Selected ideas will also benefit from robust analysis, stress-testing, and development by Climate Policy Initiative’s team of experts.
value of analytical and communications support received by selected Lab ideas
mobilized by Lab instruments endorsed in previous cycles
invested by Lab Membership of over 70 expert institutions
WHAT HAPPENS IF YOUR IDEA IS SELECTED?
If your idea is selected by Lab Members, you will work with a team of analysts, key stakeholders, and experts to:
✓ Develop or refine the mechanics of your idea
✓ Survey comparable instruments, ensuring the final instrument is innovative and impactful
✓ Develop robust financial modeling
✓ Assess and document potential social and environmental impacts
✓ Develop a detailed implementation plan
✓ Produce promotional content
✓ Present your idea to donors and investors
✓ Potentially receive endorsement from the Lab
HOW HAVE PREVIOUS LAB INSTRUMENTS PROGRESSED?
Below are a few examples of Lab instruments that were launched and endorsed in previous Lab cycles, and their latest impact and progress. To learn more about all previous Lab instruments, visit Ideas.
Sub-National Climate Finance Initiative (SCF)
SFC is a private equity fund seeking to scale mid-sized climate resilient infrastructure projects at the sub-national level, featuring a technical assistance facility to provide local government capacity building and certifying all projects for SDG impact prior to investment. It has secured USD 150 million for a first-loss tranche of the SCF’s investment fund
Green Receivables Fund (Green FIDC)
The Green FIDC allows clean energy and energy efficiency projects to secure financing based on future cash flows from sales. The Green FIDC builds on a Brazil-specific instrument used by companies to raise capital by securitizing receivables. It has raised USD 50 million for expanding solar distributed generation in Brazil.
TerraFund (Rural Prosperity Bond)
TerraFund provides loans to SMEs working in land restoration in Africa, South Asia, and Latin America, benefiting from a unique partnership with WRI’s Land Accelerator. Upon graduation from the accelerator, these SMEs will be able to apply for credit from the bond.