*In January 2022, the Lightsmith group announced the final closing of Lightsmith Climate Resilience, based on CRAFT. Read more.
In addition to being selected to move forward in the 2016-2017 Global Lab cycle, CRAFT was also a finalist in the 2016 Fire Awards.
Between 2003 and 2013, natural disasters caused $1.5 trillion dollars in economic damages worldwide, $550 billion of which was in developing countries. As climate change worsens, so will these challenges. Therefore, in sectors such as agriculture, water, energy, and financial services, companies and communities are increasingly looking for ways to reduce their vulnerability to climate change. There is a market opportunity to offer services and solutions to help customers assess and manage their climate risks and reduce costs. Investment is especially needed to bring existing technologies and solutions to new sectors, geographies, and users, particularly in developing countries.
As a growth equity fund, CRAFT will invest in 10-20 companies, located in both developed and developing countries, which have proven technologies and solutions for climate resilience and have demonstrated market demand and revenue. The Fund, together with an accompanying Technical Assistance Facility, will help companies – like weather analytics, catastrophe risk modeling services, and drought resilient seed companies, among others – expand into new sectors and geographic markets.
For every one dollar of concessional financing and technical assistance grants, CRAFT will leverage an estimated 3.3 dollars of direct commercial investment to enhance the resilience of communities, businesses, and critical infrastructure. By making the business case for investment in climate resilience, the Fund will also help catalyze a global market for climate resilient products and services; promote climate resilient development; and contribute to rapidly evolving resilience standards and metrics.
CRAFT will leverage concessional and commercial investment to enhance the resilience of communities, businesses, and critical infrastructure, while also helping catalyze a global resilience market.
The Fund’s primary investment team is in place, with regional partnerships being developed to assist with investment origination and due diligence.
For the Fund to move forward, its developing country sleeve in particular will benefit from the identification of one or more “anchor” investors, such as development finance institutions, to help attract and mobilize capital from private investors. The Fund will seek to enter into the due diligence process with one such investor in the fall of 2017, after which further private and public investment could be secured in 2018. In parallel, the Fund’s Proponents will develop the design of, and seek donors to, the Technical Assistance Facility.
Addressing a critical area of uncertainty and need, CRAFT is a solution that is immediately actionable, with a highly experienced team led by Lightsmith Group committed to its success, an initial pipeline of investments identified, and regional partnerships under development.
The fund combines a standard growth equity investment fund structure with technical assistance to enable the deployment of climate resilience services and technologies in developing countries. The design includes:
- Two legally and financially separate sleeves for developed and developing country investments. The two investment sleeves will enable clear separation of risk profiles. While both sleeves target USD 250 million each in total funding commitments, the developing country sleeve will target USD 150 million of commercial funding and USD 100 million of concessional funding to de-risk investments.
- Technical support to help resilience companies expand in developing country markets. In addition to financing and strategic support provided by the Fund, a TA Facility will provide grants for technical support helping companies enter and expand in developing country markets.The TA Facility will fund market studies; preparation and implementation support activities; and knowledge and capacity building. The TA Facility will target USD 20 million in grant-based funding and will have a separate governance structure from the Fund.
- A waterfall structure de-risks private investment, enabling 20-25% gross returns for commercial investors, in line with expectations for growth equity. Both the developed and developing country sleeves will incorporate a 6% preferred return threshold for commercial investors. Beyond this, returns will be distributed at an 80/20 ratio to limited partners and the Sponsor. The developing country sleeve will incorporate an additional concessional equity layer.
News & Events
Lab instruments mobilized USD 816 million in 2021, making it the best Lab year so far for total mobilization figures. Since the Lab’s inception in 2014, Lab instruments have surpassed USD 3.2 billion in climate investments, with roughly USD 1 billion coming from the private sector. Instrument Cycle USD Blockchain Climate Risk Crop Insurance […]
Lightsmith Group Closes Inaugural USD 186 Million Growth Equity Climate Fund, the First to Focus on Climate Resilience and AdaptationFebruary 2, 2022
2017 Lab proponent Lightsmith announced the final closing of Lightsmith Climate Resilience with USD 186 million of commitments. Lightsmith Climate Resilience is the first private equity fund to have focused on climate resilience and adaptation, investing in growth-stage technology companies that address the effects of climate change. The fund is based on an investment strategy […]
CRAFT secures USD 100 milion from Green Climate Fund in adaptation finance for projects in six countriesNovember 25, 2021
Lab instrument CRAFT is one of the 13 new projects for mitigation and adaptation action selected by the Green Climate Fund (GCF) and has secured USD 100 million. From the original announcement: “GCF’s commitment of USD 100 million in catalytic capital to CRAFT will allow the programme to scale up adaptation finance and accelerate development, […]
Jay Koh, Managing Director of the Lightsmith Group and proponent of CRAFT, endorsed by the Lab in 2017, joins Molly Wood from NPR Marketplace to discuss how the coronavirus crisis changes the calculus for the fight against climate change. Read the full press release from CRAFT proponent Lightsmith Group, here.
Forbes interviewed Jay Koh, Co-founder and Managing Director of The Lightsmith Group and the proponent of 2017 Lab instrument CRAFT (Climate Resilience and Adaptation Finance & Technology Transfer Facility). He talked about how private equity can help address the risks of climate change. “All investments will be impacted by climate risk, and investments in every […]
The NDF Board of Directors approved NDF support to the Climate Resilience and Adaptation Finance and Technology Transfer Facility (CRAFT) with a financing commitment of EUR 10 million. CRAFT, a 2017 Lab instrument, is the first commercial investment vehicle dedicated to expanding globally the availability of technologies and solutions for climate change adaptation and climate resilience. […]
CRAFT, a 2017 Global Lab instrument, receives USD 1.6 million from Nordic Development Fund and Global Environment FacilityNovember 13, 2017
Bonn, Germany – November 13, 2017 View the original press release from the Lightsmith Group here. The Lightsmith Group (Lightsmith) – the proponent of the 2017 Global Lab instrument CRAFT – today announced that it is receiving $1.6 million in funding from Nordic Development Fund (NDF) and the Global Environment Facility (GEF). Conservation International is the GEF […]
The Lab launches a new class of sustainable finance instruments NEW YORK, September 20, 2017—Today, investors and government representatives met in the margins of the United Nations General Assembly and New York Climate Week to launch a new class of businesses and initiatives that will mobilize finance for addressing climate change. Founded in 2014, the […]
December 6, 2016, London – The Global Innovation Lab for Climate Finance has selected three new ideas for climate finance instruments to move forward for further analysis, development, and preparation for launching in its 2016-2017 cycle – a cloud forest conservation fund, a facility for early stage finance for renewable energy, and a commercial investment […]
Lightsmith Group, a new firm founded by former Siguler Guff & Co. partner Jay Koh, is getting closer to launching a private-equity fund to invest in protecting communities from droughts, floods and threats from a changing global climate. The New York firm is working with the Global Innovation Lab for Climate Finance, an incubator, to […]
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