Over two-thirds of the global population is expected to live in cities by 2050. Urban infrastructure built over the next 30 years to accommodate this growth will largely determine whether the world locks in a high-emissions, non-resilient future or reaches global sustainability goals.
Engagement at the sub-national level is critical. Approximately 6,000 state and municipal governments are already committed to reducing emissions. Despite this, a tremendous amount of investment is needed. With public budgets increasingly under strain, private sector investment is crucial to meeting this need, yet private investment barriers include high risk, low returns, and small investment size.
SCF is expected to be the first private equity fund to feature a Technical Assistance Facility that provides local government capacity building and certifies all projects for SDG impact prior to investment.
SCF seeks to remove barriers to the sourcing, financing and sustainability certification of mid-sized sub-national infrastructure projects by:
• De-risking projects through concessional finance and technical assistance, while offering larger investable opportunities through the fund format
• Sourcing deals through a Technical Assistance Facility (TAF) which will also ensure standard governance, reporting, and local government capacity building to strengthen local regulations and enforcement of contracts
• Certifying all projects prior to first close using internationally recognized Gold Standard methodologies for environmental and social impact
The Initiative targets emerging market urban areas and has already procured No-Objection Letters from 42 countries across Asia, Latin America, Africa, Central Europe and the Middle East. The projects targeted have to be aligned with host countries’ NDCs, need to have a commercially viable business model, a clear climate mitigation component and contribute positively to at least two other SDGs.
The Consortium estimates that the SCF concessional tranche could mobilize 4x private finance at the fund level and up to 24x at the project level. With a target fund goal of USD 750 million, the initiative could generate up to 1.8 GWh of renewable energy per year, create 20,000 direct jobs, avoid 3.8 million tonnes of CO2 annually and, over its lifetime, improve urban living conditions for 17 million city dwellers.
The SCF uses a blended investment vehicle and adds several new features that make mid-size infrastructure projects more attractive for investment.
A Technical Assistance Facility (TAF) will be implemented in tandem with, yet financially and operationally separate from, the Fund. The TAF carries out three sleeves of activities: 1) project preparation; 2) impact monitoring and certification; and 3) local government capacity building.
To finance individual projects in the portfolio, SCF will provide blended equity, while sourcing commercial debt and equity financing from international and domestic investors. The Fund anticipates this capital will be invested in a portfolio of around 40 sub-national infrastructure projects – including sustainable energy, waste & sanitation, and nature-based solutions – in up to 20 countries, with a target project size ranging from USD 5 to 75 million.
|Type||Role of Capital||Amount|
|TAF Level||Public Grant
DFIs, Governments, Foundations, Multilateral Climate Funds
|Grant funding for Technical Assistance||USD 28 million|
|Fund Level||Commercial Equity
Private endowments/ Institutional investors/ HNIs / Private finance institutions including from emerging countries / Corporates
|Commercial Investment tranche of the Fund||USD 600 million|
Multilateral Climate Funds
|Concessional investment tranche of the Fund||USD 150 million|
News & Events
The Lab is pleased to share the news that the Sub-national Climate Finance Initiative (SCF), one of the eight climate finance instruments incubated during the Lab’s 2020 cycle, has launched with an initial commitment from the Green Climate Fund (GCF) of up to USD 150 million for a first-loss tranche of the SCF’s investment fund […]
Today, the Global Innovation Lab for Climate Finance (the Lab) launched eight innovative finance solutions to drive private resources to climate action in developing economies. After a thorough process of analysis, development and stress-testing, these solutions are ready to provide investment opportunities for a post-COVID, green economic recovery. The Lab, an initiative of over 60 […]
The Lab announces 2020 program winners to mobilize investment for sustainable cities, energy access, nature-based solutions, and sustainable agricultureMarch 5, 2020
Mar 5, 2020 LONDON – The Global Innovation Lab for Climate Finance (the Lab), an investor-led initiative that identifies, develops, and launches promising solutions to drive critical public and private investment to action on climate change in developing countries, has selected its top eight ideas for 2020, the 6th year of its annual competition. The Lab […]
David Albertani, R20 Regions of Climate Action