Right now nearly 200 nations are meeting in Bonn Germany for COP23, the UN’s annual climate change conference. Nations do the negotiating but the private sector also attends and has a critical role to play. According to a recent report by the Precourt Institute for Energy at Stanford, to keep the planet under 2 degrees Celsius of warming, the global economy will need to invest USD 2.3 trillion per year until 2040. This can’t be achieved without the private sector, but more needs to be done to make the case for investing in the climate.
At Convergence we’re trying to do that. Climate change, conservation, and sustainable energy solutions figure prominently across all of our activities. As the second week of COP23 kicks off we wanted to share some of our activities in the climate space.
Deal and investor match-making platform
A community of public, private, and philanthropic organizations connected through a match-making platform to invest in blended finance transactions.
Over one-third of deals on our platform are in the energy and climate change sectors, with carefully vetted deal sponsors like Finance in Motion, Climate Fund Managers, and USAID. These deals total USD1.2 billion and span diverse regions, from Latin America and the Caribbean to sub-Saharan Africa and East Asia and the Pacific. At the same time, nearly a quarter of institutional investors who have specified their preferences, have cited energy and climate change as sectors of interest. It may be tough to structure investable climate-change-related transactions, but what we’re seeing in the Investment Network community is that it’s a priority for investors and that blended finance is one of the ways we will get there.
The only global funding program providing grants to organizations developing blended finance structures that catalyze private sector investment to developing countries.
Convergence has provided grants in the following climate and conservation-related areas:
Renewable energy and smallholder livelihoods:
ADM Capital and ADM Capital Foundation, with BNP Paribas and UN Environment, are designing a financing facility for renewable energy and smallholder livelihood projects in Indonesia. The first transaction under the facility – a $70M rubber replantation – is expected to close by the end of this year. Read more.
Africa GreenCo will help attract private sector investment into renewable energy generation projects in sub-Saharan Africa, by acting as an intermediary off-taker and aggregator of renewable energy projects. Africa GreenCo will be co-hosting a side event with the European Commission and The Rockefeller Foundation on the 14th of November in the EU Pavilion in the Bonn zone. Read more.
Conservation: NatureVest, the conservation investing unit of The Nature Conservancy, are designing blue bonds to finance debt conversions for conservation in small island developing states. NatureVest are aiming to place the bonds in the first half of next year. Read more.
KNOWLEDGE AND DATA
The most comprehensive and up to date source for original blended finance research and knowledge.
Historical deals database
Our historical deals database is a catalogue of over 200 blended finance deals – who did them, how big they were, in what country and what sector. By creating the largest and most comprehensive database on blended finance deals, we give investors a place to go to see what’s worked in the past.
In the database, energy & climate finance account for 25% of blended finance transactions, the second most common focus area behind financial services. 42% of climate-focused blended finance transactions focus on sub-Saharan Africa, well ahead of the next largest target regions Latin America & Caribbean (21%) and South Asia (21%). IFC, FMO, Shell Foundation, and Deutsche Bank are some of the key climate-focused blended finance investors. It’s not surprising that so many deals focus on energy and climate. Blended finance allows for the creative structuring needed to address mispriced climate change risks, getting climate-smart investments off-the-ground that wouldn’t otherwise happen and mobilizing millions of private sector dollars towards critical development sectors including access to energy and sustainable infrastructure.
Convergence has published several case studies that do a deep dive into blended finance transactions in the energy, conservation, and climate change space:
CrossBoundary Energy is dedicated to financing on-site solar generation for commercial and industrial businesses in sub-Saharan Africa. Read the case study for details on how their blended finance fund is establishing solar as an investable asset in sub-Saharan Africa. Read the case study.
NatureVest structured a ground-breaking debt conversion for marine conservation and climate adaptation with the Seychelles government. Read the case study for details on how NatureVest is contributing to the creation of the Indian Ocean’s second largest marine reserve. Read the case study.
The Danish Climate Investment Fund (KIF) was established to attract institutional capital to investments in low-carbon and climate-resilient projects in developing countries. Read the case study to see how KIF represents a best-practice example of using blended finance to attract invests to sustainable development investments. Read the case study.