A new multi-million-dollar initiative to promote clean energy investment in developing countries was on Monday (December 7, 2015) announced at the COP21 climate talks in Paris, France.
The Global Environment Facility (GEF) will provide $2 million in initial funding to help kick-start the formation of the “Climate Aggregation Platform” (CAP) in 2016. The CAP is expected to leverage over $100 million in co-financing from different partners, including from the Inter-American Development Bank (IDB).
The announcement was made by Naoko Ishii, GEF CEO and Chairperson, during Energy Day at COP21. The CAP aims to help build pipelines of standardised, low-carbon energy assets in developing countries and to develop low-cost sources of financing for these assets, tapping new and diverse investor bases.
The United Nations Development Programme (UNDP), together with the Climate Bonds Initiative (CBI), will implement the CAP programme. The IDB will be a core partner in demonstration transactions.
The CAP will be structured around three core activities:
- A global working group, to promote engagement and coordination amongst key finance and industry stakeholders.
- Promoting the standardisation essential to aggregation.
- In-country demonstrations and providing technical support for pilot transactions, to build pipelines and achieve scale.
Aggregation is important to allow developing country financial institutions, from banks to micro-finance lenders, to make the most of their limited balance sheets. The aggregation, or bundling together, of small loans and assets aims to create investment products that meet the large-scale needs of institutional investors including global pension funds and insurance funds. Effective financial aggregation holds out the promise of opening up new finance & investment channels, both domestic and between North and South.
The operational launch of the CAP will take place in Spring 2016 following further project planning and international stakeholder consultations.
Naoko Ishii, CEO GEF said: “We need to rapidly ratchet up financing support for clean energy in developing countries. I’m delighted to announce the launch of the Climate Aggregation Platform to help spur strategic and transformative investments and to accelerate energy efficiency.”
Helen Clark, Administrator UNDP, said: “Access to low-cost financing will be essential to the goal of bringing affordable, clean and reliable energy to the citizens of developing countries. I welcome the CAP and am hopeful that, in promoting financial aggregation, it can make a contribution to this important objective.”
Climate Bonds CEO Sean Kidney said: “The CAP is an initial step in addressing the myriad of structural, financial and economic barriers that currently hinder the rapid growth of small scale climate friendly projects. Bringing together the major stakeholders to progress the underlying issues around aggregation is a welcome development.”