Global Innovation Lab for Climate Finance | Multi-Regional

The Global Innovation Lab for Climate Finance network accelerates well-designed financial instruments that can unlock billions towards a sustainable, inclusive, net zero economy, while also reducing private investors’ risks. A public-private partnership, the Lab brings together and catalyses broader government and private sector efforts to scale climate finance.

Since 2014, the Lab has helped launch 55 innovative instruments. Collectively, these initiatives have unlocked more than USD 2.5 billion in new investments for climate action, in sectors and regions where climate investment is needed most. The solutions include energy efficiency, renewable energy access, sustainable urban infrastructure, climate-smart agriculture, nature-based solutions, and curbing deforestation.

Key facts

The Lab brings together over 70 expert institutions and investors from government, the private sector, philanthropy, and development finance, which crowdsource, select, and develop innovative finance instruments and business models.
Of the USD 2.5 billion of the total finance mobilized, USD 800 million has come from the private sector, with more than 90% of that coming from institutional investors and commercial banks.
The success rate for Lab instruments is high: 53% have raised at least one round of funding. This is a stronger success rate than most commercial incubator or accelerator programs.

The challenge

The Lab addresses the huge gap between current climate investments and what the world actually needs to limit the global average temperature rise to 1.5°C. Many of the ideas to address this gap face specific barriers to attracting investment, especially in emerging markets.

The solution

The Lab focuses on earlier stage ideas, and often ideas that employ a blended finance approach, leveraging public or concessional finance to de-risk, and catalyse, private investment in key sectors.

Lab instruments are working to drive investment to crucial mitigation and adaptation sectors. A few examples are listed below.

Climate Resilience and Adaptation Finance and Technology Transfer Facility (CRAFT) is a fund that blends commercial and concessional capital into a private equity fund that invests growth capital in adaptation efforts. To date, CRAFT has mobilized USD 84 million.

Conexus Impact Fund facilitates small-scale tailored finance to specific enterprises, such as direct loans and guarantees combined with technical assistance. It is the only fund in Brazil designed to redirect federal subsidized credit (Pronaf) to sustainable production systems and those that keep forests standing.

Long-Term FX Risk Management provides tools to address currency and interest rate risk, helping overcome major barriers to investment in renewable energy and climate-relevant projects in developing economies. So far it has hedged USD 240 million in climate-related investment in 11 countries.

Pay-as-you-Save for Clean Transport accelerates investment in clean transit by lowering the upfront cost of electric buses, allowing a utility to capitalize the on-board battery and charging station for bus owners and recover its costs with a predictable monthly charge. Cape Town and Lima, among other cities, are currently taking steps towards pilots of the PAYS model.

Helping people

Participants in the Lab have included representatives from commercial institutions, governments, non-profit organizations, as well as entrepreneurs. Lab Member organizations across the public and private sectors also benefit from the Lab, helping accelerate innovative, investment-ready financial products and approaches that support their objectives.

Indirectly, the Lab supports sustainable investment that benefit SME owners, smallholder farmers (the majority of which are women), as well as citizens and communities in developing economies who benefit from: sustainable energy access, reduced pollution, increased resilience to climate change through sustainable agriculture, forestry, and water resource management, as well as reduced emissions worldwide.

For example, one of the Lab’s areas of focus is on smallholder farmers. In understanding that smallholder farmers are among the most vulnerable to the impacts of climate change, the Lab has partnered with the International Fund for Agriculture Development (IFAD) to accelerate transformative instruments that finance sustainable agriculture and build climate resilience. Under this program, the Lab has developed the West African initiative for Climate-Smart Agriculture, the Blockchain Climate Risk Crop Insurance, and TerraFund. These, and other smallholder farmer Lab instruments, hold the potential to transform the livelihoods of thousands of smallholders by addressing barriers to rural finance, providing new economic opportunities, and improving food security, as well as community resilience to future climate shocks.

Spillover effect

Catalytic potential is a key criterion used in selecting and developing Lab instruments. The Lab selects ideas that have a strong capacity to (1) mobilize private climate capital within a sizeable market, (2) be scaled or replicated in other contexts, and (3) achieve positive climate, development, and environmental impacts.

For example, Energy Savings Insurance, a Lab instrument that began with a relatively small pilot in Mexico, has now scaled to seven countries in Latin America, has been replicated in Europe, and has recently been approved for implementation in Africa and Asia. Another example is Climate Investor One (CIO), one of the Lab’s most successful instruments which has gone on to mobilize more than USD 850 million in climate investment.