A new multi-million dollar initiative to promote clean energy investment in developing countries was announced on the 7th of December at the COP21 climate talks in Paris.
The Global Environment Facility (GEF) will provide $2 USD 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 USD 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.
According to UNDP, 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 and investment channels, both domestic and between North and South.
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.”