With the IPCC’s Fifth Assessment Report (2014) showing that resources to address climate change must be significantly scaled up, the issue of climate finance had a significant role in shaping up the outcome of the UN Climate Talks in Paris 2015.

At the 2009 UN climate change conference in Copenhagen (COP15), developing countries were promised US$30 billion. in ‘fast-start financing’ to invest in low-carbon infrastructure and adaptation measures by 2012. This commitment was largely met – but by 2020 these climate finance flows are due to reach a minimum of US$100 billion. per annum.

Investment in development that is climate compatible must be in the trillions – not millions – of US dollars

Although this US$100 billion. target may sound a lot, it is less, for example, than the cost of bailing out the UK banks in the wake of the 2008 banking crisis (at its peak, government support for the banking sector totalled £1,162 billion.). What is more, according to UNEP, “investment in development that is climate compatible must be in the trillions – not millions – of dollars.”

The United Nations Financing for Development Conference, held in Addis Ababa in July 2015, and the summit to adopt the post-2015 development agenda (the SDGs), in New York in September 2015, both reaffirmed the commitment by developed-country parties to the UNFCCC to a goal of mobilising jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation. In the Addis Ababa Action Agenda, all parties agreed that the overall focus is not just on aid, but on domestic finance, foreign direct investment and other ‘means of implementation’, including trade and technology.

The UNFCCC’s COP21 launched a process of Nationally Determined Contributions (NDCs) that outlines goals for each country for their mitigation and adaptation action, often with different levels of ambition, with and without external support. Mobilising resources for the integration and implementation of these NDCs will be one of the key challenges for developing countries in the coming years, and one of key drivers for selection of projects for financing by the Green Climate Fund (GCF) and a wide range of other sources of bilateral and multilateral development finance.

CDKN, finance and climate negotiations

Developing countries need a clear roadmap regarding the type and scale of climate finance they can expect to have access to in the coming years. This will be crucial for planning and prioritising climate change projects and programmes, and determining the scale and speed of integrating the climate change challenge into national strategies. CDKN has strengthened the voice of the most climate vulnerable countries in designing international climate finance architecture, including the Climate Finance Advisory Service (CFAS) which has supported developing country members of the Green Climate Fund and Adaptation Fund Boards and UNFCCC Standing Committee on Finance.

As discussed in the Chapters above, climate change will – unless checked – undermine the economic and social development of low- and middle-income countries, putting years of investment at risk. A key challenge, therefore, is to find solutions that stimulate private sector action and investment to support climate compatible development.

National planning customarily looks back in time to help guide decision-making for the future. This approach to policy development is no longer adequate, however, given the high level of climate-related risk and uncertainty. This is already placing a strain on public finance management systems – systems that are not particularly robust in many developing countries.

Finance strategies and policies for inclusive green growth that address risk and uncertainty must therefore be developed and implemented and become an integral part of the vision for economic policy. Public sector support at a market level is required in order to facilitate additional private finance. This in turn will necessitate changes in the approaches used for collection and dissemination of investment data at a national, regional and international level.

Climate change is a crisis-multiplier and CDKN suggests climate change should be seen primarily as an economic concern that calls for ‘3As’ – attention, acknowledgement, action – from both the public sector (including national finance and planning ministries and local governments) and businesses.

What form does climate finance take?

The 2014 Biennial Assessment and Overview of Climate finance flows, prepared for the UNFCCC Standing Committee on Climate Finance, frames the concept as follows: “Climate finance aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts.” It can be interpreted to include international and domestic public finance for, and private investment in, climate specific mitigation and adaptation activities to enable the transition towards climate compatible development.

Where will this money come from?

The challenge is to make all development expenditure climate compatible. At a time when industrialised countries are largely focused on deficit reduction and/or austerity measures, high-income countries are determined that only limited amounts will come via the taxpayer. The need to look beyond traditional aid mechanisms towards wider development finance has never been greater and the expectation – or perhaps hope – is that much of it should come from the private sector. At the same time, low- and middle-income countries are demanding additional resources, not just cash redirected from existing aid budgets.

Yet low-emission, climate-resilient development often requires upfront investments that, initially at least, can be costlier than conventional options. Moreover, current funding is largely directed at project interventions rather than programmatic approaches which would catalyse greater amounts of funding from public and private sources.

In middle-income countries, an immediate concern is to identify mitigation actions that will reduce carbon emissions, across energy, industrial, transport and land use sectors. These actions will require tailored funding strategies to secure private sector investment. In contrast, in low-income countries where per capita greenhouse gas emissions are low but the impacts of climate change are already felt, public expenditure is required to fund adaptation strategies, particularly to address the needs of poor and vulnerable people.

Although we are only just beginning to appreciate the true costs associated with responding to climate change, the ability to mobilise and leverage additional sources of domestic and international finance – for adaptation and mitigation – will be key. Given the scale of the challenge, international climate funds alone will never form the bulk of investment in low-carbon pathways or resilient infrastructure. Rather, they are a catalyst to shift resource allocation from many other diverse sources, in this direction.

Strong public sector leadership is required

As discussed elsewhere in this book – and also when it comes specifically to mobilising finance – there is a need for strong awareness in the public sector of the cost of inaction on climate change. This, coupled with leadership and innovative interventions by government, is required to stimulate private sector action and investment in climate compatible development.

The global landscape of climate finance 2015 by the Climate Policy Initiative draws together climate finance data from numerous sources to present policy makers with the most comprehensive information available about the scale, key actors, instruments, recipients and uses of finance supporting climate change mitigation and adaptation.

In 2014, annual global climate finance flows totalled approximately US$391 billion., an increase of 18% from 2013 levels. Public finance continues to drive private investment and grew steadily. Most came from development finance institutions which provided 33% of total climate finance flows. Private investment surged 26%. A total of 74% was spent in the country where it originated, which indicates a strong role for domestic resource mobilisation. Public support is significant but still totals less than a third of government subsidies for fossil fuel consumption which reached around US$490 billion in 2014.

Transformational change is far more likely when public finance leverages significant private finance, and the reality is that some 85% of all finance to address climate change will need to come from the private sector. There are, however, several constraints to private sector investment:

  • domestic policy barriers;
  • domestic market risks;
  • lack of ‘investment ready’ low-emission, climate-resilient, projects; and
  • the low price of carbon and resultant uncertainty in carbon markets.

This is why strong public sector leadership and innovative interventions are therefore required in order to stimulate private sector investment in climate compatible development. CDKN suggests a number of complementary strategies for overcoming the barriers to private sector investment including:

  • using public funds to support early entry projects at the national level that will be of sufficient scale to help transform markets and pave the way for further private investment; and
  • catalysing private capital with innovative tools that will attract the private sector as a large-scale investor.

Almost three-quarters of climate finance flows were invested with the expectation of earning commercial returns. This demonstrates that investment environments that are more familiar and perceived to be less risky dominate investment decisions. It also highlights the importance of domestic policy frameworks in unlocking climate finance. A study of climate change in key sectors of Uganda – a low-income country – found that by 2050, without the necessary adaptation measures, the costs of inaction on climate change by 2025 are 20 times the costs of adaptation (see also Chapter 2). Most crops would show reductions in total production. For example, yields of staple crops such as sweet potato and cassava could reduce by 40%; reductions of up to 75% in yields of its principal export crops, tea and coffee, are possible. These represented about 50% of Uganda’s export values in 2013. A major deficit of biomass could occur over the period 2010-2050 due to surplus demand and deforestation (the deforestation rate is currently 1.8% per year). These losses, together with reduced water available for hydropower, mean that Uganda must transition rapidly to obtain more power from low-carbon forms of energy, including renewable electrical power. Deficits in water supply may also occur; a conservative estimate puts losses at US$5.5 billion and they could be as high as US$50.3 billion.

Strong rates of return on adaptation activities, however, mean these offer very ‘bankable’ investments. An existing government of Uganda programme to increase the efficiency of water use by households – which simultaneously increases clean water access to households that have lacked it – shows excellent economic returns. Such facts can help engage a Ministry of Finance to address resource allocation across different sectors to address and prepare for the different impacts of climate change.

A CDKN-supported report on public–private partnerships for climate resilience identified six success factors for policy-makers to bring private businesses and other actors on board: 1. Build on a foundation of local engagement and trust; 2. Start small and local, but position for scale and replicability; 3. Integrate skill building to maximise community ownership; 4. Build adaptive capacity by strengthening businesses and livelihoods; 5. Create partnerships along—or across—value chains, and 6. Find innovative alternatives to traditional infrastructure.

As described in a CDKN Inside Story Harnessing geothermal energy: The case of Kenya, renewable energy development in that country is financed by the government, development partners and the private sector. The government finances energy development via the national budget, while development partners provide loans and grants. Alternatively, the private sector uses debt and equity to fund its geothermal projects. Debt financing occurs when a firm raises capital by selling bonds, bills or notes to investors; in return for lending money, the creditors are promised repayment of the principal and interest. Equity financing raises money for company activities by selling stocks to investors.

A new paradigm for national climate finance

Shifting the global economy onto a 2°C trajectory requires a rapid shift of existing investment patterns and far reaching transformation in technology, infrastructure and practices, including the adoption of new financing and business models.

A key challenge for developing countries is how to develop a national climate agenda that is fully integrated with social, economic and environmental objectives.

A CDKN-funded research programme on national financing pathways for climate compatible development was implemented by E3G in Colombia, Chile and Peru in 2013. Based on discussions with representatives in the three countries, the authors identify issues, frameworks and tools that may influence these pathways. They highlight the inter-dependencies between public, private and international sources of finance in delivering scaled-up investment. The interplay between national policy objectives and institutional frameworks in turn influences the shape and pace of green growth.

A key finding is that approaches will differ in line with country specific priorities, goals and contexts, with the structure and maturity of the local financial sector being an important factor. It is also evident that developing countries are taking a leadership role in considering how to draw upon available sources of international climate finance more dynamically. This helps shift the more traditional ‘supply-side’ focus on climate finance to a ‘demand-side’ or needs-based approach. The process of developing financing pathways can therefore be useful in helping to identify and communicate how international climate finance can be effective in financing a new development paradigm.

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Developing a climate finance strategy at the national level

Colombia is currently one of the most progressive countries in terms of mainstreaming climate change in the development agenda.

Climate change was included in the 2010-2014 National Development Plan and is currently one of the priorities for the 2014-2018 Plan that was already approved by the Law 1753/2015. The country’s climate change strategy, which includes a REDD+ programme, Low Carbon Development Strategy and National Adaptation Plan, needs to guarantee financial resources for implementation now and in the future. The Government of Colombia identified the urgency for a comprehensive finance strategy that would allow the country to better address this climate policy challenge.

CDKN has supported the Government’s Climate Finance Committee to develop a framework for a national climate finance strategy including a Climate Public Expenditure and Institutional Review. The committee includes various Ministries, the Colombian Adaptation Fund, the National Development Cooperation Agency and institutions from the public and private financial sector. The challenge is to find and develop financial mechanisms with both a national and subnational perspective, assess available funding sources and design the necessary institutional arrangements.

The international community has responded favourably to Colombia’s effort. Germany’s Environment Ministry (BMU) has selected Colombia for its Climate Finance Readiness Program, including financial support of US$1.6 million for a two-year project (2014-2016) to ready itself to receive monies from the GCF and leverage public and private domestic funds.

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INSIDE STORY: Harnessing geothermal energy: The case of Kenya
INSIDE STORY: Harnessing geothermal energy: The case of Kenya

There is a significant gap in support to decentralised and smaller-scale innovations

A number of innovative projects have been launched to develop, test and scale up resource mobilisation from the private sector for adaptation and mitigation action. These include payments for ecosystem services, making use of the carbon market in developing countries, and introducing new types of insurance schemes.

For example, ‘index-based insurance’ for livestock mortality has helped herders in Mongolia to build their resilience against extreme weather events. Traditional insurance is often not available in large, sparsely populated areas like Mongolia, but index-based insurance provides financial security.

In Bolivia and other Latin American countries, deforestation in upper river basins causes problems downstream, including soil erosion and declining water quality. A CDKN-supported project in the Bolivian Department of Santa Cruz – whose methodology has been widely replicated in other Latin American contexts – explored the potential to tackle these issues together through Reciprocal Water Arrangements. These enable land managers in upper catchments to receive in-kind compensation, designed to boost incomes and livelihood prospects, in exchange for conserving forest lands. Since the first such agreement was developed, over 50 municipal governments and water cooperatives across the Andes joined the movement and thousands of downstream users are now compensating upstream families for protecting 210,000 hectares. These ARA schemes are thus unlocking vital resources for upland farmers who otherwise risked becoming increasingly marginalised by their lack of capital. State law-makers from Bolivia’s Santa Cruz Department produced a draft ‘Sustainable Santa Cruz’ law to promote watershed protection, climate change adaptation, mitigation and economic development, based on this experience.

In Veracruz, Mexico, expansion of sugar cane production, cattle ranching and urban development threatens the tropical rainforest that serves as habitat for numerous species of key migratory bird species. A social marketing campaign was launched to motivate landowners to join a network of conservation areas in exchange for ecosystem payments under the country’s national payments for ecosystem services programme. Initial results indicate the application of social marketing methods facilitated a social change, enabling the protection of more than 1,500 hectares of previously unprotected forest.

There remains, however, a significant gap in support to the diffusion of decentralised and smaller-scale innovations, including technological innovations. This is particularly relevant for Africa. Consistent across energy and agriculture sub-sector case studies, the greatest private financing gap was found to be the lack of resources for widespread diffusion of small-scale technologies (both hard, such as distributed generation, and soft, such as conservation agricultural practices), which are particularly relevant to least developed country contexts.

Targeting smaller business requires a focus on different financial instruments, moving from a few large allocations of project financing to many small applications of working capital loans, lines of credit, venture capital, loan-to-own of consumer goods, etc. It also requires domestic financial institutions to broker such financial services at reasonable transaction costs at scale.

Using public resources to mobilise the financial sector and private economic choices for diffuse small-scale technological change also effectively serves the dual ambitions of climate compatibility and poverty alleviation, which are at the core of many public institutions.

A CDKN-supported study by Dalberg on micro, small and medium-sized enterprises (MSMEs) concluded that MSMEs have an important role to play in climate action as they account for 90% of enterprises in developing countries. Three key areas require attention to increase access to climate finance for MSMEs: improving the enabling environment; increasing knowledge and awareness of MSME climate finance opportunities; and providing tailored financial products. High transaction costs are a fundamental barrier to MSME investing – finance providers should work through local financial intermediaries and MSME aggregators to maximise their reach and efficiency. The vast majority of MSMEs in developing countries are in the informal sector – finance providers should test and expand use of alternative credit worthiness assessments and alternative collateral approaches to reach informal businesses. Based on market projections for MSME climate technology sectors in developing countries, wastewater, small hydropower, and water technologies will support the highest number of MSMEs, so support to these businesses will be crucial.

National and international private sector investment should be driven by clear national priorities

The challenge is to allocate and prioritise resources towards climate compatible options, and the focus should be on strengthening national systems to ensure effective and efficient management of public capital.

This mirrors the many years of international assistance to improve national budgetary systems, and climate finance adds to the necessity of these reforms. Governments must ‘own’ their national climate finance strategies, with key public institutions on board. At the same time, climate-financing strategies should be aligned with national spending agendas and matched to the readiness level and prevailing conditions in country. In many developing countries, significant public expenditure on adapting to climate change is taking place through national budgets. CDKN is supporting countries like Colombia and Peru to develop frameworks for national climate finance strategies with a view to speeding up the shift to domestic resource flows towards climate compatible investments (see boxes below).

REPORT: Financing Pathways for Low Emissions and Climate Resilient Development
REPORT: Financing Pathways for Low Emissions and Climate Resilient Development

Unfortunately fossil fuel subsidies still hold sway, however. They represent a drain on national budgets and undermine international efforts to avert dangerous climate change. Phasing out these subsides by 2020 for G20 countries (and globally by 2025) would eliminate the perverse incentives that drive up carbon emissions, create price signals for investment in a low-carbon transition and reduce pressure on public finances. A CDKN feature on escaping the fuel subsidy trap in Indonesia highlights the importance of building up the domestic energy infrastructure and systems for reducing the country’s dependence on imported oil and truly breaking free from the fuel allowance trap.

OPINION: Escaping the fuel subsidy trap in Indonesia
OPINION: Escaping the fuel subsidy trap in Indonesia

When governments establish strong institutions and commit their own national budgets to climate-related action, this will boost international climate finance flows (e.g. through the Green Climate Fund, GCF). CDKN is helping, for example, the Ethiopian and Rwandan governments to develop their institutional and fiduciary approaches to managing climate finance flows. A CDKN-funded research report by Germanwatch Learning from Direct access modalities in Africa provides valuable lessons from the accreditation process of National Implementing Entities (NIE) for the Adaptation Fund in enhancing developing countries’ direct access to the GCF. CDKN’s experience in supporting Ethiopia in building capacity to gain accreditation to the GCF and Adaptation Fund is summarised in the box (see below).

Adaptation Fund NIEs in Africa: Independent insight
Adaptation Fund NIEs in Africa: Independent insight

Five key lessons from Ethiopia’s accreditation process

  1. A pre-accreditation exercise to identify and address gaps is essential
    An important first step in NIE accreditation is to initially carry out a gap analysis that identifies what needs to be improved in order to meet fund requirements. This exercise will also help develop a ‘blueprint’ on how to approach the actual accreditation work and associated processes. In hindsight, a comprehensive gap assessment early in the process (i.e. pre-accreditation application) would have been beneficial.
  2. Prior experience in similar process is critical to fast-track accreditation
    The Ministry of Finance and Economic Cooperation’s previous experience in putting in place, refining and implementing improvements to meet specific fiduciary requirements of various funds (e.g. Global Fund), and multilateral and bilateral donors (e.g. the World Bank, the African Development Bank, the UK Department for International Development (DFID), etc.) was particularly relevant in demonstrating the existing capabilities of the Ministry in meeting the GCF’s and Adaptation Fund’s requirements. It was also possible to expedite the GCF accreditation process, as the Ministry had already begun preparing for Adaptation Fund accreditation, so could draw from this existing experience.
  3. Accreditation involves assessing the existing national fiduciary system
    The accreditation process to international climate funds requires an assessment of a country’s fiduciary management and understanding of several aspects for which the National Implementing Entity (NIE, i.e. the institution that is proposed to be accredited for direct receipt of GCF and Adaptation Fund monies) is not the lead competent national institution. These include aspects such as audits, ethics, anti-corruption, anti-money laundering, procurement, and environmental/social safeguards. This is why it is important to bring on-board all lead nationally competent institutions such as the Office of the Federal Auditor General, the Federal Ethics and Anti-Corruption Commission, the Public Procurement and Property Administration Agency and others early in the accreditation process. A strong national fiduciary and governance system becomes a prerequisite to fulfil these accreditation requirements.
  4. A holistic operational competency of the proposed National Implementing Entity (NIE) is critical
    The assessment for an NIE accreditation is not just about demonstrating the existence of working and operational documents, but also the demonstration of their operationalisation and use. In this regard, Ethiopia’s NIE was able to demonstrate the use of the existing systems and operational documents ‘on the ground’ and in a cascaded manner at the different levels of its operational units.
  5. Accreditation requirements often don’t reflect the institutional and operational realities of budgets and government institutions in least developed countries
    During the accreditation process, it was sometimes difficult to understand and relate fund requirements to the Ministry’s operational modalities and existing processes. While the Ministry of Finance and Economic Cooperation demonstrated the rigorous processes required from a budgetary/government institution, some of fund requirements mainly considered financial institutions and banks.
    This meant substantial effort was required to demonstrate the Ministry’s existing systems, and strong communication with the funds’ secretariats was needed. Both the Ministry of Environment, Forest and Climate Change (as the designated national authority for these funds), and the Ministry of Finance and Economic Cooperation (as the NIE) engaged consistently with the GCF and Adaptation Fund, which helped them respond quickly to their requests.

National Climate Change Funds (NCCFs) have so far not played a significant role in global climate change financing and have often been unable to mobilise sufficient resources to achieve their goals. NCCFs accounted for less than 0.2% of global climate finance flows in 2013. The majority of NCCFs have received less than US$100 million. in lifetime capitalisation. Following a CDKN-supported study by Dalberg, it is clear that successful resource mobilisations often comprise three common elements: 1. Well-defined vision and theory of change; 2. Clear analysis of institutional capacities, gaps, and requirements; and 3. Systematic approach to investor engagement.

OPINION: Increasing access to climate finance for small and medium businesses
OPINION: Increasing access to climate finance for small and medium businesses

Adaptation and mitigation funding are often on different tracks and this can lead to projects that are at cross-purposes to each other. A CDKN-supported research project by Germanwatch concludes that in the case of financing for climate-smart agriculture and food security, the answer could lie in establishing so-called ‘national gatekeeper institutions’ with the primary objective of channelling climate finance for agriculture and food security – without separating mitigation and adaptation funding. These gatekeeper institutions would ensure that the joint mitigation and adaptation potential of agriculture projects was spotted and pursued at country level. Such national institutions might also be best attuned to a country’s diverse farming types. For example, they might be better than international financial institutions at supporting smallholder farmers who depend heavily on their agricultural lands for food security.

FEATURE: Agriculture needs streamlined approach to climate finance
FEATURE: Agriculture needs streamlined approach to climate finance

In addition, local government should play a crucial part in any national response to climate change. This requires:

  • strengthened flows of funding to subnational bodies;
  • subnational strategies and governance to be aligned with national ones; and
  • subnational entities to be empowered to mobilise and deliver resources for climate compatible development investments, including reallocating existing resources.

For CDKN, climate finance readiness includes the introduction of models for national climate finance delivery, testing innovative schemes for raising and distributing revenue, and improving developing countries’ abilities to reallocate national resources and tap international support for low-emission and climate-resilient investment options. However, even when the necessary institutional and fiduciary capacities are in place for identifying required interventions and managing domestic and international financing, readiness support programmes have frequently identified the lack of a portfolio of bankable projects as a key obstacle to success. This reflects weak capacity in technical preparation, risk assessment, consultative processes and financial engineering for projects that would be based on the needs and priorities of the requesting country/city and in line with the criteria of potential sources of funds.

The term ‘bankable’ means different things to different people and in different contexts. At heart bankability refers to the ability of a funder to finance an investment, having weighed up its expected risks and returns. However, the range of possible funders varies widely in the climate and development context, ranging from commercial banks and pension funds to international climate funds and national governments. The criteria and thresholds contributing to bankability vary depending on the type and source of finance pursued. A number of factors particularly relevant to the bankability of investments and projects in the climate and development context include: vision and transformation, time and scale, cost-benefit trade-offs, and leadership and government ownership.

By combining these characteristics and aligning them with conducive national and subnational policies and regulations, developing countries will be in a position to mobilise the resources necessary for implementing and increasing the ambition of their Nationally Determined Contributions (NDCs) agreed to at COP21 in Paris.

A new climate fund - A game changer in Rwanda

In 2013, the Government of Rwanda signed an historic agreement with the UK to capitalise its new national climate fund, Fonds National de l’Environnement (FONERWA), with £22.5 million support from DfID, making it the largest demand-based climate fund in Africa.

CDKN is supporting this initiative by building capacity in the private sector, civil society and government agencies in various districts. Several other sources have provided additional funds since.

FONERWA is designed as a ‘basket fund’ in which diverse sources of finance can be pooled. It will be the primary vehicle through which Rwanda’s climate and environment finance is channeled, disbursed and monitored. The Fund is an instrument to access international climate finance and streamline existing domestic revenue streams. Line ministries, government agencies and districts, civil society, academic organisations and the private sector can access the Fund. At least 20% of the fund is earmarked for the private sector and at least 10% for Rwanda’s local districts.

Rwanda is now starting to finance climate change interventions that support the country’s national development agenda. Key to the Fund’s success is ensuring that governance and administration capacity exists within the public and private sector to access the Fund. Potential beneficiaries must also understand how climate finance works, how to scope eligible projects and how to structure successful proposals. These are seminal in allowing governments to access climate funding: they afford governments the opportunity to implement projects that facilitate climate compatible development.  

Developing countries are able to access, for example, the Adaptation Fund and Green Climate Fund via accredited implementing entities, multilateral, regional or national. To date, a number of National Implementing Entities in Africa have commenced the process of programming direct access to the Adaptation Fund; moreover, domestic climate funds in several African countries, including Rwanda, are similarly grappling with this challenge. This will help determine how the provision of innovative financing mechanisms and direct access funding instruments will work in practice. In July 2015, the host ministry of FONERWA, the Ministry of Natural Resources, was accredited as a National Implementing Entity for the GCF, paving the way for direct access to support national initiatives.

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Harnessing private enterprise for climate compatible development – Key messages from a CDKN-hosted event, May 2015

Actions by the government and the non-profit sector are necessary but insufficient to address society’s greatest challenges, including climate change.

“Business, the most powerful man-made force on the planet, must create value for society, not just shareholders. Systemic challenges require systemic solutions and the B Corp movement(known as Sistema B in Latin America) offers a concrete, market-based and scalable solution”, said Pedro Tarak, co-founder of Sistema B, which makes up a part of the movement that is transforming the way companies do business.

Although Sistema B only started 36 months ago, it is now active in five countries in South America with over 160 certified B Corps [members] and more than 500 companies in the process of application. In December 2014, Brazil’s top cosmetics, fragrance and toiletries maker, Natura, became the largest – and first publicly traded – company to attain B Corp certification, and consumer goods giant Unilever is considering becoming the next one.

“But what is even more staggering is the scale that can be achieved through changes to procurement policies along the supply chain. Many large companies are looking to use the integrated B Impact Assessment tool to measure the degree of sustainability of procurement policies of thousands of suppliers” said Mr Tarak. “These companies might become cutting edge competitors in emerging markets thanks to the catalytic and market networking role of Sistema B.”

In Sub-Saharan Africa, CDKN’s Business Partnership programme is supporting an innovative business and investment initiative for climate compatible development: the provision of renewable off-grid energy for irrigation and telecommunications, two key issues for rural development. Although renewable power systems have been developed and tested in Africa, no one has created a viable business model to provide remote off-grid community power without subsidies.

To achieve this CDKN has been working with Africa Power, an independent provider of power systems in rural areas of emerging economies; Sunflower Pump; and Sincronicity Power, which installs and maintains power systems for cell-phone towers. The initiative has tested the cost model for providing renewable off-grid power systems to: power a village cell-phone tower; a solar powered drip-irrigation system; and 200 hundred solar household power systems for lighting and cell-phone charging. These companies are also looking at the financial sustainability of the creation of, and investment in, an off-grid power company – a completely new business venture.

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Business Partnerships programme
Business Partnerships programme