Pioneering Sub-national Climate Finance initiative launched with global consortium and commitment from Green Climate Fund

Pegasus Capital Advisors (Pegasus), the International Union for Conservation of Nature (IUCN), BNP Paribas, Gold Standard, and R20 – Regions of Climate Action today launched the Sub-national Climate Finance Initiative (SCF), a novel global funding instrument to mitigate climate change and strengthen community resilience projects, with an initial commitment of up to USD 150 million from the Green Climate Fund (GCF).

Mid-sized infrastructure projects at a sub-national level (e.g. municipalities, provinces) of around USD 30 to 50 million are playing a central role in improving the resilience of local communities to the impacts of climate change, especially in developing countries. However, the comparatively smaller size of these projects has historically limited their access to traditional investors, thereby creating a funding gap. As an innovative global blended finance initiative, SCF will seek to scale this untapped market of mid-scale climate resilient and low-carbon infrastructure, regenerative agriculture and nature-based solutions in developing countries through four key components:

• (i) An investment fund managed by Pegasus, which will invest in a global portfolio of mid-sized infrastructure projects in the fields of sustainable energy, waste and sanitation, and nature-based solutions in developing countries;
• (ii) A grant-funded dedicated technical assistance facility managed by IUCN with a target size of USD 28 million, of which USD 18.5 million have already been committed by the GCF. Through this facility, IUCN will provide technical assistance in identifying suitable projects for the fund to invest in, and train implementers to ensure that projects are feasible and deliver environmental and social benefits in addition to financial performance. Key indicators will be developed in order to measure and monitor the projects’ contribution to Sustainable Development Goals and Nature-based Solutions. The initiative will also feature third-party certification to verify social and environmental impacts
• (iii) The Green Climate Fund (GCF) as an anchor investor and partner has already approved a commitment to a first-loss tranche of up to USD 150 million to the investment fund, which is intended to mitigate risk to private investors at the fund level, thereby bridging the gap between public and private investors. The remaining amount will be raised from a pool of traditional investors;
• (iv) A partnership of consortium members providing leading expertise along the entire value chain. In addition to Pegasus and IUCN, the Consortium also includes BNP Paribas as administrator, custodian and distribution partner; Gold Standard as a leading third-party impact certification and R20 – Regions for Climate Action, supporting capacity building and project development;
  

“GCF is delighted to support the Consortium formed by Pegasus Capital Advisors (PCA), IUCN, BNP Paribas, Regions 20 and Gold Standard to launch an equity fund that will support small- and medium-sized sustainable infrastructure projects in developing countries, including 13 Least Developed countries (LDCs) and 6 Small Island Developing States (SIDS). Providing finance to financially underserved sub-national projects is a priority for the UNFCCC and the Paris Agreement.” 

- Yannick Glemarec, GCF Executive Director

“I am thrilled that we have launched this innovative blended finance effort with such a terrific group of partners. I am very grateful for the leadership role taken by the Green Climate Fund and the support of the many countries who have agreed to work with us. I believe with our partners we will unlock private capital to invest in needed and financially sound projects at the sub-national level across multiple sectors and geographies. We need to accelerate dramatically the pace of this capital and investment.”

- Craig Cogut, Founder, Chairman & CEO, Pegasus Capital Advisors

“The private and public sectors need to work together to fast track nature-based solutions which benefit the environment, societies, and investors alike, with positive impacts on climate and societal resilience. IUCN has long championed this approach, and will lean on the Union’s expertise to ensure that investments by the SCF are not just financially, but also environmentally and socially sound.”

- Dr Bruno Oberle, Director General IUCN

“Achievement of the UN’s Sustainable Development Goals and the Paris Agreement requires the scaling up and mobilisation of capital, shared knowledge and innovation from across a full spectrum of investment and impact experts. BNP Paribas recognises this initiative will be ground-breaking in tackling the climate crisis by leveraging the expertise of leading institutions, including the Green Climate Fund, to channel finance towards infrastructure, energy transition, and nature-based solutions. BNP Paribas looks forward to supporting SCF and bringing the full strength of the bank and our depth of experience in sustainable finance to the consortium.”

- Alain Papiasse, Chairman of Corporate & Institutional Banking, BNP Paribas

“With an increasing interest in sustainable finance, it’s critical that these instruments deliver what they claim. Impact certification gives participants across the value chain confidence that outcomes are real, measurable and verified, and tells the global community exactly what progress is being made toward global ambitions codified in the Paris Agreement and the Sustainable Development Goals.”

- Margaret Kim, CEO, Gold Standard

“It is of great satisfaction to have been able to successfully develop a dedicated blended finance vehicle at sub-national level, especially since the Paris Agreement has officially recognized that 50 – 80 % of climate change solutions stand within the hands of sub-national authorities. Our experience, around the world, in delivering mid-sized low carbon and climate resilient infrastructure show that sub-national authorities meet a lot of obstacles to access the green finance market. SCF sends a clear signal to the climate change community in general to the finance leaders in particular, to be a game changer in climate change investment in emerging markets at sub-national level.”

- Christophe Nuttall, CEO, R20: Regions of Climate Action

For further information on the SCF Investment Facility, please contact:
Brian Friedman
+1 212-710-2500
[email protected]
https://www.pcalp.com/

For further information on the Technical Assistance Facility, please contact:
IUCN Media Relations
+41-79-536-0117
[email protected]