Posted on 29 June 2016
The Global Innovation Lab for Climate Finance (The Lab) announced endorsement for four new investment vehicles that are ready to pilot in developing countries.
One of the vehicles is the Dutch Water Financing Facility that is committing 3 million US dollar in anchor funding to a pilot in Kenya.
According to The Lab the Dutch facility has the potential to mobilise 1.2 billion US dollar per year in private finance for climate resilient water projects in seven potential pilot countries out to 2030.
|Scheme of the Water Financing Facility that blends multiple financial resources for water utilities|
Additional funds for resilient infrastructure
The three other investment vehicles are the Climate-smart lending platform, Energy efficiency enabling Initiative and Oasis platform for catastrophe and climate change risk assessment and adaptation.
The Global Innovation Lab for Climate Finance is a public-private initiative to identify, develop, and pilot cutting edge climate finance instruments that can drive billions of dollars of private investment in climate change mitigation and adaptation in developing countries.
The Lab was endorsed by the G7 in 2015 and has catalyzed over 500 million of dollars in seed funding for climate projects in Colombia, Mexico, and Rwanda, among others.
|Chief Investment Officer Linda Broekhuizen at Dutch development bank FMO during the Lab meeting.|
Pooled bond facility
The water sector has not traditionally attracted much private investment. The Water Finance Facility has the potential to change this by mobilizing institutional investors including pension funds and insurance companies through the local bond markets, investing in local climate resilient water project.
The facility is developed in the Netherlands and being put to practice in Kenya where a pooled bond facility is currently being set up. The issue of the first bond is planned for later this year.
The Kenya National Water Master Plan, published in 2014, estimates a need of 976 million US dollar (KES 100 billion) to achieve its Vision 2030, with anticipated public funding of just 585 million US dollar (KES 60 billion).
Raising money from institutional investors would go some way towards bridging this gap.
|The Lab principal Elizabeth Littlefield pledged for cutting edge financing of climate adaptation projects.|
Key role for private sector
On the occasion of the endorsement for four new investment vehicles, The Lab principal Elizabeth Littlefield said: "Global climate change is a critical issue affecting our world and future, and the private sector will play a key role in financing action".
"To solve this complex issue as we promote sustainable development", Littlefield continued, "will require innovative thinking. The Lab is at the cutting edge, providing the early support for solutions that shift us toward new sectors and opportunities."
Moving forward in financing climate adaptation
As one of the first investors to commit anchor funding to the new instruments, Dutch minister Lilianne Ploumen for Foreign Trade and Development Cooperation, said: “The Netherlands is a founding member of The Lab, and is pleased to offer strong technical, financial and political support to take these instruments from concepts, to action."
"Adaptation finance is a key priority, so we are pleased to support the Water Financing Facility to move forward to ensure climate-resilient, safe water resources for Kenyan communities", according to Dutch minister Ploumen.
Read also on this website
● Innovative finance facility presented at water conference in Nairobi, Kenya, 1 March 2016
● Stockholm World Water Week: Use water banks to unleash investors money into the WASH-sector, 28 August 2015
● Smart tax can bridge financial gap to meet universal access to water and sanitation, 17 June 2015
● Big leap for prepaid water in Kenya: WaterForever wins two tenders, 12 December 2014
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Director Jane Wilkinson of the Climate Policy Initiative and Senior WASH advisor Dick van Ginhoven of the Dutch ministry of foreign affairs about the Global Innovation Lab for Climate Finance.