WASHINGTON, D.C.—Blending finance from diverse climate funds—including the Climate Investment Funds (CIF), Green Climate Fund (GCF), Global Environment Facility (GEF), and Adaptation Fund (AF)—can lead to better development outcomes, efficiency, and scale of financing in developing countries, according to a new study from independent consultancy group Arepo.
The report, “Synergies Between Climate Finance Mechanisms,” is one of the first analyses to assess the experiences of aligning investments from multiple large-scale climate financing instruments. The findings are based on country-specific case studies, stakeholder interviews, and project portfolio reviews.
The authors examined results and testimonials from individual projects financed by multiple climate funds in Cambodia, Kazakhstan, Mongolia, and Namibia. In those cases, they determined that the investments supporting renewable energy, resilience building, and energy efficiency saw improved rates of pilot program replication, project continuity, scale, and knowledge sharing, among other enhancements. These outcomes were said to be more likely when the funds’ respective investments built on one another, supported thematically or geographically complementary objectives, or coincided with parallel knowledge sharing efforts.
“CIF and other large climate funds can not only be complementary, but force multipliers. This report shows how to achieve both in practice,” said CIF head Mafalda Duarte. “We need to deliberately and systematically pursue complementarity across all levels of governance and implementation. Together, we can do more to help developing countries achieve their development and climate goals.”
For example, in Kazakhstan, partners are joining forces to achieve more than they could have alone. From 2010-2015, CIF and EBRD investments helped lower regulatory and other barriers to clean energy development and establish the Kazakhstan Renewable Energy Finance Facility (KAZREFF). GCF has subsequently injected additional financing to help the Facility fund its oversubscribed project pipeline and accelerate the country's energy transformation. Today, KAZREFF is unlocking 600 megawatts of renewable energy capacity and is expected to prevent around 850,000 tons of carbon dioxide every year. The facility is helping Kazakhstan meet its target of 6% renewable energy generation capacity by 2025.
Similarly, by leveraging multiple financial and technical partners, local banks in Mongolia are improving design and delivery of finance for sustainable communities and businesses. In one instance, private bank Xacbank used knowledge gained from prior work with the European Bank for Reconstruction and Development to better inform planning around a subsequent CIF-supported project. This in turn set the stage for the Asian Development Bank to retain XacBank as an advisor for its projects in the country. Through complementary streams of finance and expertise, XacBank has since become one of Mongolia’s most experienced and influential climate finance players, accelerating the nation’s climate-smart transition.
Leveraging comparative advantages of various climate funds is a boon to climate action but getting it right requires deliberate planning at every stage of the investment cycle. According to the report, challenges related to in-country coordination, institutional capacity, and structural and administrative fragmentation can frustrate efforts to align investments from varying climate funds.
This report underlines the importance of partnerships in bridging the climate financing gap and helping support developing countries meet the challenge of the climate crisis.
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