- The halls of the United Nations climate conference (COP25) in Madrid this week have been buzzing with discussions about the complex challenges posed by climate change—and the equally complex solutions.
- Climate finance providers face a different challenge: the need for more and higher quality investment opportunities in developing countries.
This week, Rocky Mountain Institute (RMI) and partners unveiled an innovative intervention to unlock finance in developing countries: adding in-country capacity in the form of highly trained climate finance advisors. In 2020, RMI and partners will launch the Climate Finance Access Network (CFAN), which will ensure that more countries have access to finance experts who are better prepared and better connected to finance institutions.
At a panel discussion at the climate conference, RMI partners, including representatives of Antigua and Barbuda and Canada, as well as the African Adaptation Initiative, Green Climate Fund, and NDC Partnership, outlined the underlying challenges that CFAN seeks to resolve and described how CFAN offers a high-impact, scalable approach to building finance capacity.
Although the volume of climate finance flowing to developing countries has increased substantially over the past decade, the system for delivering and accessing finance has become highly complex. Developing countries looking to secure finance for climate projects face hundreds of public and private finance providers, each with their own investment criteria.
As a result, climate finance often takes years to reach actual projects. For example, the Climate Funds Update estimates that of the $29.5 billion in climate finance pledged by multilateral funds between 2003 and 2017, only $5.6 billion has been disbursed.
While several initiatives have emerged to support developing countries in achieving their climate investment objectives, and several have done so through in-country embedded advisors, these services tend to focus on developing national or sectoral strategies and plans as opposed to project-level financial solutions. Furthermore, existing initiatives tend to work with policy or environmental experts as opposed to financial specialists. As a result, developing countries face a critical gap: the lack of in-country finance expertise to accelerate climate investments.
That’s where CFAN comes in.
What is CFAN?
CFAN is a network of international organizations, countries, and donors working together to increase the number and impact of in-country climate finance advisors. CFAN will deliver the training, in-country support, and long-term capacity building needed for countries to more quickly access finance and achieve their climate objectives.
Understanding that CFAN is not the first initiative to pursue an embedded advisor approach, the network builds on and accelerates efforts of existing initiatives to ensure complementarity and reduce costs. CFAN further adds value through its focus on finance experts and its unique approach to training and supporting advisors. Within the CFAN structure, existing initiatives will continue to work with countries to recruit and manage advisors, while a coordinating entity will provide additional network services. Specifically, advisors will enroll in a cohort-based “climate finance bootcamp” which will include both technical training and relationship building with public and private finance institutions. Once trained, advisors will work in-country for at least one year, and CFAN will provide technical support. Finally, CFAN will draw on advisors to facilitate in-country climate finance workshops for civil servants, ensuring that capacity remains in-country beyond the tenure of the advisor.
The African Adaptation Initiative, Global Green Growth Institute, Low Emissions Development Strategies Global Partnership, and NDC Partnership have provided ongoing input to the CFAN design and will participate in its implementation.
How Does CFAN Respond to Country Needs?
Developing countries have played a central role in shaping CFAN’s development. To design a data-driven solution, RMI spent last summer surveying over 100 representatives of 45 countries on the CFAN concept. Specifically, RMI asked country representatives to describe their demand for an advisor and how they envision working with an advisor.
The demand assessment revealed overwhelming interest in climate finance advisors, with 86 percent of respondents indicating they were “very interested” in working with an advisor.
RMI also asked country representatives to describe the types of activities that advisors should undertake. Respondents highlighted project- and program-level activities as priority areas requiring support from an advisor (as opposed to sectoral planning, national planning, and regulatory design).
Further, respondents indicated strong preference for advisors with experience in project finance and financial structuring. As a result, CFAN will work with its member initiatives to identify professionals with a track record in project-level finance, recognizing that the job description for the advisor will ultimately be informed by the country’s priorities.
COP25 marked an important milestone toward launching CFAN, with a dynamic panel discussion featuring representatives from several CFAN member institutions. Following the COP, the real work begins as these organizations continue to collaborate to officially launch this program in early 2020. The goal? Thirty advisors working in-country within the next year.
You can watch a recording of the session here.
For more information, download the CFAN brochure.
This article was originally published by the Rocky Mountain Institute and is republished with permission.