As delegates from 196 States enter the final day of the 21st Conference of the Parties (COP21), the European Impact Investing Luxembourg (EIIL) network released a paper Friday on structured climate bonds in Luxembourg.
Cimate funds have been subject to pioneering work in financing a wide range of important activities for the sector, ranging from renewable energy to climate-smart landscapes.
Significant amounts of investment are required to convert, adapt, evolve and disrupt current carbon-based economies in the move towards a carbon-neutral one, with the transition to renewable energy alone necessitating initial investments of about $8 trillion. The $100 billion committed each year by governments in 'developed' countries is not sufficient in achieving the objective of limiting global warming to 2° or 1.5°C, with the EIIL instead advising that scarce public funds be strategically used to attract private sector investments towards financing economically viable climate projects.
In this context, the EIIL took stock of what the funds sector in Luxembourg has already done to mobilise financing dedicated to adapting to climate change and to mitigating its effects. The innovative structure of capital allows funds based in Luxembourg to be effective tools for combining private and public financing, using public funds to leverage financially viable climate investment.
With a more than ten-year history, structured funds in Luxembourg have grown in number, size and impact areas, including climate finance. The paper, published by EIIL and written with contributions from the European Investment Bank, Innpact and the Luxembourg Microfinance and Development Fund, presents seven of these funds and their characteristics:
The Global Climate Partnership Fund (GCPF)
The GCPF is an innovatibe public and private partnership that supports local financial institutions with a viw to promoting energcy efficiency and renewable energcy on-lending to small and meidum-sized enterprises as well as to private households and, in so doing, deliver greenhouse gas emissions savings. The result has been mor than 3.7 million tonnes of CO2 emissions reduced over the lifetime of over 25,000 GCPF funded projects.
The eco.business Fund
Launched in 2014 by Frankfurt-based Finance in Motion, the eco.business Fund dedicates financing and technical assistance to business practices which contribute to biodiversity conservation and the sustainable use of natural resources. The fund seeks investments that yield both financial and environmental returns.
The Global Energy Efficiency and Renewable Energy Fund (GEEREF)
A fund-of-funds, GEEREF holds €222 million invested in 9 private equity funds that focus on renewable energy and 45 underlying energy efficiency projects in emerging markets across all regions of the developing world. The funds provide much-needed equity financing to small and medium-sized infrastructure projects that generate low-risk clean power through proven technologies and at the end of 2014 these projects had an installed capacity of 472MW. Advised by the European Investment Bank and the European Investment Fund, GEEREF applies EIB social and environmental standards.
The Althelia Climate Fund
Launched in 2013, the Althelia Climate Fund invests in ecosystems conservation and sustainable agro-forestry, applying best-in-class environmental, social and governance (ESG) criteria. Returns are generated through the production and sale of sustainable agriculture and soft commodities such as certified cocoa and coffee, FSC timber as well as presently undervalued environmental assers such as carbon emission reductions and other ecosystem services payment.
The Forestry and Climate Change Sub-Fund
Expected for 2016, the future Forestry and Climate Change Sub-Fund will hold €15-20 million to invest in the sustainable management of tropical secondary and degraded forests, generating ecological, economic and social value added and reducing green house gases emitted from forestation with a focus on Central America.
Green for Growth Fund (GGF), Southeast Europe SA, SICAV-SIF
The GGF has acheievd high environmental impact in its five years as the first specialised fund to support energy efficiency and renewable energy in Southeast Europe, including Turkey, and the Eastern Neighbourhood countries. The primary objective of the GGF is to provide financial institutions with financing to help them reduce energy consumption and CO2 emissions, which stand at 1.1 million MWh/year and 300,000 tonnes/year, respectively.
European Energy Efficiency Fund (EEEF) SA SICAV-SIF
The EEEF was originally launched in 2011 by the European Parliament and Council of Ministers as a sustainable energy facility providing market-based fiancning to commercially viable public energy efficiency and renewable energy projects across every Member State. The Fund has achieved total accumulated savings of 83,858t CO2 and 65,295 MWh of primary energy savings and will support EU Member States in meeting their objective to reduce greenhouse gas emissions by 20%, increase renewable energy usage by 20% and lower energy consumption through a 20% improvement in energy efficiency.
