Guidance

Capital Markets Climate Initiative

Guidance on the government's CMCI programme to raise private funding for renewable energy projects in the developing world.

Overview

The Capital Markets Climate Initiative (CMCI) was launched in September 2010 to establish public-private dialogue and action to help mobilise and scale up private finance flows for low-carbon technologies, solutions and infrastructure, with a focus on developing countries. CMCI is not a legal entity but rather a platform for sharing financial expertise and experience and improving public-private dialogue and action on this agenda. It aims to:

  • develop a common understanding among policy makers of why and how public sector action can help mobilise private capital and encourage new markets in low-carbon investments
  • demonstrate the potential impact of public sector action by developing and testing tailored financial and policy tools in specific partner country case studies to mobilise private capital

Recognising the urgency for building institutional and organisational learning and capacity around these issues if they are to work in practice, CMCI can play a role in moving this agenda forward more rapidly than if it were left to governments or the market alone. This is driven by a combination of:

  • UK government leadership, in turn facilitating engagement with other governments and international processes on the private climate finance agenda
  • financial innovation expertise from some of the most significant institutions in the finance and investment sectors to help identify financial solutions to the barriers identified, as well as scope for capital investment
  • improved prospects for delivery given the potential to deploy UK public climate finance through the International Climate Fund (eg through funding of risk mitigation tools).

The CMCI approach

The CMCI provides a platform for government engagement, dialogue and knowledge-sharing with the private sector, NGOs (non-governmental organisations) and research institutes on the UK’s climate finance agenda, including the UK’s International Climate Fund (ICF). This work is led by the Department of Energy & Climate Change and, including the Department for International Development and Her Majesty’s Treasury, is delivered through a high-level steering group - the CMCI innovation platform and subject specific sub-groups.

Innovation platform

The CMCI innovation platform provides a forum where specific government proposals and ideas for using the ICF to mobilise private finance into low carbon, climate friendly solutions can be tested with CMCI participants. The objective is to:

  • encourage constructive challenge and feedback that can be directly used to refine and strengthen ICF projects at the design stage
  • enhance understanding amongst CMCI participants of the priorities, objectives and constraints associated with ICF funding
  • provide updates on government funding decisions and climate finance policy positions

In addition, the platform will seek to encourage new ideas from participants on innovative ways in which public finance can leverage and scale up private finance. The aim is to provide a forum in which ideas from outside organisations can be shared, discussed, and potentially inform future ICF projects developed by HMG.

You can read the stakeholder brief which sets out the aims and objectives of the ICF, the process of developing and approving ICF projects and the constraintsand considerations that come into play, and how CMCI informs and shapes project development.

CMCI has discussed, challenged and shaped a number of ICF projects and policies, for example, Get Fit Uganda and GCPF.

You can read the stakeholder brief which which sets out the aims and objectives of the ICF, how the process of developing and approving ICF projects works, what constraints/restrictions/considerations would come in to play, and how this fits in to CMCI.

Research and policy

Guidelines for Investment Grade Policy

Chaired by Anglia Ruskin University, CMCI developed a set of principles for policy makers to enable a common understanding of what constitutes investment grade policy, with the aim of leveraging climate-friendly private finance.

You can read research which helped inform the principles at:

Policy Risk Study

As a result of CMCI work to identify barriers to low carbon investment, DECC is funding a study into ‘policy risk’ in renewable energy projects in developing countries. Policy risk and offtaker payment risk have been identified as major barriers to private investment flows into the climate sector. Through this study, the UK Government aims to develop evidence-based recommendations for (1) whether and (2) how this risk can be effectively tackled by the international donor community in order to foster greater private sector investment. The study is being undertaken by Cambridge Economic Policy Associates, in consultation with CMCI and will be available Summer 2014.

UK funded projects and opportunities

Examples of existing private sector projects that are funded by the International Climate Fund:

The Department for International Development (DFID) produces a monthly Sustainable Energy Newsletter. It highlights new funding opportunities, events and research surrounding renewable energy, resource efficiency and low carbon development.

If you would like to join the list please contact Julia Kraetke at Julia-Kraetke@dfid.gov.uk

Participation and outreach

CMCI participants come from the following institutions:

Anglia Ruskin University, Aviva, Accenture, ATP, BP Pension Trustees, BNP Paribas, BTPS Barcap, Black Rock, Brookings Institute, Climate Change Capital, Clinton Climate Initiative, Climate Group, CDKN, Chatham House, Climate Bonds, CMIA, Department for Energy and Climate Change, Department for International Development, Deutsche Bank, EIB, EBRD, Emerging Power Group, E3G, ECN, Friends Life, GGGI, Goldman Sachs, HSBC, Her Majesty’s Treasury, Holden, InfraCo, IFC, IIGCC, Innovator Capital, Institute of Actuaries, Jupiter, KPMG, Legal & General, London Stock Exchange, London Bridge Capital, Lloyds, Mumbai Stock Exchange, Merrill Lynch BoA, Morgan Stanley, NEF, ODI, OECD, PIDG, PWC, Prince of Wales Foundation, RBS, SDCL, S&P, Shell, Standard Bank, Standard Chartered, SARi, SwissRe, Soros Foundation, Schroders, Towers Watson, UKSIF, USS WRI, Ward Associates, Willis Re, World Bank World Economic Forum, Yell.

If you are interested in getting involved with CMCI or receiving more information, please contact julia.ellis@decc.gsi.gov.uk.

Annual reviews