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 will provide a forum whereby 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 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. You can also read papers relating to the first meeting of the innovation platform.

Country partnerships

The CMCI Working Group 2, chaired by the World Economic Forum, seeks to foster partnerships with developing country governments to evaluate barriers, and then design and test new financing models to address these challenges in country, with the aim of scaling up private capital flows. The exact focus and support provided by CMCI will be tailored to partner-country contexts and opportunities.

India

The CMCI is, through its work with the Government of India, providing a positive example of how specific financial innovations can be delivered. The Government of India’s National Solar Mission aims to incentivise the installation of 22,000 MW of solar power by 2022. During 2011 the CMCI brought together leading developers, policy makers and financiers to develop a roadmap for unlocking capital investment for the National Solar Mission. A preliminary analysis of challenges has been made and potential solutions proposed, based on consultation with a wide range of international and domestic stakeholders such as foremost financial institutions, donors and policy makers.

Phase 2 of this case study moved from situation analysis to solution development and implementation, working closely with the Indian Government and CMCI participants. On the basis of this work, a bid to the UK’s International Climate Fund is being developed by independent consultants under the leadership of CMCI and the British High Commission in India, with the aim of supporting greater private sector investment in the National Solar Mission.

In developing this bid to the ICF a series of stakeholder meetings were organised in India with government ministers, officials and private sector stakeholders.

Daniel Radov, Associate Director (NERA London) and Amit Kumar, Associate Director (PwC India) gave presentations at the CMCI stakeholder meeting held in New Delhi on 19 April 2012 which can be dowloaded here:

Kenya

CMCI has identified some of the key barriers to the deployment of private capital at scale in the clean energy sector in Kenya, and working alongside existing in-country processes to combat climate change, will provide a platform where proposed solutions can be tested and developed.

Minister Greg Barker led a low carbon mission to the Republic of Kenya in October 2012, building on a conference - Unlocking financing for clean energy in Kenya - held in Nairobi in May 2012, to promote scaled-up private investment in Kenya and the East African region.

Research and policy

Chaired by Anglia Ruskin University, CMCI Working Group 1 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.

Following the finalisation of the principles for investment grade policy and projects, the Working Group 1 workstream has been concluded and next steps will include identifying opportunities to promote the principles with international stakeholders as well as using them to guide work within government. Working Group 1 participants will continue to engage and contribute through the innovation platform and we would like to hear from any participants who feel that there are specific issues that either the wider group or a sub-group of CMCI participants could usefully engage on.

You can read research which helped inform the principles at:

UK funded projects and opportunities

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

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 sepi.golzari@decc.gsi.gov.uk.

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