Climate Finance Accelerator
Updated 31 May 2023
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The Climate Finance Accelerator (CFA) is a £12 million technical assistance programme funded by International Climate Finance (ICF), through the UK government’s Department for Energy Security and Net Zero (DESNZ).
The CFA is part of the UK’s efforts to support climate action at scale by providing practical ways to help governments in middle income countries finance and deliver their climate commitments under the Paris Agreement.
The CFA works with middle-income countries to help them achieve their national climate plans and Nationally Determined Contributions (NDCs), from the bottom up. It does this by helping to identify challenges and blockages that prevent finance from flowing at the volume and speed required to have a meaningful impact on their climate ambitions.
By bringing together project developers, finance providers (including experts from the City of London) and policymakers, the CFA seeks to enable a collaborative approach to unlocking a steady flow of funding for climate projects at scale and create a pipeline of ‘investment ready’ low carbon projects, thereby strengthening countries’ ambitions to limit global warming to 1.5°C. The programme will have several co-benefits, such as supporting green recovery efforts from COVID-19 through inclusive approaches to sustainable development, improved gender equality, and building resilience to climate impacts.
Participating countries
The former Department for Business, Energy and Industrial Strategy (BEIS) funded 3 pilot activities to test the CFA approach, which took place between 2017 and 2020, and involved Nigeria, Colombia, and Mexico. These confirmed demand for the CFA and informed the decision to scale-up the concept into a £12 million ICF programme.
The full programme will operate in 9 countries:
| 3 pilot countries | Wave 2 countries | Wave 3 countries |
|---|---|---|
| Colombia | Turkey | Egypt |
| Nigeria | South Africa | Pakistan |
| Mexico | Peru | Vietnam |
The programme is being delivered by in-country local delivery partners, part of an alliance led by PwC, with support from Ricardo, and independent experts. Delivery is overseen by a steering group, convening external experts from across the global finance community. The programme commenced in November 2020 and is due to run until at least November 2024.
The challenge
Climate mitigation projects in middle-income countries face several challenges in accessing funding at scale:
- project proposals may not be ‘investment-ready’
- there is low visibility of available low carbon investment opportunities among the investment community
- there may be policy and regulatory barriers
- an improved understanding of project finance, blended finance opportunities, and low-carbon technologies may also be required
The programme seeks to understand and address these challenges, and to improve the flows of climate finance, through the following process:
- identifying low carbon projects which can help meet a country’s NDC and bringing them together with private financiers to identify and prioritise financing propositions
- developing the commercial structure of these projects to the stage where they can attract primary finance, initially in local capital markets
- securing this primary finance, which in many instances will involve blended finance products capable of funding projects at scale
- for projects of a certain scale and from relevant sectors (such as renewable energy, buildings, transport), refinancing these projects into green bonds and similar investment instruments that are attractive to global capital markets
The CFA Process
The CFA in-country process comprises of 4 phases of activities:
1. Scoping phase
This phase starts with a mapping of the context, priorities, and climate finance ecosystem in the country to identify the key barriers to a fully functioning climate finance supply chain.
2. In-country workshop
Based on the results of the scoping phase, a call for proposals will be run to identify low carbon projects relevant to the country’s NDC, of interest to investors, and considered financeable. The projects should also deliver co-benefits such as poverty reduction, improved gender equality, and building resilience to climate impacts.
Capacity building will be undertaken with these project developers so that they can meaningfully engage with financial experts.
A 3-day workshop will then be held to connect project developers with potential local investors and policymakers. The key objectives of this workshop are both to secure financing for projects, and to identify measures that could reduce the blockages that prevent the mobilisation of climate finance.
3. London workshop
Following the in-country event, delegations from countries where CFA operates, including project developers and government representatives, will engage with finance professionals from the City of London at a 4–5 day workshop. They will work together on the set of low carbon project proposals with the aim of making them commercially viable.
In addition, this event will provide an opportunity to identify measures that could improve the enabling environment for the mobilisation of climate finance in respective countries.
The London workshop is intended to become an annual event, to share the world-leading expertise of the City of London and expose participants to the requirements and priorities of international capital markets. The workshop will also help London-based institutions to recognise investment opportunities in CFA-participant countries, helping them to better understand potentially new markets.
Please contact cfa@beis.gov.uk for more information on participation.
4. In-country CFA process
This stage will develop an ongoing, locally embedded, CFA process to facilitate the continued identification and development of low carbon projects and bring them forward for consideration by potential finance providers.
Recommendations will also be made for policy and regulatory changes that could help unlock greater flows of finance. The ongoing process will be country-driven, determined by the nature of the climate finance landscape in each country and will take different forms depending on demand. In all cases, the intention will be to create a business plan for the ongoing process that will allow it to continue to operate once CFA programme support has ceased.
CFA conference and capacity building materials
At the end of the CFA process, a CFA conference will be organised, bringing together participants across the 9 countries to present their programme achievements and reflect on lessons learnt.
Knowledge products will be developed and disseminated throughout the programme, to help deliver the activities and capture lessons learnt. These will include materials that should be useful to project developers and governments globally.
Knowledge products
Gaps in the climate finance investment chain: early findings from the CFA on what climate projects need to progress, and what they are missing, including tangible guidance on where resources should be focused in order to accelerate financing for climate mitigation over the next decade.
Contact
If you have any questions please contact: cfa@beis.gov.uk.