E Co bites: What are the main challenges when working with large climate funds?

7 October 2022, Category: All insights, E Co. bites, Tags: Adaptation Fund, climate change, climate finance, E Co. bites, GEF, Green Climate Fund, project design

What are the main challenges when working with large climate funds?

In this E Co. bite, the focus is on answering this question, alongside avenues for overcoming these problems. Clare Wingfield elucidates some of the most common problems when designing low-carbon, climate-resilient development projects, problems such as risks to investment, lack of application experience, and the friction caused when aligning a project with a specific government’s climate change policy. 

Here at E Co., we’ve encountered all of these challenges and more in our years of working in the climate finance sector, and, after having obtained and mobilised over USD $3bn in funding from major donors, we’ve discovered some interesting solutions that can be utilised. Watch Clare’s video below to find out more. 

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-TRANSCRIPT-

For many of the funds that we work with, one of the main challenges is the high level of risk and uncertainty of investing in new regions or emerging economies. The fund may not have experience of working with those countries, and the economic and investment environment is not always conducive. As a result, we are seeing more and more funds looking to reduce the risk of their investments and diversify their portfolio, by using blended finance mechanisms and by investing across multiple countries and even multiple sub-sectors.

On the flip side, governments are only willing to support investments and programmes which are aligned with their climate change policies and strategies, as well as their existing portfolio of projects and programmes.

There are several ways in which we can help funds overcome these challenges. Firstly, we help private funds to develop multi-country programmes, often with a portfolio of between 10 and 20 countries, using co-financing and public sector funding to de-risk their investments. These are often complex programmes, requiring extensive country analysis, and market and policy research. E Co’s in-house experience in these areas can ensure that programmes are designed in-line with country targets and plans, as well as providing reassurance to the fund about the regions they are investing in.

We also support funds with their stakeholder engagement, which when investing in multiple countries can be quite extensive. This can involve consulting and engaging with key governmental ministries, civil society organisations, international agencies as well as ground-level engagement with communities, Indigenous Peoples and vulnerable parts of society. This is a key component of a funding proposal, to ensure that everyone’s voices are heard, and to give stakeholders a say and influence in how the programme is designed.

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Have you had similar experiences as the ones Clare mentions? If yes, or no, let us know by writing your answer in the comments below.

Getting to grips with the world of climate finance

Let’s accelerate progress together: Get in touch with our climate finance consultants to discuss a project you’re working on. Email us at: amy@ecoltdgroup.com or find us at the following:

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What do you think are the main challenges when working with large climate funds? Let us know by writing your answer in the comments below.