Ben Broché, Martha de Sá, Las Perera, and Sanjay Wagle at the Lab Summit during Climate Week in New York.
The Global Climate Finance Innovation Lab (the “Lab”) hosted a panel discussion during the 2024 New York Climate Week Lab Summit, featuring three alumni from different industries, regions, and tool types. They shared their experiences and insights into developing innovative climate finance solutions in laboratory projects.
The group includes:
Here are some key takeaways from their conversation, hosted by: paperbackdeputy director of CPI.
1. Scaling up climate finance requires standardization and replication
Marta de Sá recalls the Amazon Viva financing mechanism piloted in partnership with Natura, the first time they used capital market instruments to finance local cooperatives in the Amazon and support the bioeconomy. It took two years to structure the $10 million deal—a time she describes as “crazy” and one that highlights the challenges of creating a scalable, replicable model in this space.
“Of course, nature and sustainability add complexity and make things more difficult. We have to aim for ‘good enough’, not perfection, because perfection is impossible. The question is, what is good enough to start with? We can build from there, but we need a solid foundation to begin with. That's where I invest my time – building the foundation with technology, building mods, understanding specific needs and developing the right product.
While scaling up climate finance is important, organizations must be careful about imposing strict standards across emerging markets. Every situation is unique, and a one-size-fits-all approach can hinder innovation.
By focusing on the fundamentals of understanding local needs, developing customized financial products, and combining them with technical assistance and other financial services, the lab can help create a powerful framework for replication and scale.
“When you combine standards with technology, you create a replicable model. That’s where we are now – understanding local needs, speaking their language, and simply documenting things. Look at fintech companies: they are scaling so fast because their processes are simple, scalable and replicable. We need to take the same approach to natural finance,” said Martha de Sa.
2. Nature needs its own asset class
Thinking of natural resources and ecosystems as investments is the same as thinking of nature as an asset class. Just like stocks, bonds or real estate, nature can generate financial returns in addition to environmental returns. Investing in nature-based solutions such as reforestation, permaculture and ecosystem restoration can create economic opportunities while promoting long-term environmental sustainability.
However, institutional investors, businesses and local communities have different needs and perspectives. The lack of common language and understanding makes aligning goals and promoting investment challenging.
The Low Carbon Agriculture Transition Mechanism aims to make investing in nature as easy and attractive as investing in other asset classes, thereby driving significant capital investment into sustainable initiatives. A key part of this is translating into a single language what institutional investors, corporates and especially investors on the ground need.
“It is important to look at things from the perspective of opportunities. We are all aware of the challenges and the problems of climate change. Nonetheless, we also have great potential, especially when discussing economic growth and combining social and environmental goals,” Martha de Sa explain.
3. Guarantees can play a role in mobilizing institutional capital flows to emerging markets
Guarantees help reduce the risk of climate investments, making them more attractive to institutional investors. A recent CPI study explored the prospects, challenges and effectiveness of various guarantee types.
“Climate finance benefits from a variety of guarantee solutions, large and small. While large-scale guarantees have delivered impressive results for debt-for-nature swaps, smaller guarantors are increasingly needed to support different sectors and scale. This hybrid allows for replicability across environments,” Las Pereira said.
By providing investment grade guarantees, Green Guarantee Corporation (2022 Lab Solutions) increases the access to financing for these projects, particularly in emerging markets with credit ratings below investment grade. Furthermore, once trust is established in the market, the guarantee can be removed.
“The GGC acts as the ‘glue’ that facilitates this collaboration, and what is unique about our guarantee model is its flexibility. Our involvement is only a commitment until needed, and once the stakeholders have established an independent collaborative With the necessary relationships and trust, they can move forward easily without us, ensuring a strong, low-intervention tool that enhances market confidence but does not become a permanent fixture,” Pereira said. .
4. Climate adaptation is an inevitable change that requires the joint efforts of multiple investors
When Sanjay Wagle and Jay Koh came to the lab to develop CRAFT in 2017, investments in climate adaptation and resilience, especially in the context of private sector investment, were still nascent and largely unexplored. “The private sector had no idea what this meant,” Wagel recalls.
They developed CRAFT as a global growth equity strategy designed to identify and invest in innovative solutions in developed and developing countries and demonstrate the real-world impact of climate adaptation.
“The institutional investors we interviewed asked a great question: ‘Has anyone developed a climate adaptation strategy before? What would that look like and what would the returns be?’ We spent a lot of work convincing institutional investors in the U.S. and Europe , to make them believe there's a real opportunity here and identify what it's going to look like,” Wagle said.
Seven years later, it has become easier to demonstrate the real need and investment opportunities for climate adaptation. Investors are increasingly recognizing the profitability of climate adaptation, as the sector’s early success encourages others to follow suit and incorporate adaptation into their investment strategies.
“The reality is that small funds focused on climate adaptation and growth equity are not going to solve the problem. We need more investors. Ultimately, climate adaptation will require all types of capital. It will require venture capital, credit for new technologies and project financing of resilient infrastructure, projects and assets,” Wagel concluded.
