Designing climate change projects that attract climate finance: Lessons from Lima

By Will Bugler

What does it mean to be climate finance ready? This was the question that was at the centre of a 4-day learning event held in Lima Peru last month. The event, hosted by the Climate and Development Knowledge Network (CDKN), brought together participants from Bangladesh, Colombia, Ethiopia, Pakistan, Peru and Rwanda, to share their experience of developing climate change projects that could attract investment.

There is a considerable need to increase the amount of international climate finance being spent on climate change resilient development. Many developing countries have been working hard to improve their climate finance readiness by introducing national planning processes, developing tools for monitoring and evaluating impacts and testing schemes for distributing money efficiently. However, despite these efforts, one of the main breaks on climate finance delivery is a lack of project concepts that meet the requirements to be funded.

Increasing the number of fundable (or ‘bankable’) projects is essential to unlock the climate finance and move from project concept to implementation. Participants in Lima came together to share their experiences and learn how to increase the funding potential of their projects, creating a strong pipeline of bankable projects that appeal to international donors, funds and private sector investors.

The key messages of the workshop included:

• Across funds there are important similarities in their requirements: they are impact-driven and focused on ensuring the sustainability of the impacts beyond the project lifespan.
• Countries face the challenge of ensuring the sustainability of projects by developing robust exit strategies as well as mainstreaming gender in the context of gender disaggregated data gaps. High overhead project preparation costs and the high level of due diligence information needed for funding applications were perceived as major constraints.
• There is a need to raise awareness about the business case for private sector engagement regarding adaptation. This requires building an enabling environment, sharing information and knowledge, making connections and identifying a common language, using existing private sector bodies and business associations as platform to share information and raise awareness regarding opportunities for the private sector.
• The private sector needs to be involved from the very beginning of project development.
• Using a mix of grants (or grant-equivalent instruments) and non-grant financing from private and/or public sources to provide financing on terms that would make projects financially viable and/or financially sustainable poses a huge opportunity for project development.

Lima was the perfect location to host such a meeting. Last year the Peruvian Trust Fund for National Parks and Protected areas (PROFONANPE) was successful in securing project funding from the largest official climate finance mechanism in the world, the Green Climate Fund (GCF). The funding is helping to make a project designed to increase the resilience of Peruvian wetlands a reality, and has positioned Peru as a leader in accessing GCF funding.

The event facilitators, Juliane Nier of CDKN and Acclimatise’s Virginie Fayolle guided participants from government, civil society organizations and the private sector through topics including; funding requirements for projects, building the business case for private sector investment; evidence gathering to support project bids; and what funders are looking for from proposals.

Originally published here: http://acclimatise.uk.com/network/article/designing-climate-change-proj…