The Development Bank of South Africa (DBSA) and the Green Climate Fund (GCF) have established a specialised Climate Finance Facility, following a year-long process.

The agreement marks the GCF’s commitment of US$56 million to the Climate Finance Facility, which will use financial tools such as credit enhancements to drive investment into projects that mitigate climate change.

The programme will target South Africa, Namibia, Lesotho, and Eswatini, but has a strong potential to be replicated in other developing countries to rapidly scale up private sector climate investments.

Initial capitalisation of $100m

The Climate Finance Facility also has capital from the DBSA’s balance sheet, for an initial capitalisation of more than US$100 million. With its transactions, the Climate Finance Facility will aim to draw in five dollars of private investment for each dollar directly invested.

The Coalition for Green Capital (CGC) partnered with the DBSA on designing the facility and arranging the deal with the Green Climate Fund. This work was funded by Convergence Finance and the ClimateWorks Foundation.

Andrea Colnes, international director at CGC, said: “We are thrilled to see South Africa’s Climate Finance Facility move forward. The facility is the first of its kind to use the green bank model in a developing country, and sets the stage for others to take advantage of this innovative and cost-effective method to drive investment into clean projects and take action against climate change.

“It sets the stage for others to take advantage of this innovative and cost-effective method to drive investment into clean projects and take action against climate change”

The Coalition for Green Capital (CGC) applauds this progress and is proud to have partnered with the DBSA on designing the facility and arranging the deal with the Green Climate Fund. This work was funded by Convergence Finance and the ClimateWorks Foundation.

Andrea Colnes, international director at CGC, said: “We are thrilled to see South Africa’s Climate Finance Facility move forward. The facility is the first of its kind to use the green bank model in a developing country, and sets the stage for others to take advantage of this innovative and cost-effective method to drive investment into clean projects and take action against climate change.”

That expansion of the Green Bank model in developing countries is already underway in Rwanda, where CGC has been engaged to develop a new Catalytic Green Investment Fund with the support of the Rwanda office of the United Nations Development Programme (UNDP).

Green bank movement
Momentum in green banks is growing around the world. Jeffrey Schub, executive director at the Coalition for Green Capital (CGC), the non-profit, which incubates local clean energy finance institutions, told SmartCitiesWorld that the core value provided by green banks is similar whether city-, county-, state-, or entire country-scale.“Public dollars available for investment in green energy projects are limited, and policy-makers, of course, want to maximise the impact of each dollar of investment,” he said. “Green banks accomplish this in a unique way, blending public, private and philanthropic investment in clean energy projects that would otherwise struggle to find capital. Green Banks can also help to meet needs in hard-to-reach markets, such as those serving low-income customers.”