Category: CD Group Companies

As discussions at the United Nations Climate Conference (COP28) turn to finance, MOBILIST is proud to be featured among investors and programmes using innovative new vehicles to drive the much-needed mobilisation of commercial capital to address climate change, including adaptation and mitigation efforts.

Public markets and the institutional capital they attract must form part of the discourse, suggested reforms, and innovative solutions needed to close the climate finance gap in developing countries. 

The recent UK White Paper on International Development highlights the need for new financing vehicles that meet the requirements of institutional investors in tackling climate change. The White Paper highlighted how MOBILIST’s investments are already enabling institutional investors worldwide (including pension funds) to finance sustainable development and critical infrastructure needs in developing countries. 

As discussions at the United Nations Climate Conference (COP28) turn to finance, MOBILIST is proud to be featured among investors and programmes using innovative new vehicles to drive the much-needed mobilisation of commercial capital to address climate change, including adaptation and mitigation efforts. 

Andrew Mitchell, UK Minister of State in the Foreign, Commonwealth & Development Office (FCDO), highlighted the potential role of public markets in mobilising climate finance in his remarks at a roundtable on unlocking commercial investment in adaptation and resilience at COP28. “We are also collectively recognising the need to catalyse innovative public markets approaches. With support from the UK’s flagship public market mobilisation programme, ‘MOBILIST,’ we are backing the world’s first global hard currency climate guarantor to unlock $1 billion from global capital and credit markets for mitigation and adaptation in developing countries.”

Read more about UK climate aid announced at COP28 here. 

The Green Guarantee Company (GGC) will be the world’s first global guarantor that focuses exclusively on developing market climate adaptation and mitigation projects. Subject to final documentation, five investors – the UK’s Foreign Commonwealth & Development Office, the Green Climate Fund, the Nigeria Sovereign Investment Authority, USAID & Prosper Africa, and Norfund – together intend to invest $100 million to establish GGC. GGC is managed by the Development Guarantee Group (DDG).  

Ross Ferguson, FCDO MOBILIST Programme Lead, says that guarantees issued by GGC will enable businesses at the forefront of the climate transition to access global capital markets. “Like the markets GGC will operate in, the Company is set up to be a commercial operation that will grow rapidly, enabling borrowers to tap into the large pools of institutional capital in global markets at a lower cost, and creating a large and diversified green bond market for global investors, helping more commercial capital flow to emerging market and developing economies (EMDEs) than would have been possible otherwise.” 

GGC is the first global guarantor focused on providing hard currency guarantees for more sophisticated borrowers in emerging markets who will have the ability to mitigate currency risk but are restrained by the sovereign rating of their home country from accessing global capital markets on an affordable basis. GGC also offers technical assistance to borrowers to improve their credit ratings to investment grade. 

“GCF supports platforms, critical market services, and infrastructure to create a more competitive ecosystem for longer-term private finance mobilisation for climate action. One example is GGC, which will be able to leverage its initial capital base by a factor of 10x, unlocking far more capital from global credit markets than would be possible through traditional development finance,” says Henry Gonzalez, Deputy Executive Director of the Green Climate Fund (GCF). GCF and MOBILIST were the first investors to commit to supporting GGC. 

British A. Robinson, Coordinator of Prosper Africa, says the U.S. government’s  Prosper Africa and USAID are thrilled to join the UK government and other partners in launching GGC as a de-risking product that will help African nations achieve their climate goals. “Green Guarantee  Company  is an example of multiple donors collaborating to drive climate finance at greater scale by crowding in large pools of mainstream private capital — that have until now — remained on the sidelines in developing countries.” 

Through MOBILIST, FCDO’s support for GGC also delivers on the UK’s commitment made at COP26 to support a new kind of guarantee offer for developing countries, enabling businesses driving the climate transition to access new capital through international capital markets. With support from MOBILIST and partner investors, that commitment is now being realised. 

Source: www.mobilistglobal.com

GuarantCo, part of the Private Infrastructure Development Group (PIDG), collaborates with Axis Bank, India’s third largest private sector bank, to provide Northern Arc Capital with INR 3.25 billion (c. USD 40 million) to ensure increased access to finance for underbanked borrowers in India. GuarantCo’s transaction will support Northern Arc to sustainably grow its loan portfolio within specific sectors such as microfinance, small business enterprises, commercial vehicle financing, affordable housing and education.

The proceeds, mobilised by GuarantCo, will be leveraged around five times over the five-year period of the facility, multiplying the number of borrowers benefiting from this initiative. Therefore, an estimated 200,000 low income and rural borrowers in India will ultimately benefit from an increased access to finance. Given that the Northern Arc will exclusively focus on female borrowers, it is expected that at least 50 percent of the beneficiaries will be women. Additionally, a large number of small and medium-size enterprises will benefit through increased access to finance via small business loans.

GuarantCo’s and Axis Bank’s credit facility to Northern Arc will in turn be passed through and benefit Northern Arc’s borrowers. The transaction demonstrates the benefits of offering longer tenors to Non-Banking Finance Companies which can be replicated in the future to benefit the local people and the economy.

Over the last decade, Northern Arc has positively impacted the lives of over 66 million underserved and unbanked customers. The company uses proprietary technology and data analytics platforms to enable credit access to underserved households and businesses and has facilitated over 8 million loans to retail customers, individuals, households and small businesses so far.

Layth Al-Falaki, CEO of GuarantCo, said: “We are happy to partner with Northern Arc and Axis Bank to develop and execute an innovative finance solution to help Northern Arc grow its loan portfolio. The easier access to finance and longer terms offered to borrowers will not only benefit the local economy but also improve the lives of an estimated 200,000 people in India. The transaction will make a direct contribution to SDG 8.10: Strengthen the capacity of domestic financial institutions to expand access to banking and SDG 5.5: financial services with a focus on providing women equal opportunities.”

Ashish Mehrotra, MD and CEO of Northern Arc Capital, said: “We are excited to partner with GuarantCo and Axis Bank and build on our track record of delivering innovative credit solutions for the underserved. Together, we aim to expand access to credit to thousands of underserved households and businesses in India, especially women, and help create more entrepreneurship and employment opportunities. With our combined expertise, we are confident of making a meaningful impact and drive financial inclusion in India.”

Swedish International Development Cooperation Agency (Sida) has provided GuarantCo, the guarantee arm of the Private Infrastructure Development Group (PIDG), with a USD 100 million (in Swedish Krona equivalent) 20-year re-guarantee facility to increase GuarantCo’s capacity to facilitate infrastructure financing solutions and further build local capital markets to the benefit of companies and people in lower income countries across Africa and Asia.

This innovative facility is the first of its kind to be offered by Sida. Taking inspiration from Sida’s previous experience in catalytic solutions and the private credit insurance markets, the facility has been structured to provide capacity to grow GuarantCo’s portfolio through Sida risk sharing in defined portions of transactions originated by GuarantCo. This will allow GuarantCo to undertake larger transactions while continuing to manage risk within single obligor, country and sectoral limits, enabling GuarantCo to deliver enhanced impact and local currency capacity in its target geographies and sectors.

The facility will also deliver additionality by allowing GuarantCo to originate transactions of sufficient size to allow wider syndication including to the private credit insurance market, thereby mobilising an additional source of private sector support into underlying transactions. The track record built with the international insurance market through these transactions is aiming to provide a long-term demonstration impact and encourage insurers to extend their risk appetite.

The re-guarantee facility will allow GuarantCo to enhance the sustainable development impact that it delivers and help achieve the company’s vision to become a centre of excellence for local currency credit solutions for infrastructure finance in lower income countries thereby assisting with the alleviation of poverty.

Since 2005, GuarantCo has made a significant difference to people’s lives including mobilising total investment of USD 6 billion and USD 5 billion of private sector investment, providing 43 million people with improved access to infrastructure and generating 327,000 jobs in Africa and Asia.*

GuarantCo is funded by the governments of the United Kingdom, Switzerland, Australia and Sweden, through the PIDG Trust, the Netherlands, through FMO and the PIDG Trust, France through a stand-by facility and Global Affairs Canada through a repayable facility.

True Schedvin, Head of Unit Global Sustainable Economic Development at Sida, said: “With this guarantee, Sida contributes to boosting GuarantCo’s investment capacity in crucial infrastructure in countries with limited economic resources. Green and sustainable infrastructure that is accessible for all is necessary to give people the opportunity to create better living conditions for themselves as individuals and economic actors. Sida expects this partnership with GuarantCo to give a strong contribution to Sida’s mission to reduce poverty globally.”

Layth Al-Falaki, Chief Executive Officer of GuarantCo, said: “We are delighted that Sida has provided us with a USD 100 million re-guarantee facility to support GuarantCo and PIDG in delivering its strategic and developmental objectives to the benefit of local people in lower income countries across Africa and Asia. The facility provides essential support, allowing us to increase our capacity and facilitating local capital market development and poverty alleviation in lower income countries. It also demonstrates an efficient model for partnership with GuarantCo for other stakeholders who wish to leverage on our expertise in credit guarantees in lower income countries.”

Philippe Valahu, Chief Executive Officer of PIDG, said: “We welcome this support from Sida, and this latest innovation allows us to build on our partnership to continue to deliver vital infrastructure in the countries where it is needed the most.”

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GuarantCo, part of the Private Infrastructure Development Group (PIDG), and African Guarantee Fund (AGF) have provided GreenYellow, with a credit guarantee of MGA 33 billion (c. EUR 7.1 million) with a nine-year tenor to a syndicate of local banks to finance a 20 MW solar plant extension alongside a 5 MW solar battery storage system in Ambatolampy, Madagascar. Société Générale acted as the main lender. GuarantCo provided a guarantee of MGA 23.6 billion (EUR 5 million) and AGF a guarantee of MGA 9.4 billion (EUR 2 million). This is the second phase of an existing 20 MW solar power plant operation that GuarantCo and AGF helped refinance in 2020.

The project will provide improved electricity access to around 285,000 people supporting SDG 7 and reduce emissions by 28,000 tonnes of CO2 through the displacement of thermal power supporting SDG 13. Only 27 percent of the population have access to electricity with considerable disparity between urban (79 percent) and rural (8 percent) areas.

GuarantCo has been the first company to mobilise local currency from commercial banks for utility scale solar projects in Madagascar. Through demonstration and replication, this is expected to enhance the resilience of the power sector by diversifying away from thermal power, reducing the cost of generation and improving the sustainability of the state-owned electric utility and water company in Madagascar.

This is GuarantCo and AGF’s second transaction with GreenYellow. In October 2020, GuarantCo provided a MGA 36.9 billion (USD 9.3 million) guarantee and AGF a guarantee of MGA 14.8 billion (c. USD 3.8 million) to refinance the operational 20 MW Ambatolampy solar power plant, the first grid connected and largest solar plant in Madagascar. This 20 MW power / 5 MW battery extension is testimony to the replicability of such projects and the viability of local currency financing for solar plants in Madagascar.

GuarantCo has played an active role in shaping the transaction with its ability to mitigate risks and lower the cost of financing. This has led to additional local capital becoming available through BFV Société Générale Madagasikara and Banque Nationale d’Investissement Madagascar.

Layth Al-Falaki, CEO of GuarantCo, said: “We are delighted to have closed a second local currency transaction with GreenYellow. Both transactions have helped to crowd in private sector banks to lend to solar power projects and played a major role in building the capacity of these banks to finance clean energy projects that are key for the sustainable development of Madagascar. Most importantly, our guarantees will help provide access to affordable clean energy for people and companies in Madagascar, create local jobs and stimulate wider economic development.”

Pierre Marouby, CEO of GreenYellow Indian Ocean, said: “The completion of this transaction demonstrates the commitment of our financial partners and reaffirms their confidence in GreenYellow and our business model. With this new financial achievement, GreenYellow reinforces its strong presence in the Indian Ocean, where we are already the leading producer of photovoltaic energy.”

Jules Ngankam, Group CEO of African Guarantee Fund, said: “Together with GuarantCo, our initial credit guarantee to Green Yellow has provided access to clean, affordable and reliable energy to households and companies in Madagascar, whilst creating local jobs and stimulating wider economic development. As the largest solar power plant in Madagascar, Green Yellow will now have even more significant impact in accelerating the country’s green energy transition. Thanks to this second guarantee line which has helped double the capacity of the Ambatolampy plant, AGF is delighted to support Madagascar’s sustainable economic development.”

Zdenek Metelak, CEO of Societe Generale Madagasikara, said: “Société Générale is very happy to have finalized the second phase of this landmark transaction. This emphasizes the very specific position the bank holds in Madagascar being able to structure complex operations and stand-by on the long run beside its clients. This innovative financing is part of the Grow With Africa initiative launched by Societe Générale Group six years ago and illustrates the major role we play to build a sustainable future in Africa.”

GuarantCo Management Company (GMC), GuarantCo’s fund manager and a subsidiary of Cardano Development, has appointed Surabhi Mathur Visser as Chief Investment Officer (CIO), effective 3^rd January 2023, to ensure that GuarantCo, a Private Infrastructure Development Group (PIDG) company, is well prepared to deliver against future growth opportunities to the benefit of local people across Africa and Asia.

Surabhi joined GuarantCo from Mirova SunFunder, based in Nairobi, where she led the investments team from June 2019, firstly as Head of Investments and latterly as CIO.  She joined Mirova SunFunder from MRI Group in Singapore where she managed the structured trade finance team globally. Prior to that, she was a member of Sumitomo Mitsui Banking Corporation’s power & infrastructure project finance team and before that she worked in Standard & Poor’s securitisation team. Surabhi holds an MBA from HEC Paris and a Bachelor’s degree in Finance from Georgetown University.

In her new role, Surabhi will be part of the Senior Management Team and GMC Board. She will be working closely together with the various teams across GMC, PIDG and Cardano Development to set the overall direction and strategy to grow the company’s guarantee portfolio in its priority lower income countries whilst supporting GuarantCo’s local capital market development mandate. As PIDG launches its new strategy, she will be working closely with PIDG senior management.

Layth Al Falaki, CEO of GuarantCo, said: “We are delighted that Surabhi has joined GuarantCo Management Company.  Since 2005, GuarantCo has become renowned as a centre of excellence for infrastructure finance local currency credit solutions and is delivering on its mission to help alleviate poverty in lower income countries across Africa and Asia.  Surabhi’s extensive and relevant experience will make a significant contribution to furthering this mission. She will be pivotal in helping us capitalise on further growth opportunities and delivering against our ambitious business plan”.

GuarantCo, part of the Private Infrastructure Development Group (PIDG), has provided Orabank Côte d’Ivoire with a five-year, XOF 10 billion (c. USD 15 million) portfolio guarantee to enable the bank to grow its infrastructure-related portfolio across the region. It is GuarantCo’s first transaction in Côte d’Ivoire and its second with Oragroup, after providing a XOF 14.55 billion (c. USD 25 million) portfolio guarantee to Orabank Togo (an Oragroup subsidiary) in January 2022.

In the West African Economic Monetary Union (WAEMU) countries*, the implementation of Basel II and III banking regulations have limited the lending capacity of banks to infrastructure projects. The portfolio guarantee will help Orabank achieve capital relief, increase their lending capacity, and comply with single obligor limits. GuarantCo expects this transaction to be replicated with other lenders to ensure that infrastructure project financing is not compromised whilst necessary prudential safeguards are implemented.

This transaction will unlock greater access to capital for agri-businesses, manufacturing, trade and logistic firms and telecommunication providers delivering economic growth and job creation supporting SDG 9 and SDG 8.5. A Paris Alignment screen will be conducted for all underlying transactions as part of the guarantee and we will continue to work with Orabank on developing their climate change strategy.

Layth Al-Falaki, CEO of GuarantCo, said: “We are delighted to have closed our first transaction in Côte d’Ivoire and our second with Oragroup in West Africa. The guarantee that we have provided will support the development of essential infrastructure projects from which the Ivorian people will obtain significant benefit. The increase in infrastructure project financing unlocked from our portfolio guarantee, combined with volumes from potential similar guarantees replicating this transaction in the region, will lead to a critical and much needed infrastructure improvement.”

Losseni DIABATE, Managing Director of Orabank Côte d’Ivoire declared: Orabank Côte d’Ivoire welcomes this partnership with GuarantCo relating to a loan portfolio guarantee of 10 billion FCFA (approximately 15 million USD) to strengthen the capacities of SMEs and SMIs and support the implementation of infrastructure projects. Indeed, GuarantCo could not have found a better partner in the West African region, particularly in Côte d’Ivoire, Mali, Burkina, Senegal, Guinea Bissau, and Niger, than Orabank, whose purpose remains to support all initiatives contributing to a positive transformation in Africa. In our booming economies, this type of partnership to strengthen the structuring of financing is essential to boost the development of SMEs-SMIs, real levers of economic development and employability, and thus enable credit institutions and financial institutions to better support national development plans.

Nyala Venture has today announced the appointment of its inaugural FSDAi Nyala Facility Advisory Board and Nyala Venture Investment Committee. The Advisory Board and Investment Committee encompass a broad range of expertise from the gender lens and impact investing space, combined with extensive governance experience and a growth mindset. The members are set to deliver support and guidance which will boost the development potential of Local Capital Providers (“LCPs”) in Africa who use alternative approaches, best suited to providing essential financing for Small and Growing Businesses (“SGBs”), whilst expanding on existing gender-smart approaches to financing SGBs.

Diago Dieye, Managing Director, Nyala Venture: “We are privileged to have seasoned professionals, who are committed to building a new asset class of Local Capital Providers in Africa join us on this journey as part of our Advisory Board and Investment Committee. This is a significant milestone as we endeavor to provide adequate funding to Small and Growing Businesses through Local Capital Providers, with a priority for gender lens investing.”  

Anne-Marie, Chidzero, Chief Investment Officer, FSDAi: “I am delighted and extremely proud of our gender diverse governance structure composed of seasoned professionals who will steer the FSDAi Nyala Facility to catalyze a new class of asset allocators in Africa serving Small and Growing Businesses and driving more capital into the hands of women investors and business owners. I am also pleased that we have an Investment Committee of incredible women from diverse geographies, though predominately African, who have outstanding accomplishments in the world of capital. With the critical and astute eye of our Board and Investment Committee, Nyala Venture and its partner, the Collaborative for Frontier Finance, are well placed to build a nascent asset class of young, African, gender diverse, and innovative asset allocators on the continent.”

Drew von Glahn, Executive Director, Collaborative for Frontier Finance: “For years, Africa’s entrepreneurs and Small and Growing businesses have lacked access to appropriate growth capital.  With Diago’s leadership Nyala Venture will be able to “lean in” and provide the catalytic capital for local capital managers as a critical component in addressing this gap.  Now, she and the team will have the support and deep knowledge from a high caliber Investment Committee and Advisory Board. We are highly appreciative of the diversity and experience these individuals bring – further allowing Nyala to be a leader in driving large scale capital flows to Africa’s Small and Growing Businesses, in particular women led enterprises.”

INAUGURAL FSDAi NYALA FACILITY ADVISORY BOARD MEMBERS:

• Anne-Marie Chidzero, Chair of the Advisory Board
• Geetha Tharmaratnam, Board Member
• Aunnie Patton Power, Board Member
• Steven van Weede, Board Member

INAUGURAL NYALA VENTURE INVESTMENT COMMITTEE MEMBERS:

• Geetha Tharmaratnam, Chair of the Investment Committee
• Nana Appiah-Korang, Independent Member
• Claire Labrunerie, Independent Member
• Isabelle Lessedjina, Independent Member

For press queries, please contact: [email protected]

About Nyala Venture

Nyala Venture is a Fund Manager, set up as a joint venture between Cardano Development and Total Impact Capital Europe. The German Federal Ministry for Economic Cooperation and Development (BMZ) contributed to the seed capital of Nyala Venture. As a Fund Manager and through the various funds it raises, Nyala Venture aims to contribute to boosting local economies. With a priority for Gender Lens Investing, Nyala Venture provides capital and capacity strengthening services to Local Capital Providers (LCPs), which are best equipped to finance and support Small and Growing Businesses (SGBs), the most important business segment in any economy. The first fund managed by Nyala Venture is the FSDAi Nyala Facility (FNF). The capacity strengthening services of the Facility are provided in partnership with the Collaborative for Frontier Finance.  

About FSD Africa Investments  

FSD Africa Investments (FSDAi) is the investing arm of FSD Africa, a specialist development agency working to make finance work for Africa’s future. FSDAi deploys early-stage, risk-bearing capital to unlock green economic growth, benefiting both people and planet. Our investments are catalytic, serving to crowd-in larger volumes of private capital, and patient, with long-term horizons. We use a range of equity, debt and grant-based investment instruments specifically designed to accommodate early-stage commercial risk, drive high market development impact and generate acceptable risk-adjusted financial returns on investment. FSDAi’s distinctive approach focuses on backing ambitious management teams with innovative financing solutions that fill a critical gap in the existing financial system – gaps requiring an investor with appetite for proof-of-concept investment risk. In this way, innovation potential and scalability lie at the heart of each and every investment decision we make.

About Cardano Development

Cardano Development (CD) is an incubator and fund manager, established in 2007. Through careful risk-management analysis in data-poor settings, CD identifies scalable solutions that help to make frontier financial markets more inclusive, investible, and sustainable to unlock lasting economic value. CD creates solutions for local currency, credit, and liquidity risks in these markets. With over USD 6 billion assets and USD 1.5 billion capital under management, CD supports its scale-up funds and a number of start-ups with ongoing management services, financial support and corporate governance oversight.  Cardano Development works with reputable partners including foundations, governments, impact investors, institutional investors and commercial partners. 

The Green Climate Fund has approved an equity investment in the Green Guarantee Company – the first ever global guarantor dedicated to providing guarantees for climate bonds in developing countries, in a move set to significantly expand access to climate finance.

The Green Climate Fund’s investment is being undertaken in partnership with MUFG Bank, Ltd as Accredited Entity and the Development Guarantee Group, part of Cardano Development, as Executing Entity. It was approved during the recent 34th meeting of the Green Climate Fund Board in Songdo, Republic of Korea.  The move came just before the start of COP27 where boosting access to finance for developing nations is a key area of focus.

The Green Guarantee Company aims to plug a key financing gap. According to the United Nations developing countries require circa USD 500 billion of investment every year to meet their climate adaptation and mitigation infrastructure needs. But large climate projects struggle to attract affordable financing. The Green Guarantee Company will act as an advocate for developing countries in global capital markets working to help climate projects gain access to affordable long-term financing from international investors thanks to its guarantees.

The Green Climate Fund will be one of the founding equity shareholders of the Green Guarantee Company and will initially invest USD 40.5 million with further investments of up to USD 82.5 million as the Green Guarantee Company scales up. The Foreign, Commonwealth and Development Office (FCDO) is providing technical assistance support to the Green Guarantee Company.  This is administered through the UK government’s flagship programme – Mobilising Institutional Capital Through Listed Product Structures (MOBILIST), which supports investment solutions that help deliver the Global Goals for Sustainable Development and the climate transition.

The Green Guarantee Company will provide guarantees to mobilise more than USD 1.6 billion of climate finance in the Green Climate Fund’s Host Countries – leveraging the Green Climate Fund’s investment more than twentyfold. These bonds will finance climate adaptation projects such as flood protection and climate mitigation projects such as electric buses or renewable energy.

Yannick Glemarec, Executive Director of GCF, said, “GCF is proud to be a founding shareholder of the Green Guarantee Company. This innovative company represents an opportunity to mobilise critical funds from global investors and will be a powerful ally for developing countries by giving them greater access to international capital markets for climate finance.”

Koichiro Oshima, Managing Executive Officer, Head of Financial Solutions Group, MUFG Bank, Ltd., said, “Establishment of the Green Guarantee Company is a landmark for the GCF’s private sector agenda. GGC sets a high standard in terms of financial additionality, leveraging GCF’s contribution many times through the global capital markets, while ensuring maximum climate additionality and long-term impact. MUFG is proud to be a partner in this strategic GCF transaction.”

Lasitha Perera, Managing Partner of the Development Guarantee Group, said, “An essential quality of a guarantor is its ability to inspire confidence. Consequently, the Green Climate Fund, as a founding shareholder, will help ensure and build confidence in the climate impact of the Green Guarantee Company. The Development Guarantee Group, as the manager of the Green Guarantee Company, looks forward to working with the Green Climate Fund to deliver on the significant potential of global capital markets to help developing countries in their fight against climate change.”

About Development Guarantee Group

The Development Guarantee Group was founded by Lasitha Perera and Boo Hock Koo, with Cardano Development as an institutional shareholder, thereby uniting the collective experience of a global network of experts in setting up and running guarantee companies and programmes focused on addressing development challenges globally. The Development Guarantee Group is the world’s first dedicated guarantee platform with the mission to design, develop and operate guarantee solutions and companies that can effectively mobilise private sector capital towards funding development and sustainability challenges. The Green Guarantee Company is the Development Guarantee Group’s first company under management.

About Cardano Development

Cardano Development (CD) is an incubator and fund manager, established in 2007. Through careful risk-management analysis in data-poor settings, CD identifies scalable solutions that help to make frontier financial markets more inclusive, investible, and sustainable to unlock lasting economic value. CD creates solutions for local currency, credit, and liquidity risks in these markets. With over USD 6 billion assets and USD 3.1 billion capital under management, CD supports its scale-up funds and a number of start-ups with ongoing management services, financial support and corporate governance oversight.  Cardano Development works with reputable partners including foundations, governments, impact investors, institutional investors and commercial partners. 

New York, 29 Sept 2022 – Today, the Global Innovation Lab for Climate Finance launched seven innovative financial instruments for climate-related projects in emerging economies. Combined, the new deals seek over USD 1 billion from commercial, concessional, and philanthropic investors for climate adaptation, food systems, zero-carbon buildings, sustainable energy, and high-integrity carbon projects.

The Lab’s member institutions met last week at the margins of the New York Climate Week. They voted to endorse all seven financial mechanisms and enterprises that completed the Lab’s 2022 six-month acceleration program. The Lab will host a virtual Demo Day on October 19 to present this year’s instruments to potential investors, funders, and implementation partners. Registration is open here.

“The financial instruments the Lab develops are unique because they have enormous potential to generate market-rate financial returns for investors while delivering the social and environmental benefits the world so desperately needs,”

The 2022 Lab class leverages a broad range of financial instruments such as guarantees, insurance, and investment funds to increase the pipeline of bankable opportunities for challenging sectors like methane abatement, green steel, climate-smart shrimp farming, and sustainable housing (full list below). Pilots are planned across several emerging markets, such as Brazil, Ecuador, India, Indonesia, Kenya, Sierra Leone, South Africa, and The Philippines, with the potential of catalyzing billions of dollars to address the climate crisis.

“We are living through the decisive decade in tackling the climate crisis – to decarbonize and build a climate resilient economy, it’s crucial that we The Lab, an initiative of over 70 public and private investors and institutions, accelerates investment solutions to support sustainable development goals in emerging markets. Created in 2014, the Lab has now launched 62 instruments that have collectively mobilized over USD 3.3 billion. More information, including investment opportunities, is available on the Lab’s website: innovative climate finance ideas.

The complete list of instruments is:

Climate Insurance Linked Resilient Infrastructure Financing (CILRIF) is a novel offering of long-term (>10 years) municipal climate insurance, with known premiums dependent on municipal resiliency measures and a unique linked financial product to access capital for climate resilience. The United Nations Capital Development Fund (UNCDF) leads the idea.

Climate Smart Shrimp Fund provides loan packages, supported by a technical assistance facility, that enable shrimp farmers to transition to more sustainable and efficient production systems while simultaneously restoring mangrove ecosystems. Proponent Conservation International intends to pilot the idea in Indonesia, Ecuador, and the Philippines.

Financing Steel Decarbonization combines technical assistance, low-cost patient capital, and implementation stage support to prepare, invest in, and de-risk decarbonization technology projects for low-carbon steel production while supporting the development of the broader industrial ecosystem. Proponents Smartex and the U.S. National Renewable Energy Lab (NREL) plan a pilot in India.

Green Affordable Housing Finance deploys construction and mortgage loan guarantees alongside targeted enabling interventions to foster a locally driven and self-sustaining affordable housing finance ecosystem. Proponent Reall will pilot the instrument in Kenya.

Green Guarantee Company is the first specialist guarantor for emerging market climate adaptation and mitigation projects, unlocking access to global investors by de-risking green bonds and loans. The Development Guarantee Group will launch the instrument in South Africa.

Reservoir Methane Capture Mechanism is the first of its kind methane-as-a-service structure with blended funding to unlock investments into emerging methane capture technology in hydropower reservoirs to produce cleaner energy. Proponents Bluemethane and Open Hydro target the Brazilian market.

The Fund for Nature is Africa’s first debt fund for high-integrity, nature-based carbon projects. Proponent CrossBoundary aims to increase the supply of high-quality nature-based carbon projects to meet the growing demand from corporate off-takers while increasing the economic benefit to project implementers and local communities.

Quotes:
Lab members gathered last week to endorse the financial instruments from the Lab 2022 class, echoing similar themes while offering input for their implementation pathways.

Christina Chan, U.S. State Department, Senior Adaptation Advisor, U.S. Special Presidential Envoy for Climate – “Mobilizing private finance is key for the President’s Emergency Plan for Adaptation and Resilience – PREPARE, and the Lab is instrumental in generating innovative in financial mechanisms capable of doing so. The U.S. is a Lab founding member and we are proud to see the results achieved since we started this partnership in 2014.”

Dr Jeanne d’Arc Mujawamariya, Rwanda’s Minister of Environment – “The climate finance innovation the Lab provides is essential because you cannot address the climate crisis unless you use every tool at your disposal. When it comes to these tools, we need to empower countries like Rwanda so they can be players and managers in the carbon market, not just providers of credits.”

Lori Kerr, FinDev Canada, CEO – “The Lab is unique in joining public and private investors with entrepreneurs advancing innovative projects in climate finance. FinDev Canada is proud to join the Lab as a funder for the upcoming cycle, as this long-standing initiative aligns with one of our key impact goals of promoting climate action.”

Nawar El-Abadi, Swedish International Development Cooperation Agency (Sida), Program Officer – “For Sida, the goal has been to find a way to identify innovative sustainable finance ideas within food systems in a market that hasn’t been as mature and lacks investible opportunities. That’s where the Lab has come in, with their method to both identify and develop innovative finance instruments connecting them to the vast array of actors they need to achieve their impact.”

Sergio Gusmão, Desenvolve SP, Chief Executive Officer – “After watching the Lab’s entrepreneurs present their innovations here today, we were impressed by the quality and creativity to solve problems in such complex sectors. We are confident that these innovations will soon be available to investors and contribute to the much-needed net zero transition.”

Vera Rodenhoff, German Federal Ministry of Economic Affairs and Climate Action (BMWK), Head of Division of General Issues of International Cooperation, Implementation Initiatives – “Germany has been supporting the Lab since its beginning, and we have witnessed an impressive growing complexity of the projects the Lab move forward. It reinforces the truly innovative nature of the Lab as it embraces the most difficult sectors where barriers for private finance are higher.”

GuarantCo, part of the Private Infrastructure Development Group (PIDG), has provided a VND 1,150 billion (c. USD 50 million) partial credit guarantee to support a VND 1,725 billion (c. USD 75 million) bond issuance by EVN Finance Joint Stock Company (EVNFinance), a premier non-bank financial institution in Vietnam. This landmark transaction is Vietnam’s inaugural onshore, local currency, internationally verified green bond. It is also the first-ever partially guaranteed corporate bond that has attracted institutional investors in the country including Manulife and AIA. Vietcombank Securities (VCBS) a leading investment bank and securities firm in Vietnam acted as the mandate lead arranger on the transaction.

The bond proceeds will allow EVNFinance to issue longer-term loans to finance capital expenditure of green infrastructure aligned with the company’s Green Bond Framework including loans towards the fast-growing rooftop and ground-mounted solar sub-sectors in Vietnam. The green transaction contributes to Sustainable Development Goal (SDG) 7 (ensure access to affordable, reliable, sustainable, and modern energy for all) by enhancing Vietnam’s energy and climate resilience. Through EVNFinance’s financing of the solar sector there will be a reduction in the national grid’s dependence on fossil fuels as well as its emission intensity. The rooftop solar solutions supported by EVNFinance will further benefit the wider economy by providing commercial and industrial end-users with access to an alternative form of energy, which is not only cleaner but also cheaper.

GuarantCo worked alongside the Global Green Growth Institute (GGGI), an inter-governmental international development agency, which provided EVNFinance with technical assistance structuring the green bond and assisted in the third-party verification of EVNF’s Green Bond Framework. The support was made possible through a technical assistance grant under the GGGI’s Vietnam Green Bond Readiness Programme supported by the Ministry of Finance, the Government of Vietnam and the Government of Luxembourg. GuarantCo and VCBS played an important role in attracting investors and coordinating the transaction, contributing to the success of a new financial product in the local market, one which could be replicated across other similar transactions in Vietnam.

This transaction demonstrates PIDG and GuarantCo’s long-term commitment towards Vietnam and is a hallmark of GuarantCo’s mandate to develop local capital markets and crowd in private capital participation. This is GuarantCo’s third transaction in the country, having previously supported two 100 percent guaranteed transactions in 2018 (VND 660 billion/USD 29 million) and 2019 (VND 1,150 billion/USD 50 million) in the affordable housing and road transportation space respectively.

This pathfinding transaction seeks to be an example that will help build market confidence in the potential of local currency green bonds as a means of raising financing for sustainable infrastructure development in Vietnam. This transaction follows the Vietnam Green Capital Market Event organised by GuarantCo and sponsored by PIDG Technical Assistance in August 2021. The event provided attendees with an understanding of the importance of green and climate financing for Vietnam.

The collaboration between EVNFinance and GuarantCo was earlier announced by the Prime Minister of the United Kingdom during COP26 in Glasgow in November 2021 as part of the UK Clean and Green Initiative and is of considerable political importance.

Layth Al-Falaki, CEO of GuarantCo, said: “We are delighted to close our third transaction in Vietnam and collaborate with EVNFinance to support its sustainability agenda through a future focus on renewable energy projects. This first local currency certified green bond in Vietnam will further climate mitigation and adaptation efforts in line with PIDG and GuarantCo’s aims. We hope that this transaction will set a precedent for future initiatives which could be replicated in Vietnam and accelerate the growth of green bonds in order for GuarantCo to make a significant impact towards positive climate action and support the Sustainable Development Goals through the long-term, local currency credit solutions that we provide.”

Philippe Valahu, CEO of PIDG, said: “As a Group we accompanied Vietnam’s effort to develop renewable energy, from one of the first hydro IPP to the development in 2018, of one of the very first utility-scale solar IPP farm in Ninh Thuan; PIDG development arm InfraCo Asia brought the 168MW plant to financial close and operation before exiting to investors attracted to Vietnam for the first time. Four years later the market is ready for the first verified green bond and we are proud of the role of PIDG TA and PIDG company GuarantCo in making this happen.”

Nguyen Hoang Hai, CEO of EVNFinance, said: “Green bonds are an effective capital mobilization channel for investors who are interested in sustainable development and aim to attract capital for green and sustainable growth in the future. EVNFinance, therefore, issued its very first green bond to create opportunities for local institutional investors and promote investment in renewable energy sector in Vietnam. Being guaranteed by GuarantCo and supported by VCBS and GGGI, EVNFinance’s green bond issuance is expected to contribute to Vietnam’s commitment to its transition to a low carbon economy and the company’s strategy on green financing.”

Le Manh Hung, CEO of VCBS, said: “We are very pleased to have our contribution to the success of this transaction. Not only does it promise a future for new financial products in our market, but it also promotes the development of green energy, demonstrating Vietnam’s actions in addressing global concerns. We see the transaction as a big milestone to mark our Company’s 20th anniversary. We hope that VCBS will have further opportunities to collaborate with both local and foreign partners to bring new internationally standardized financial products, particularly those relating to green finance, to Vietnam.”

Sang Hui Lee, Chief Executive Officer, Manulife Vietnam, said: “As one of the anchor investors on this transaction, we have been leveraging our strong relationship with GuarantCo to collaborate closely with them on structuring the deal in support of the long-term sustainability financing in Vietnam. This is the first partial guaranteed transaction and local currency green bond for us in Vietnam. As one of the leading Iife insurance and investment management companies in the market, Manulife Vietnam takes a long-term approach toward both the commitment to our clients and our investments in the country. We will continue to support Vietnam in its efforts to achieving a more sustainable future.”

Wayne Besant, CEO of AIA Vietnam, said: “We are delighted to partner with GuarantCo in all three bond issuances in Vietnam, from fully guaranteed bond to this partially guaranteed first verified green bond. AIA aims to deliver long-term value by allocating capital to companies that commit to sustainable outcomes. We completed the divestment of directly managed, listed equity and fixed income exposures to coal mining and coal-fired power businesses in 2021 to facilitate the transition to a low-carbon economy. What is good for Vietnam, is good for AIA Vietnam.”

Dr. Jason Lee, Deputy Director and Head of Emerging Economies Asia, Vietnam Country Representative of Global Green Growth Institute, said: “The issuance of Vietnam’s first private sector Green Bonds by EVNF is a landmark in the realm of green financing in Vietnam. It demonstrates the transforming investment appetite and maturity of Vietnam’s sustainable financial market. GGGI is proud to bring its green bond technical expertise and advise EVNF in this pioneering transaction. This success will catalyse the market for green bonds in Vietnam and support the Government of Vietnam in achieving its net-zero carbon emission targets.”