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Investing in Climate-Smart Solutions

Giving Compass' Take: • Jennifer Louie, writing for  AVPN, discusses the various barriers for impact investors to finance smart climate solutions and what is needed from funders to ensure a sustainable future.  • What can donors and impact investors do to fully understand the scope of the issue? What are some examples of successful climate financing?  • Read about innovative solutions for climate change.  Since joining Nexus for Development (Nexus) in 2018, one of my key focus areas has been to lead the fundraising activities for the Pioneer Facility – a debt facility which finances growth-stage clean energy and water enterprises across Southeast Asia. The facility was launched during a time when few players in the market were willing to take the risk of lending to smaller companies, especially those with limited track record and credit history. During the AVPN Southeast Asia Summit, I had the opportunity to join a group of passionate panelists to discuss the opportunities and challenges of financing climate smart solutions. There is a consensus that a real financing need exists across financially excluded small and medium enterprises (SMEs), which limits the scale of meaningful solutions. Bridging this “missing middle” is not only critical for sustainable economic growth and job creation, but also catalytic to support positive environmental change. The ingredients to bridge the missing middle are already in place. Our conversation at the Summit made it clear that there are many different investment products being offered to move more capital towards global climate issues. There has also been an emphasis placed on blended finance structures, where concessionary funding is leveraged as catalytic capital to crowd-in private sector money. This blended finance model is how the Pioneer Facility was designed, and I would argue that risk is well mitigated by the size of the first loss capital tranche. The ingredients to bridge the missing middle are already in place. Our conversation at the Summit made it clear that there are many different investment products being offered to move more capital towards global climate issues. There has also been an emphasis placed on blended finance structures, where concessionary funding is leveraged as catalytic capital to crowd-in private sector money. This blended finance model is how the Pioneer Facility was designed, and I would argue that risk is well mitigated by the size of the first loss capital tranche. Read the full article about finding climate-smart solutions by Jennifer Louie at AVPN.