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Climate Aggregation Platform
  • Climate Aggregation Platform

    Lowering financing costs for small-scale, low-carbon energy

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Introducing the CAP

CAP aims to advance, and raise awareness for, innovative solutions to market barriers for financial aggregation

The Climate Aggregation Platform (CAP) is a new initiative to promote the scale-up of financial aggregation – and to reduce the cost of financing - for small-scale, low-carbon energy assets in developing countries.

The United Nations Development Programme (UNDP) is implementing the CAP, with initial seed financing from the Global Environment Facility (GEF).

The challenge

High financing costs can hamper the competitiveness of small-scale, low-carbon energy assets. Access to low-cost financing will be critical to scaling -up deployment, in turn bringing energy, human development and climate benefits.

High origination and transaction costs associated with small-scale, low-carbon financings, combined with the inability of financial intermediaries to accurately assess and price credit and default risks, are some of the key, underlying barriers.

CAP aims to reduce financing costs by addressing these and other barriers, boosting lending for small-scale transactions, and over time creating a virtuous cycle of better-understood credit performance, leading to larger, lower risk lending portfolios.

CAP’s approach

CAP advances innovative solutions to market barriers for financial aggregation. It then raises awareness around those solutions, with a view to cross-disseminate good-practices across and within markets.

CAP’s central mechanism to identify and support innovative solutions is a globally-coordinated, local partnership model, targeting the private sector.  This is via the establishment of outcome-oriented, national working groups in each of the CAP’s target markets.

Local partners may include banks and non-bank financial intermediaries, rating agencies, local and foreign institutional investors (debt and equity), and sponsorsand developers active in low-carbon energy and associated supply chains. CAP will benefit from UNDP’s domestic convening powers, connecting to regulators and relevant government ministries, industry initiatives and local NGOs.

CAP’s focus

CAP's focus is on addressing barriers in financial aggregation as applied to only debt financing.

CAP's mandate is global and includes all developing countries.  Its roll-out is being phased-in to select target markets in Asia, Africa and Latin America.  Over time, as CAP gains experience and contributes to local market development for small-scale low-carbon energy, its model will extend to other countries, and potentially to other low carbon sectors that have small-scale aggregative business models.

While CAP is sector or business model agnostic, its initial activities include distributed solar.  CAP has not defined a minimum- size threshold for what constitutes small-scale. 

Investability considerations related to lack of supportive regulation, such as net-metering and tariff structures, limited availability of VC/equity capital, and the absence of supportive macroeconomic conditions, while also a source of credit risks, will not be part of explicit CAP's mandate.  For such issues, CAP will seek to empower domestic partners based on UNDP’s and its partners convening ability.

Please contact [email protected] if you have an interest in learning about CAP and potential partnership opportunities.

 

           Climate Bonds Initiative           GEF