For catalytic capital leaders, climate impact and social impact are often intersecting objectives.
In the U.S., that awareness is acute right now, as the federal Environmental Protection Agency and a range of community investment organizations finalize workplans for $27 billion in Greenhouse Gas Reduction Fund (GGRF) awards. At the same time, advocates and investors working globally are also developing strategies to deliver energy efficiency alongside work to mitigate long-standing pollution and climate impacts, support forests and agriculture, and fuel employment related to green activity.
“I see clean energy investments as a long-term pathway to economic stability and political stability in communities that have historically been exploited,” said William Barber, senior director of impact and equitable investments with the Coalition for Green Capital (CGC), which was awarded $5 billion through GGRF that will be deployed through its network of green banks.
He said capital deployment is not just an opportunity to activate new markets for clean tech but a chance to do so in ways that promote true community ownership and wealth-creation opportunities.
“We are seeking to engage in ways that help us understand community priorities, to understand and commit to direct benefits for communities, and to help create local infrastructure so that investments are not simply one-time infusions in distressed areas, but actually become long-term catalysts for systemic change,” he said. Hear more about CGC’s approach (video).
According to Mauricio Rincon, managing director of capital solutions for Opportunity International, the same is true in sub-Saharan Africa, where catalytic capital providers can support communities working to address these significant challenges.
Opportunity is the U.S.-based economic development NGO that is currently promoting the Climate Collateral Alliance (CCA), a catalytic investment vehicle combining commercial impact capital, catalytic credit support, and technical assistance to advance locally driven climate adaptation efforts in seven African countries. The CCA features a credit support vehicle designed to enable consistent access to capital across smallholder farmers and agricultural businesses that are implementing regenerative agriculture and other smart climate strategies.
“Traditional impact capital is not meeting the needs of communities in sub-Saharan Africa. Unfortunately, these communities are facing the worst of the climate crisis globally,” Rincon said. He also noted that “women are disproportionately affected, and they are leading the battle, leading the charge, in improving the conditions in their communities.”
“We believe catalytic capital plays a very significant role in supporting these communities that are actually feeding the world,” he added. Hear more about Opportunity International’s approach (video).
David Krivanek, senior program manager with the Impact Investing Institute, echoed the importance of catalytic capital in the just transition to decarbonization around the world. “What is really important from a just transition perspective is that you can bridge these two imperatives of green—achieving net zero globally, not only in rich countries but also in developing and frontier markets—and social development needs as part of this,” he said.
The Institute is a U.K.-based nonprofit organization working to mobilize capital markets to support sustainable and inclusive economic growth globally. It offers a guide to help catalytic capital providers connect the environmental priorities of private investors with the social needs of emerging and frontier markets. Hear more about the Institute’s approach (video).
For example, the Institute explains how catalytic capital can help impact funds deliver on their hoped-for just transition outcomes. Providers can help identify and respond to barriers to entry for private investors; assist fund managers with the design of their strategies and processes; offer expertise and capacity to promote engagement with investees; and support an ongoing feedback loop to ensure that the community voice continues to inform the fund’s lifecycle.
“You can ensure as a catalytic capital provider that it’s not only big companies—very established companies that might be based elsewhere than these geographies that benefit from green investments—but also local players, which we think is integral to making sure to making sure the transition is sustainable and works in the long term and that it doesn’t leave anyone behind,” Krivanek said.