Description

A major barrier for cities in effectively addressing climate shocks is the low capacity and fiscal autonomy to allocate budgets towards resilience. Acknowledging that many climate solutions are within the reach of subnational authorities, SnCF aims to overcome barriers to mobilizing private capital at the subnational level, to encourage investments in climate resilient infrastructure. A Technical Assistance Facility is paired with a private equity fund, for project preparation, provide capacity building for local governments, and certify all investment projects for their climate and SDG impact. These projects would be aligned with countries’ NDCs, articulate climate adaptation co-benefits, and incorporate Nature-based Solutions to enhance their climate resilience and long-term sustainability. The proof of concepts of investment projects will be made available to promote replicability and scalability, and granular methodologies and tools will be developed to continuously monitor and track adaptation co-benefits. The fund targets USD 750 million, of which USD 600 million will be commercial equity.

Stage of Implementation

SnCF is currently under implementation, after receiving approval from GCF in 2020 and will run through 2028. It expects to support around 40 subnational projects with a deal size of USD 5 million to 75 million.

Actors Involved

• Development finance institutions: DFIs can provide the anchor funding necessary to secure private investors’ support and mobilize funding at scale. This can take the form of grants, for the TA facility, as well as concessional first-loss equity. SnCF will be receiving USD 150 million in concessional equity from GCF to unlock a further USD 600 million in private equity.
• Institutional investors: The combination of the technical assistance facility and concessional equity sufficiently de-risks investments for commercial equity to be mobilized at scale. SnCF expects to attract 80% in commercial equity for its fund.
• Subnational governments: Subnational governments are the main beneficiaries of this instrument, as it allows them to secure funding at more favorable terms than they would otherwise receive by borrowing from the capital markets. Governments may also benefit long-term from the TA facility, which will help build project pipeline and capacity for local authorities to design investments that are commercially attractive.

Criteria

• Subnational governance capacity: A minimum level of governance capacity is required for subnational entities to receive and efficiently allocate finance, as well as adequately monitor project impacts.
• Policy framework for achieving climate and SDG impact: Subnational entities that may not be able to borrow from international capital markets but have strong potential for achieving catalytic impact are good candidates for the instrument. Countries with a strong vision and mandate for achieving climate targets and SDGs provide incentives for subnational entities to invest in climate adaptation.

Applicable Countries

Of the 42 countries involved in SnCF, 16 countries are in Africa: Burkina Faso, Cameroon, Côte D’Ivoire, Democratic Republic of the Congo, Gabon, Kenya, Mali, Mauritania, Mozambique, Morocco, Nigeria, Senegal, South Africa, Togo, Tunisia, and Uganda.