Green Climate Fund looks to crowdfunding for cash boost

Innovative platform could attract wider range of investors as GCF seeks to expand private sector links, say officials

(Pic: Skyseeker/Flickr)

(Pic: Skyseeker/Flickr)

By Ed King

The UN’s flagship climate finance body is considering a crowdfunding platform to boost its ability to back a wide range of projects in developing countries, documents show.

Green Climate Fund officials argue this approach could help drive investment to small-scale low-emission and climate-resilient projects, in a series of papers released last week.

“There is great potential in crowdfunding to complement traditional sources of finance and to channel and mobilize individual contributions into climate-sensitive investments,” they say.

“The use of such a platform can mobilize resources from individuals and organisations that are looking for innovative investment opportunities.”

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Raising additional funds this way through debts, grants or equity has the potential to generate between $500,000 to $40 million per project, says the paper.

In the long term, GCF officials say it could generate greater support for its projects, which they write could be more important than financial contributions.

“A Fund crowdfunding portal would enable members to create a green community that can channel its energy in a positive manner through the portal.”

A relatively new phenomenon, crowdfunding offers a large number of small investors the chance to invest in big projects, and is expected to mobilise over US$10 billion in 2015.

High profile success stories include Oculus Rift, a virtual reality headset that raised $2.4 million backing on Kickstarter in 2012, and was bought by Facebook for US$2 billion in 2014.

In the green energy sector, Abundance Generation has invested just over £9m in 11 wind and solar projects since 2011, with Solar Mosaic in the US and Lumo France following a similar path overseas.

Private engagement

The GCF proposal is one of a series that will be presented to board members when they meet at its headquarters in Songdo, South Korea, later this week.

Other ideas include targeting “high net worth individuals” based in developing countries, together with more conservative sources of funding such as pension and sovereign wealth funds.

So far,the GCF has US$10 billion pledged from governments over a 3-4 year timescale, but with trillions of low carbon investments expected to be required by 2030 it needs to leverage more support from the capital markets.

Andrew Teacher, who works with the Spacehive crowdfunding platform in London, said the potential for raising huge funds for civic construction projects was as yet untested

“From what we have seen the sweet spot for civic funding is around the £50-100,000 mark,” he said.

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Instead the value for the GCF could be to engage a wider audience who could in the future make a contribution, Teacher suggested.

“If you use crowdfunding, you need to drill down to what the point of it is, and the answer is it is as much about engaging people as it is about raising money,” he said.

“When you see people from a charity stopping you outside the tube – the value is as much getting people signed up and engaged as it is as raising money from them.”

Jon Williams, a partner at PwC’s sustainability and climate change department in London, said he welcomed signs the GCF was “thinking differently” to traditional multilateral banks.

“It [crowdfunding] is growing exponentially but it is still a minute part of the market,” he said. “It will bring you another market – but the main way to move capital efficiently is through the capital markets.”

The GCF’s priority had to be de-risking green investments in poorer parts of the world, Williams stressed. “It should be financing projects that the market won’t deliver.”

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