NDF Newsletter 2/2018

CLIMATE IN FOCUS A Newsletter from the Nordic Development Fund

Photo: Nuru Energy

2 | 2018

While only a small part of the total offering, the addition of a second challenge fund further positions NDF as a broad provider of innovative climate funding.

Challenge funds kick starting for scale up With the launch of the Energy and Environment Partnership Trust Fund (EEP), NDF now manages two challenge funds, the other being the Nordic Climate Facility (NCF).

established a strong track record, backed by 200 pioneering energy technology and access projects.

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Why challenge funds?

DF Managing Director, Pasi Hellman, believes Challenge funds are generally capable of reaching a wider vachallenge funds make good business sense, citing riety of sectors as well as addressing more obscure concepts the obvious synergies with NDF’s core financing in need of preparation or testing. “Sometimes all it takes activities. is a nudge from the public “Challenge funds can complement “By picking up some of sector to get a small idea off the initial risk and uncerthe ground that can have a the more traditional financing tainty through a challenge potentially large impact.” instruments of the NDF family.” fund,” Hellman explains, In recent years NDF“we can smooth the way for funded projects have more traditional NDF financing options as well as private received numerous awards for innovative climate projects, sector involvement.” notably UNFCCC Lighthouse Momentum for Change Private sector players already have a stake from the outAwards; best climate practice awards from the ICCG; and set with EEP, which offers early-stage clean energy funding recognition at One Planet in Paris, amongst many others. predominantly to privately-led projects in Southern and “Unsurprisingly,” Hellman points out, “most of these projects East Africa. For NDF, assuming leadership of EEP marks a recognised for innovation have originated from our highly visible strategic new avenue for mobilising resources and engaging challenge fund, NCF. This attests to the valuable and versatile with new partners. In the last seven years, EEP has already role these funds can have in testing new boundaries.”

This issue highlights the growing role of non-grant instruments in the NDF mix Challenge fund roadshow opens privatesector doors / Strategy for NDF strengthening

NDF expands portfolio mix joining innovative clean energy fund - CIO

News from NCF / Women business leaders combat climate change in Nepal

NDF catalyses funding for digital fishing app on Mozambique coast

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Nordic Roadshow opens doors to new private partners During May 2018, NDF took a lead role in staging a Nordic Roadshow, promoting climate financing opportunities to small- and medium-sized companies as well as expanding private sector and NGO networks in the Nordics.

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DF’s flagship challenge funds, the Nordic Climate Facility (NCF) and the Environment and Energy Partnership (EEP) both took part in the event together with sister financing organisation, the Nordic Environment Finance Corporation (NEFCO).

NCF is a challenge fund set up in 2009 to finance early-stage innovative climate change projects, while EEP is a multi-donor trust fund providing early-stage grant and catalytic financing to innovative clean energy projects, technologies and business models in Southern and East Africa.

“One of our main ambitions for the Roadshow was to expand awareness of the sheer array of funding types available for climate projects in developing countries, as well as offer these opportunities to new networks across the Nordic region,” explains NCF Project Officer, Johanna Zilliacus.

“This was with particular focus on bringing in new private sector partners.”

The Roadshow, which spanned all the Nordic capitals, was conducted in cooperation with local partners on the ground, including The Swedish Agency for Economic and Regional Growth in Stockholm; Promote Iceland in Reykjavik; Norwegian Energy Partners in Oslo; and Business Finland in Helsinki.

During the Copenhagen leg, the team joined up with the Confederation of Danish Industry, which works to improve opportunities for the growth and overall competitiveness of Danish businesses.

Jeppe Falck, Senior Advisor, Confederation of Danish Industry, described the response as extremely positive: “What I considered especially valuable for our network,” said Falck, “is that NDF and NEFCO presented a mutually complementary array of Nordic finance instruments, catering for Danish companies at different stages of business development. We look forward to continuing this mutually beneficial collaboration.”

EEP Africa off to a running start

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he EEP Africa Trust Fund, launched under NDF leadership earlier this year, has become the organisation’s newest vehicle for mobilising resources and partners, and is off to a running start.

In May, during Africa Utility Week in Cape Town, the Fund hosted investors and EEP Africa developers for an afternoon of pitches, matchmaking and deal flow identification. This was followed by the launch of the 14th Call for Proposals (CfP) highlighting aspects of concept innovation, development impact, business models, and financial sustainability. The event also saw the release of a new EEP Africa video and featured a panel of past recipients of EEP Africa financing who emphasised the enabling role of EEP Africa in the region’s clean energy capacity development.

Speaking at the launch, Charles Wetherill, NDF Manager for the EEP Africa Fund, said: “More than 18

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months of work has gone toward this first CfP launch under the new fund structure. The next step is for project developers to put their best ideas into proposals so we can get to work on the next generation of innovative clean energy businesses, projects and technologies supporting sustainable and inclusive green growth in Southern and East Africa.”

Following the close of the current call, EEP Africa is already gearing up to launch the 15th CfP in autumn 2018.

The upcoming call is likely to take a more specific theme.

One option being explored is to highlight proposals from female entrepreneurs or featuring strong positive gender implications. Wetherill points out that this would build on the findings of the recent in-depth study of gender in the EEP Africa portfolio, which concludes that women and girls stand to benefit the most from the availability of sustainable, affordable and renewable energy sources.

NDF chairman strategises on fund strengthening “The capital basis for NDF is shrinking,” cautions Chairman Hans Olav Ibrekk. “Without new capital injections from NDF member countries, we’ll have to start reducing our level of activity by 2020 or 2021.”

As part of a new strategy from 2015, the Board has taken steps to increase reflows to the fund by allowing a portfolio shift towards financing instruments other than grants. These include the increased use of loans and equity investments as well as taking on management of a trust fund – the Energy and Environment Partnership. Last year, NDF’s board approved financing of EUR 44 million, 29% of which involved non-grant instruments.

Do-nothing not an option The Board is also fielding outside proposals, notably from the Nordic Council raising the option of a merger among NDF, NIB and NEFCO; as well as a proposed takeover of NDF by the Nordic Finance institutions.

“These options have been met with some reluctance and currently don’t look viable,” Ibrekk explains, adding that “the board has a number of options of their own on the table

for strengthening NDF’s financial basis. This is with a view to reaching a conclusion within the next two years.”

Discussions are positively fuelled by the Board’s belief that NDF’s role as an international financing institution must be maintained. “There is wide satisfaction with the Fund’s strategic orientation approach and results,” Ibrekk asserts, “and the Board has agreed that the ‘do-nothing’ approach cannot be an option.”

Performance evaluation in place In moving forward, discussions will continue on how NDF will fit into the evolving Nordic and global financing architecture. This will include a full evaluation of the Fund’s completed projects and overall performance, slated for within this year.

“The organisation remains relevant,” Ibrekk contends, “the question is whether we should accept having it as a EUR 30 million fund or EUR 50 million, or something larger.” The answer very much hinges on the ambitions of the Nordic Governments. “We’ll have to see whether they’ll be able to reach a joint decision and come through for us.”

Can climate resilience save a battered West African coastline?

Photo: Martina Jägerhorn/NDF

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DF has invested in the West Africa Coastal Areas Program (WACA) with the goal of strengthening climate resilience along the coastal regions of Benin and Senegal, and promoting more integrated and joint action in combating climate change. NDF’s contribution will also go towards the design and launch of the WACA platform, with the goal of leveraging public and private financing of USD 2 billion between now and 2023. NDF’s financing is provided in partnership with the World Bank.

In January 2018, NDF became the first institution to approve financing for WACA with EUR 13.1 million, while the World Bank approved financing of USD 225 million for the project in April 2018. The program, which was showcased at the One Planet Summit in Paris, presents a good example of how a small amount of seed investment can catalyse much larger investments.

Discussing NDF’s involvement, Dahlia Lotayef, World Bank Co-Team Leader for the WACA Program said: “There are no longer any doubts about the extent and impact of coastal erosion and climate change in West Africa, so we need to mobilize solutions and finance now. By providing parallel co-finance to the WACA Resilience Investment

Initial NDF funding catalyses large-scale investment to combat climate change on West African coast

project as well as financing for the WACA Platform, we see NDF as setting an example for others.”

NDF’s goals in funding the WACA project are very much in keeping with the organisation’s core strategic focal areas, notably, testing climate financing innovation, leveraging seed money and, where relevant, bringing in private sector participation.

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Spotlight on NDF 2017 results

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uring 2017, NDF redoubled its efforts to align financing decisions with its core strategic focus.

This was reflected by improvements in the organisation’s institutional level results. Notably, 100% of new commitments in the 2017 portfolio had demonstrable catalytic or leverage impacts and were focused on the highrisk project preparation stage.

“You could say our funding sweet spot is at the early stage,” says NDF’s Deputy Managing Director, Leena Klossner. “This is also the mandate given to us by our Nordic government funders.”

Despite the higher risk at the front end – only two out of three projects usually survive – Klossner insists it’s worth it. Climate change is by definition an unknown and when it comes to resilience there is still no exact knowledge about

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what the best case solutions will be. “Someone has to test in this space. And working at this intersection between different fields and risk is where innovation really happens.”

“Our closer alignment with institutional indicators linked to strategy translated into textbook results for 2017,” Focus on UN Sustainable Development Goals (SDGs) “NDF is also using the SDGs as a way of aligning our results more closely with the goals of our funders,” Klossner explains. All NDF program managers are now required from the outset to identify three or more SDGs that are in line with their project goals. The nine new projects approved by NDF in 2017 particularly target the following SDGs:

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Participatory approach defines success in Tegucigalpa In two low-income neighbourhoods of Tegucigalpa, Honduras, NDF has successfully completed a climate change adaptation project, putting into action relevant and affordable upgrading plans while building skills for a stronger more inclusive knowledge base at local Honduran institutions.

Dealing with drought and heavy rains Climate change in Tegucigalpa is characterised by intense heat waves and droughts, raising the need for advanced water harvesting techniques; as well as severe rains, compounding the need for retention walls around properties to avoid landslides.

Engineers and planners from the local authority together with NGOs and local residents conducted walks through the target communities. “People were already building retention walls, using old car tires filled with earth, and collecting rain water but in the majority of cases they were doing it without technical assistance.”

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Photo: APCA project

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lfredo Stein, Lecturer in Urban Development Planning at the University of Manchester, UK, took a lead role in the NDF initiative citing the participatory approach to the project as a key success factor.

“From the outset, we wanted to find out what climate impacts were already being experienced, Stein explains, “and more importantly, what households, small businesses and communities were doing on their own to mitigate them.”

Technical assistance was given for tire retention walls, which local people had already made themselves, to help stop landslides during heavy rains.

Success through knowledge co-production The project set an important precedent on how a participatory approach can facilitate partnerships during macro and micro planning levels: “One of the most important outcomes was addressing the gap between top down one-size-fits-all city planning and bottom up information on neighbourhood priorities and what was technically feasible and financially as well as socially acceptable to them.”

Climate Investor One – Blended Financing at its Best NDF joins innovative climate fund to fast-track clean energy investment in developing economies while responding to ambitious climate change mitigation targets set in the Paris Agreement.

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aunched at COP 21 in December 2015, Climate Investor One (CIO) brings together the need to address global climate change with investment into renewable energy infrastructure projects, in this case wind, solar and hydro in the developing world. This is with a view to cutting green house gas emissions while at the same time stimulating local economies with new job creation and affordable clean electricity.

One of the central tenets of the Paris Climate Agreement is to mobilize and increase climate finance flows towards the developing world. CIO is making a significant contribution to this goal, through its own brand of blended financing, combining both public and private sources.

“CIO’s solution is unique in that it’s a global ‘wholeof-life’ fund,” affirms Isabel Leroux, Program Manager at NDF. “Firstly, CIO is tailored to provide end-to-end

Climate Investor One to have significant impact over 20-year period:

Annual avoided carbon emissions 1.2 million tons of CO2 equating to approximately 257,000 passenger cars off the road

Local employment Generating more than 10,000 new jobs

Clean energy production Contributing to 3,200 (GWh/year) of affordable clean electricity to ≈ 7 million people

financing for each phase of a project’s lifecycle: development, construction and operations. Secondly, this blended structure allows us to put public sector funding to work at the outset of projects in ways designed to catalyse much-needed private-sector financing as they evolve.”

Over its 20-year term, CIO is well positioned to deliver significant impacts in terms of economic stimulus and emissions cutting, targeting more than 1,100 (MW) of new additional energy capacity, to produce 3,200 (GWh/year) of affordable clean electricity for about 7 million people.

In addition, CIO expects to generate more than 10,000 jobs with annual avoided carbon emissions of approximately 1.2 million tons – equating to approximately 257,000 passenger cars off the road.

Most CIO projects will be located in low-income to lower-middle-income countries, including many NDF target countries. “NDFs contribution of EUR 5 million will be specifically at the preparation and development stage of projects, which bear the highest risk in a project lifecycle,” explains Leroux. “And this risk profile is well aligned with NDF’s strategy and mandate.”

Other new financing recently approved for NDF projects: • Climate resilient roads to drive safety and accessibility in Laos: In partnership with the World Bank and the Asian Infrastructure Investment Bank, NDF plans to finance climate resilience work on the country’s most heavily trafficked national road. As part of the Lao PDR Government’s Paris Climate Agreement contributions, the project aims to double the capacity of road areas subject to increased flooding related to climate change. This will improve the climate resilience of the road, allowing yearround accessibility and increased road safety.

• Running with a winner in Regional Africa: The African Guarantee Fund (AGF), which opens the door to finance for SMEs in clean energy and climate smart agriculture, was first financed by NDF in 2016. Since then, AGF has positioned itself as one of Africa’s green finance pioneers, creating a sizable impact, including as strong focus on job creation for women and youth, while mobilising new resources.

A second capital injection from NDF sends a strong confidence signal from the existing shareholder group of AGF’s growing role and relevance in the region.

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The Nordic Climate Facility (NCF) is NDF’s unique challenge fund, through which Nordic companies and organisations can seek financing of up to EUR 500,000 for innovative climate projects realised with local partners in 21 countries in Africa, Asia and Latin America.

NCF7: From smart weather NCF 8 call for proposals forecasting to pay-as-you-go - testing the business viability of climate solutions solar

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o you have a climate project with a strong business angle? Can your project take on climate change in the developing world while stimulating local business and employment opportunities? Nordic Climate Facility (NCF) is issuing a new call for proposals from August 2018 with the theme of testing the business viability of climate solutions.

“In keeping with the NCF organisational tagline, Climate as Business, the theme of NCF’s eighth project round is a good fit,” asserts NCF Manager Emeli Möller. “The goal is to find bankable climate solutions with concrete impacts that can be developed into sustainable business models.”

NCF has a two-stage application process, which has recently been streamlined for efficiencies on the part of both the organization and its grantees. “Last year, we kicked off a new online application system with a simplified initial concept note stage, which is less demanding on first round applicants,” Möller explains.

NCF is renowned for giving individual feedback on all submissions, something which Möller believes sets them apart from other funders and characterises NCF’s personalised, hands-on approach. “We want all our applicants to get to know us and understand better what elements for us constitute a viable climate-financing project.”

Based on initial responses from NCF stakeholders this practice of giving direct feedback was cited as a strong positive. “This is good news as it also raises the probability of unsuccessful applicants returning in subsequent calls with more highly developed project proposals.”

NCF is moving towards contract negotiations with 13 shortlisted applicants from its seventh call for proposals, which took place in September 2017. Projects are characterised by climate adaptation solutions for farmers and other communities affected by climate change, notably smart, mobile affordable weather forecasting technology and fast-response flood protection. There are also mitigation strategies for remote households, such as pay-as-you-go solar solutions for off-grid areas, and sustainable and low-cost building materials.

“Of these lead applicants, 77% are for-profit companies, indicating a strong private-sector element in this call,” points out NCF Manager Emeli Möller. “This is backed by a more proactive marketing strategy across the Nordic countries over the last year, designed to jump-start private sector participation.”

Predominant sectors featured in the NCF 7 shortlist include agriculture, energy, construction, and information and communication technologies.

There is an even distribution of climate change adaptation and mitigation among the shortlisted projects, with five mitigation solutions, aimed at reducing greenhouse gases; three adaptation solutions, designed to adapt to the negative impacts of climate change; and five that include elements of both.

The 13 projects shortlisted for NCF’s seventh round focus particularly on the following six Sustainable Development Goals:

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Women’s business projects spotlighted below received funding from the Resilience Challenge fund established under the NCF project and operated by Nordic partner Arbonaut Ltd., and local partners Oxfam in Nepal and Clean Energy Nepal.

When 26-year-old Renuka Maharjan, took over the Maharjan nursery in urban Nepal, she’d never heard of climate change, she just knew that the land was drying up, springs were shrinking, and people were being forced to give up farming.

Self-described as a typical housewife, without skills or exposure to work life, Maharjan stepped up to run the family nursery when her parents in law retired. “I knew nothing about business,” Maharjan confesses. At first, selling certain types of seasonal flowers was difficult and often the expenses outweighed the returns. The family of seven suffered.

Maharjan wanted to establish more planting beds to expand into climate resilient hybrid saplings, but her challenge was land availability and affordability in the city. She solved the problem by adapting the roof of her one-storey house for growing space.

This was a first in her city and helped position the nursery as a credible green business, recognised by the municipality and the Nepal Chamber of Commerce and Industry.

Maharjan was motivated by this to apply for a grant from the Resilience Challenge fund established under the NCF project. After being accepted she was able to expand her business further by leasing more land.

“Hard work often pays off!” She currently develops and sells some 160 species of plant and tree saplings in bulk quantities, and, under her management, the Maharjan

Photo: Mr. Ram Niwas Yadav (BEE)

NCF seed money sows success in Nepalese nursery

Renuka Majarjan’s nursery has grown from a small shop to become one of the region’s most advanced climate-adaptive industries

Nursery has gone from a little-known plant shop to an advanced cottage industry, not only supplying saplings across the region but also educating the urban community on plant types, gardening and roof-top farming.

The city where Maharjan works is one of the hottest in Nepal, with summer temperatures rising as high as 45°C. Through her business of selling plants and trees to urban households, Maharjan now knows a lot more about climate change and how it can be mitigated by green plants through carbon sequestration.

Panchasheel Handicraft is a women-led business in Nepal empowering climate vulnerable women through eco-entrepreneurship. The Nepalese name Panchasheel literally translates as five quality. “We were five housewives, skeptical about ourselves, lacking identity and confined to the four walls of our house,” Proprietor Niru Chaudhary recalls.

The women originally migrated from a remote village, vulnerable to flooding and drought. As migrants from a marginalized ethnic group, they had few options to engage or earn a livelihood. But the idea to turn their knowledge of traditional handicrafts into a business changed everything.

Their product line-up, including dustbins, mattresses, laptop bags, tea trays, pen holders, and ornamental boxes, is sourced from resilient plant species found on local river banks and wetlands, helping minimise plastic use.

The business began in the backroom of Chaudhary’s house. After receiving a grant from the Resilience Challenge fund established under the NCF project, the five were able to ramp up their operation with the bulk purchasing of raw materials and manufacturing utensils, including a stove.

The ability to produce larger quantities expanded their margins through economies of scale, which culminated in a record profit margin at last year’s Business Expo Fair.

Photo: Mr. Damodar Dhital (CEN)

Women eco-entrepreneurs to the power of five

Panchasheel’s resounding success shows how women in climate vulnerable communities can create new business models for economic resilience.

“Without the support of the NCF grant we would never have imagined producing so much with such good returns,” Chaudhary enthuses. “Now we have more to invest to grow even more.”

Several hundreds have already received technical training from Panchasheel. Their success has raised the women’s social standing, bringing them new recognition within the business sector, and helping create a more inclusive community.

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Photo: Rare

Partnering to empower Mozambique fishing communities

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y empowering coastal communities to control and protect their own natural resources, the Fisheries and Climate Change project in Mozambique is revitalising the country’s coastal waters and the communities that depend on them.

Two thirds of the Mozambique population live along the 2,400 kilometre coastline, where climate change, population growth and a rise in the number of fishers have brought a decline in fish stocks. This highlights the need for a fisheries management programme that is scalable and replicable along the country’s coast.

Initially funded by NDF and the World Bank, the Fisheries and Climate Change project in Mozambique was launched in 2015 by Rare as part of a larger Fish Forever initiative operating in four countries. In Mozambique, Rare began with a full assessment of the local waters, including identifying important habitat areas like coral reefs and mangroves. Existing community fishing councils were strengthened and local champions educated to help inspire fishers and fishing households towards conserving and sustaining their own resources. Measures include the establishment of fully protected areas and adopting lower impact fishing techniques.

Central to the programme’s potential is the decision early on by the Mozambique government to decentralise power over coastal waters.

“The project really turned a corner with the devolution of power from Maputo to Provincial government,” says Steve Box, Senior Vice President of Fish Forever at Rare.

“Successful management approaches need to reflect the problem, which in the case of small-scale fishing means taking management all the way down to beach.”

The approach includes supporting community fishing councils to obtain exclusive access rights in return for stewardship, as well as strengthening the networks of local leadership and guiding them towards shared priorities.

Building their capacity to use fish catch and financial data for more informed decision-making is one such priority. With the introduction of a mobile application, OurFish, buyers can now digitally log catch data and fishers can view income data in real time.

“It’s simple but easily scalable,” Box explains, “and by connecting the daily catch to individual fishers we show them a clear path to financial inclusiveness.” According to Box, the magnitude of daily fish flows and their monetary values is often surprising. “If we can help local people to capture and retain some of this wealth locally then the program will be a success.”

The good news is that there are still fish in the water on the Mozambique coastline. “This is a project of both hope and opportunity,” Box asserts, “because it’s not too late for the people of Mozambique to turn things around.”

The Nordic Development Fund is a joint Nordic development financing institution that supports climate-related projects in Africa, Asia and Latin America.

Texts: Laurel Colless / Layout and graphic design: Rebekka Gröhn