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CPI GLOBAL INTERVIEW: “The Lab has helped develop and endorse 68 instruments and catalysed close to $4.5 billion in climate finance”

October 04, 2024

Exclusive interview with Jonathan First, Senior Advisor at Climate Policy Initiative (CPI) and a member of the advisory board of Africa’s Green Economy Summit.

You have an extensive background in climate change policy and finance. Can we talk about your career thus far?
Well, first of all, thank you very much for giving me this opportunity. I’ve been involved in what I call climate finance impact investing for almost 10 years now. But my career, I believe, is quite well suited to that experience based on the fact that I spent almost 20 years in investment banking, and then I spent 9 years at the Development Bank of Southern Africa. I was very fortunate to be put in a unit called the Product Innovation Unit, which at the time initiated the whole change in the DBSA to be far more climate-minded.

During that time I worked on a number of financial structures and financial approaches that were relevant to climate finance and impact investing. I then retired from the DBSA about 3.5 years ago, and since then I basically wear what I call two and a half hats.

The one is that I am a senior advisor and Africa representative for Climate Policy Initiative (CPI), where we’ve just opened an office in Cape Town, in fact, in May this year. So that’s the one hat. The other is that I do some work for MIGA for the World Bank with a particular focus on Southern Africa. And then, as I call it, my half hat is that I chair the advisory committee for the Green Outcomes Fund. So, it’s a combination of investment banking and development finance, but with a specific emphasis on climate finance and impact investing over the past almost 10 years.

What are CPI Global and The Lab? What is unique about the way you do climate finance and who are your partners?
I need to differentiate between CPI and The Lab or the Global Innovation Lab for Climate Finance, which was established by CPI and, in fact, it’s the 10th anniversary of The Lab, as we call it. CPI is in fact the secretariat for The Lab.

CPI as an entity does much more than just The Lab, although it’s probably best known for The Lab. It very much drives policy and funding for businesses, governments and financial institutions, with a focus on economic growth and climate or preventing climate change. So, that’s CPI. We now have around 160 people in seven offices around the world; the ones that are sort of in the emerging markets include Indonesia, India, Brazil and South Africa. As I said, we do a lot more than just The Lab.

As far as The Lab work is concerned, as I said, we set it up. The Lab is very relevant in that over the past 10 years, excluding the current cycle of 10 instruments, we have helped develop and endorse 68 instruments, and those instruments have catalysed close to $4.5 billion in climate finance. So, that is the overall success of The Lab; about 60% or just under 60% of those instruments are implemented. You’re never going to get 100% implementation, but I think that’s what the success of The Lab is. That’s why I think it continues to be relevant as it catalyses climate finance into what we call the developing markets.

Tell us more about these instruments, and who are your partners?
It’s a very interesting concept. We work on what we call annual cycles, and we have a call for ideas that goes out in November every year.

We get approximately 200–240 applications, and from that, we whittle down to anywhere between 6 and 10 instruments—this year we have 10 instruments—which we then approve for support.

Then what happens from about February, we have the advisory board meeting. Very interestingly, we’re having the Africa Advisory Committee meeting at Africa’s Green Economy Summit (AGES) this year, which for the first time will be held in person at AGES. Basically what will happen is the advisory board, which is made up of independent financial institutions, will vote on the instrument or instruments to support for the next year.

Then, from the beginning of March till Climate Week, which is in September, CPI will allocate resources to help the proponents of these instruments and take them from what we call concept stage, because they’ve arrived in a concept stage through the development phase, and are then ready for implementation as far as the partners are concerned.

If you go onto the website, you’ll see that we probably have close to 80 institutions that are members of the advisory boards of The Lab. And then we have country advisory boards like for Africa, Brazil and India, and then we have the Global Lab advisory committee. So these are the partners.

So on one hand, you’ve got the proponents of the instruments, on the other hand, you’ve got members of the advisory board, and we work very much in a democratic process to effectively choose the instruments for development. And then of course, you have CPI, which is, sort of, the glue between the two. And of course, the most important partners and the people that fund The Lab tend to be foundations, philanthropies and governments.

Why is climate finance considered central to the achievement of a low-carbon, climate resilient future?
It’s very interesting that we’ve seen the development or the increase in climate finance. Unfortunately, it’s not spread evenly. For example, Africa unfortunately sees a lot less climate finance than perhaps some of the other continents, but it’s become far more relevant and far larger in amount because of the stakeholders involved.

What’s happened is if you start at the very bottom, those are people who invest in pensions or have their assets managed through asset managers, they are now insisting that their money does good. So, let’s say, the contributors to the pension funds and the asset management funds are now putting pressure on the fund managers and the pension funds to invest in impact-related investments, which includes obviously climate. So that’s on one hand.

Then the other pressure is coming from the shareholders. A lot of the shareholders are in turn putting pressure on the asset managers, the pension funds to invest in what we call good. And then there are people within the organization themselves who have become far more conscious of the need to provide funding to prevent climate change or to manage climate change.

So I think it’s very much those components that influence the increase in the amount of climate finance that we’re seeing. It’s clearly not enough. But if you look at the growth over the last few years, it has been enormous. As I said, unfortunately a lot of that climate finance has not made its way into the emerging markets and in particular Africa.

Which sectors in the green economy are most suited to these kinds of financial structures?
So climate finance is divided into two, what we call mitigation and adaptation. Think of energy as mitigation and things like water and waste as more adaptation. So I don’t think there’s a limitation on sectors, it goes across transport, water, energy, energy efficiency and waste. So, it’s not the sectors per se, but it comes down to what we call the ability to generate cash flows and to offer a return on the investment.

So clearly in mitigation, which is energy, you’ll have far more dependable cash flows. So if you take, for example, the REEEP programme in South Africa is now almost entirely funded by the private sector. There’s very little concessional funding in there because the, let’s call it the cash flows, are well established. When it comes to other sectors, like transport, water and waste, the cash flows are not the same. That’s where concessional finance plays a much greater role. So it’s not necessarily sector-specific. I think you’ve got to look more at the sector itself and the dynamics, particularly the financial dynamics around each of those sectors.

What in your view are success stories of climate finance up until now?
Well, obviously I can point to The Lab, it has had an enormous catalysation effect. In fact, they worked out that the funding for a Lab instrument has been geared 250 times on average. So, the money that was put in to develop and implement an instrument has returned 250 times to that. So that’s been one of the big success stories, but I think there have been other success stories. Another one that is always pointed out and one that I’m fairly familiar with are the climate investor funds, which have been very successful. You know, they’ve invested in the billions of dollars across the emerging markets. So, there have been a number of very successful programmes but, as I said, those are the sort of two that I would point to, but I’m sure there are several others.

CPI Global is a partner of the upcoming Africa’s Green Economy Summit. How important is such an event for the continent?
I am obviously subjective about this given my involvement in AGES, but I go to a lot of conferences and I find that a lot of them don’t remain relevant. When I say relevant is they don’t give a lot of thought to the topics, to the speakers and to what they’re trying to achieve. It’s sort of the same as last year or maybe a slight variation. So, there’s a sort of, what I call, fatigue or a sort of boredom factor. But I think AGES is far more effective, and certainly having been involved in the advisory board and with the people who organise it, there’s an enormous amount of thought that goes into the conference, particularly around topics.

I think each time AGES tries to reinvent itself and remain relevant to what’s important on the continent. I think that’s number one.

They also have a very wide and diverse membership of the advisory board. And I think that’s important as well, because they get a lot of insights into what should be discussed, what the sectors are, what the topics are and the nature of what’s discussed. And their contacts are also very important, because, once again, it’s not only content, but it’s the kind of speakers that tend to speak at these conferences, particularly AGES.

The other thing I’ve found is that nothing is cast in stone. So, when we’ve been going through this development phase, which has now taken several months, we’re continuously revising the conference structure, the way it’s run and why it is run. So, I think that’s also a dynamic that’s very, very important. So yes, I mean, I think they’re keeping it small, it’s still several hundred people, but it’s quite small in relation to some of the other conferences. I suppose I could be slightly controversial, but you know, Africa Oil Week is coming up and yes, they do have a so-called renewable energy part of it, but it’s a very small part, so it tends to get lost. So, I just think that the people who run AGES, the thought that goes into it, the people who sit on the advisory board and the quality of the speakers they get. I think each year it remains relevant; it remains popular. It remains an event that people want to go to. For example, the Global Head of CPI, Barbara Buchner, is coming out to be one of the keynote speakers, and I think she wouldn’t have done that had it not been an important event for her, because, if I look at her calendar, she’s speaking in events probably every second week around the world.

So that to me is all very much testament to the fact that she regards AGES and we regard AGES as a very important conference.

How do you think AGES can have an actual impact, and why do you think AGES is the best platform?
The impact comes from the topics, the speakers, but also comes from the fact that it’s a very engaging conference. So, besides the panel discussions, they have fireside chats, they have breakaway groups, but they also have businesses and projects being presented for funding. So it becomes far more interactive, both during the sort of formal parts of it but also the informal parts of it.

And what I’ve been very impressed with is, let’s say the seniority, the calibre of the people that have attended AGES, you tend to get people who are far more engaged. I also think you get a very wide spread of participants. The thesis is to try and bring together projects, businesses, thought leaders together with investors, and I think they do that quite successfully by having a good blend, should I say, of both sides. Whereas sometimes you get too much of the one or too much of the other, whereas I think there’s a good balance between the two.

Is there anything you’d like to add?
Yes, I think what’s also very important is that we have chosen AGES to have our first in-person Africa Advisory Board meeting. So, The Africa Lab, if I can call it that, has been running for 3 years now, and it’s now going into the fourth cycle. These have always been virtual meetings. So, for the first time, and thanks to AGES and its organisers, we’re actually having our Africa advisory meeting at AGES.

So I think that process is a milestone. And once again, we’ve chosen AGES to have that event. I mean, we wouldn’t actually have to have it there, but we very much chose the event for doing so. And I think also that the members of the advisory board have also seen it as a positive to combine the conference with the advisory board meeting.

About the author

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