- The Extreme Climate Facility, an effort led by African leaders, is an insurance instrument that helps that continent’s countries most impacted by climate change. It funds adaptation and resilience measures that are designed to safeguard vulnerable populations against the effects of extreme climate events. This also promotes economic growth. The ECF is looking to issue more than $1 billion in catastrophe risk coverage over the next 30 years.
- The U.N.’s Land Degradation Neutrality Fund is an investment fund designed to encourage the rehabilitation of degraded lands worldwide. Such rehab efforts can reduce poverty, diversify income, mitigate climate change and create new employment opportunities. The fund is offering equity and quasi-equity, subordinated debt, guarantees and syndicated loans to generate $50 billion over 25 years.
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The Forest Resilience Impact Bond is a pay-for-performance mechanism, a la a social impact bond, that could help the U.S. Forest Service realign its $2.5 billion fire prevention and suppression budget and reduce the risk of wildfire and drought. The USFS pays for firefighting with prevention dollars, even though fighting fires costs 40 times more than preventing them. The FRIB will offer private investors a choice of debt or equity tranches and will provide annual cash flow payments, as well as a larger single payment at maturity. Returns are to be paid by utility companies and the USFS, which benefit from improved water yields and savings from reduced wildfire severity.
- The Forest Foundation Fund is an endowment-based model for halting deforestation and regrowing forests. Overseen by the Center for Global Development, the endowment would be created by sponsor countries using government bonds or public insurance to cover private bank deposits that are advanced to the FFF. The fund has the potential to generate $3.5 billion.
By funding the “gap,” the foundation is essentially trying to fill the holes left by cash-strapped governments and charitable institutions that are already stretched thin.
“As you know, funding from traditional sources such as governments, multilateral agencies and philanthropy cannot keep pace with the escalating costs of climate change, environmental degradation, health epidemics, climate refugee crises and other roiling issues,” says Zero Gap spokesperson Kavita Tomlinson.
In fact, I do know. Having spent a great deal of time in the developing world and perennially investigating the environmental woes facing industrialized countries, I have seen firsthand the ramifications of empty funding proposals.
To be sure, the Rockefeller Foundation can fill in some of that empty space. An article published by the website GreenBiz notes that “charities and nonprofit groups have [a long history] of tackling social and technological challenges that fall between the cracks of government and industry action. Philanthropies also can be patient with their grants and measure returns over longer time horizons, as well as pursue cross-border action that can be difficult for national governments to take on alone.” The article, published in March and written by Noah Deich, executive director of the Center for Carbon Removal, and Giana Amador, a research analyst at the center, made the case for foundations being the cure for the underfunded development of climate change solutions.
In perhaps the biggest example of this, Bill Gates, through his foundation, and a litany of luminaries, including Amazon’s Jeff Bezos, Virgin’s Richard Branson, Alibaba’s Jack Ma and Saudi Prince Alwaleed bin Talal, have formed the Breakthough Energy Coalition. Their aim is to invest in technologies that will create a new energy mix. “The Breakthrough Energy Coalition is working together with a growing group of visionary countries who are significantly increasing their public research pipeline through the Mission Innovation initiative to make [clean energy] a reality,” the group explains.
It’s a huge deal when more than 20 billionaires join together with countries to invest in a single sector.
There is a great deal to admire about Zero Gap and the Breakthrough coalition, both of whose efforts could be world-changing. But the real big deal should be made for here-and-now adaptation and resiliency. There are too many problems facing the world today, even if we must plan for the edge of tomorrow. And while it’s wonderful to imagine a cleaner, greener future, for many people adept mechanisms may come too late.
Madsbjerg says the Rockefeller Foundation hasn’t taken it’s eye off the ball and is focused on resiliency at the same time that it is investing in innovative financial models that address prevention. She cites the mission of one program focused on catastrophe financing, where the premise is, “if a natural disaster happens, how can we make the money available very early on?” Other programs trigger payments when evidence of extreme climate change occurs.
Zero Gap’s mission is to fund great ideas and enlist others to invest. At base, it’s a venture philanthropy model. This is how it describes itself: “Zero Gap is focused on solutions that can ultimately catalyze large-scale capital from institutional investors, as well as households and retail investors. The innovative financing mechanisms currently under exploration range from new debt instruments
to raise commercial institutional capital for environmental preservation to micro-levies that raise funds for fighting childhood malnutrition.”
Ambitious? You bet. But exigent? Absolutely.
At the time of this writing, the White House released a statement linking climate change to increased health risks. Air pollution, extreme heat, infectious diseases and water-related illnesses are at profound levels. All this, not to mention the direct risks associated with natural disasters. The entirety of human well-being is fracturing.
Mind the gap. Innovative financing may be our lifeline to the future.