A report on InFiNe Knowledge Sharing Event with ICFA

A report on InFiNe Knowledge Sharing Event with ICFA

Empowering and assisting the climate finance leaders of tomorrow

Climate finance is a critical element in global efforts to curb carbon emissions, but it often struggles to demonstrate tangible results. The International Climate Finance Accelerator (ICFA), an InFiNe member, was founded with the support of the Luxembourg government in 2018 to act as a catalyst for innovation and the scaling up of sustainability projects to ease the deployment and improve the effectiveness of climate finance.

InFiNe’s Knowledge Sharing Event on February 7 – Emerging Impact Fund Managers – Challenges for New Impact Fund Managers to Launch their First Fund – was hosted by ICFA CEO Stephan Peters and Laurence Hulin, ICFA’s programme director. The in-person and online event, staged at the House of Microfinance, is part of a series organised by InFiNe to share knowledge among its members. 

ICFA aims to advance climate finance by empowering the sector’s future leaders and assisting them in tackling the financial and administrative barriers faced by managers of small investment funds focusing on climate change and other environmental issues. Its approach is to promote a partnership between public and private sector organisations involved in the design, set-up and operation of funds on a cost-sharing basis; it does not invest directly in the funds.

Mr Peters explained that the funds with which ICFA seeks to partner must be directed toward projects that will have a major impact on climate change mitigation and adaptation, with a particular focus on emerging markets where barriers to raising finance remain high. He said: “It cannot just be a question of talking about climate change impact in Europe, but making a difference on the ground – such as funding decentralised solar energy projects in Africa.”

ICFA’s selection process targets fund managers and investment advisers launching their first or second fund and looking to scale innovative and high-impact climate solutions, with community word-of-mouth among the important channels in attracting candidates to apply.

According to Ms Hulin, participants can access ICFA’s e-learning platform for training in areas such as legal processes, impact information, marketing and distribution before making a formal application. From a typical 60 applicants a year, ICFA works with an independent review team to draw up with a shortlist of 10 funds. An independent selection committee examines the funds’ investments, concept, management team and fundraising progress before the ICFA board signs off on the applicants – usually four – selected as the cohort for acceleration. Additional factors taken into account in this final selection include the balance of funds in terms of sectors, geography and the relative maturity of the projects, the contribution to Luxembourg’s climate finance ecosystem, and a fund’s eligibility for follow-up investment from national and international funding sources.

The financing offered by ICFA’s fund accelerator programme comprises an €80,000 loan provided by private partners with preferential rates for pre-launch set-up costs, and a working capital loan of €200,000 from a Luxembourg bank, guaranteed by the government, to provide working capital for fundraising, marketing, pipeline building and other operating expenses.

Over the formal support period of four years, funds receive technical support in areas including legal, tax and marketing issues, supplemented by training workshops, coaching, fundraising support, and knowledge-sharing expertise. Ms Hulin stressed the importance of community, with participants gaining access to peer fund managers from previous years’ cohorts, now part of a growing impact finance ecosystem. “It’s important that fund managers realise they are not alone,” she said.

Mr Peters also pointed out the “visibility factor” on offer, pointing to ICFA’s presence alongside InFiNe at the Luxembourg booth during last autumn’s GIIN Impact Forum in Copenhagen. Even after the fund’s launch and four-year accelerator period, managers can count on continued interaction with the ICFA team.

The organisation is also building local teams in emerging markets: “We don’t want a kind of colonial parachuting in of people,” he said. “Funds themselves have to consider diversity and inclusion in how they build teams. When they start fundraising, people are going to judge them on that.”

Mr Peters said it is too early to see anything like definitive results so far in terms of the impact of investments, noting that some funds from the second cohort in 2019 are still raising capital. However, ICFA says the disbursement of accelerator funding has reached €8.1m, while the fund managers selected now have a total of $1.05bn in assets under management. The ICFA CEO highlighted the flexibility enjoyed by the managers selected, who have no constraints on funding relating to fund structure or the location of their operations. But he said that Luxembourg is a popular choice anyway because of its dynamic ecosystem bringing together financial institutions and impact investors.