15 January 2018
Climate-KIC project OASIS one of four new financial instruments endorsed by The Global Innovation Lab for Climate Finance
Climate-KIC’s OASIS project has been endorsed by The Global Innovation Lab For Climate Finance (The Lab) as one of four new financial instruments to catalyze billions for climate mitigation and adaptation in developing countries.
The Lab announced their endorsement for four new investment vehicles that are ready to pilot in developing countries. This announcement is in partnership with The Lab members, including the Danish, Dutch, German, United Kingdom and United States governments, Bank of America Merrill Lynch, Willis Group, development finance institutions, foundations, and other public and private investors.
OASIS responded to an open call which The Lab launched to identify and develop financial instruments which had a special focus on adaptation. The call which was opened in 2015 attracted almost 100 ideas.
“Climate change threatens development gains made in water, agriculture, energy, and infrastructure around the world,” says Lord Bourne of Aberystwyth, Parliamentary Under Secretary of State, Department of Energy and Climate Change, UK, and Lab Principal. “Previous Lab interventions quickly mobilized resources for low-carbon energy. The new instruments offer the same promise for new sectors, helping communities meet development needs today and in the future.”
Research shows current global investment falls short of the need for new finance to mitigate and adapt to climate change. Private sector investment represents the largest source of global climate finance available, but investors face unique barriers to climate-friendly, low-carbon investment in developing countries, which they perceive as riskier. In fact, 92% of current private investment in climate-friendly projects originates in the same country in which it is spent.
“Global climate change is a critical issue affecting our world and future, and the private sector will play a key role in financing action,” says Elizabeth Littlefield, President and CEO, Overseas Private Investment Corporation, and Lab Principal. “To solve this complex issue as we promote sustainable development will require innovative thinking. The Lab is at the cutting edge, providing the early support for solutions that shift us toward new sectors and opportunities.”
“Initiatives like The Lab are introducing new innovative climate finance solutions to the financial industry,” says Purna Saggurti, chairman of Global Corporate & Investment Banking at Bank of America Merrill Lynch, and Lab Principal. “These solutions are helping to broaden investment opportunities in clean energy and other low carbon initiatives and priorities.”
The Oasis Platform for Catastrophe and Climate Change Risk Assessment and Adaptation aims to provide access to transparent and standardized analytics to improve understanding and management of risks in regions vulnerable to extreme climate-related events.
Context: Total economic losses to property and infrastructure from natural disasters averaged around USD 180 billion annually in the last decade, 70% of which are uninsured. Extreme weather events are expected to become more frequent and more severe with climate change.
Approach: Developed by Oasis Loss Modelling Framework and Imperial College London, the Oasis Platform is a set of tools that aim to offer a more transparent, robust, and comprehensive approach for analyzing and pricing risk from extreme events. The Platform could strengthen climate resilience by helping to narrow the gap between insured and uninsured losses, and extending the use of catastrophe risk modeling beyond the insurance industry for risk-informed decision-making.
Impact: The Platform could directly save re/insurers 25-50% in modeling costs, catalyze USD 1-9 million in new risk model development, and indirectly generate an estimated USD 1.4 to 6 billion investment in property insurance coverage.
Initial Commitments: Climate-KIC, the EU’s main climate innovation initiative, has supported OASIS since 2012 and has pledged to further support and co-develop the core platform as it is seen to be a key enabler for developing the adaptation services market.
The Lab is a public-private initiative that identifies, develops and launches innovative financial instruments that can drive billions in private investment in climate action in developing countries.
The Lab’s members include the UK, German, US, Danish, and Dutch governments, Bank of America, Merrill Lynch, Willis Group, development finance institutions, foundations, and other public and private investors.
The Lab was endorsed by G7 in 2015 and helped catalyse more than USD 500 million in seed funding for climate adaptation and mitigation in developing countries.
Other financial instruments selected
The three other financial instruments that The Lab selected are:
The Climate-Smart Lending Platform which aims to mainstream climate-smart agriculture metrics into the potentially USD 200 billion smallholder lending market
The Energy Efficiency Enabling Initiative which mobilise equity finance and deploy technical assistance for energy efficiency in developing countries like Mexico and Colombia
The Water Financing Facility which will mobilise large-scale domestic private finance and strengthen water utilities in countries subject to climate-related water stress. The Water Financing Facility has already secured a USD 3 million commitment from the Dutch government to begin in Kenya.