Climate Investment Funds: What Are They?

The Climate Investment Funds (CIF) is a multilateral climate fund that enables climate action in over 70 low- and middle-income countries. CIF provides highly concessional finance to empower transformations in clean technology, energy access, climate resilience, nature-based solutions, and other areas. CIF has invested in almost 400 projects in 72 countries. CIF works exclusively through six multilateral development banks, including the African Development Bank, to mobilize investments to pilot and scale cutting-edge climate solutions. CIF is owned by 186 member countries and consistently rated AAA/Aaa. CIF aims to promote development by providing debt and equity to the private sector through a range of benchmark and bespoke products. CIF's business model is flexible and country-led, and it is the only multilateral climate fund to work exclusively with MDBs as implementing entities.

The Clean Technology Fund (CTF)

The CTF aims to provide positive incentives for the demonstration of low-carbon development and the mitigation of greenhouse gas emissions through public and private sector investments. It funds low-carbon programs and projects that are embedded in national plans and strategies, scaling up development and accelerating the diffusion and transfer of clean technologies. The fund targets three types of private sector players: project sponsors, investors in climate-mitigating projects, and financial intermediaries developing new lines of credit for climate change investments.

The CTF uses a blend of financial instruments, including grants, contingent grants, concessional loans, equity, and guarantees, to make investing in low-carbon technologies more attractive to both public and private sector investors in developing countries. The pricing and terms of CTF funds offered to private sector clients are structured on a case-by-case basis to address the specific barriers identified in each project. The CTF also has a 'sunset clause', which stipulates that necessary steps to conclude CTF operations shall be taken once a new UNFCCC financial architecture takes effect. However, the implementation of this clause has been repeatedly suspended, with the most recent suspension being indefinite in 2019.

The CTF has contributed to avoiding greenhouse gas emissions, co-finance from public and private entities, installed capacity of renewable energy, improved access to low-carbon public transport, and increased energy efficiency. It is expected to reduce close to 70 million tons of greenhouse gas emissions per year. The fund is governed by the CTF Trust Fund Committee and the Multilateral Development Bank (MDB) Committee, with equal representation from donor and recipient countries.

The Strategic Climate Fund (SCF)

Climate Investment Funds (CIF) are a form of multilateral climate finance partnership that deploys capital through six multilateral development banks (MDBs) to support climate action. CIF is one of the largest active climate finance mechanisms in the world, with $11.1 billion pledged.

• Scaling up Renewable Energy Program in Low-Income Countries (SREP)
• Forest Investment Program (FIP)
• Pilot Program for Climate Resilience (PPCR)
• Renewable Energy Integration Program (REI)
• Nature, People and Climate Investment Program (NPC)
• Industry Decarbonization Program
• Smart Cities Program

The SCF Trust Fund Committee is the decision-making body responsible for determining and overseeing the operations and activities of the fund. It is made up of an equal number of representatives from contributor and recipient countries, as well as official observers from stakeholder groups. The committee is responsible for approving SCF programs and eligibility criteria, ensuring the fund's strategic orientation aligns with the UN Framework Convention on Climate Change, and establishing sub-committees or technical committees to govern programs within the fund.

Climate-Smart Urbanization

Climate Investment Funds (CIF) are one of the largest active climate finance mechanisms in the world, with $11.1 billion pledged. CIF has invested in almost 400 projects in 70+ low- and middle-income countries. CIF enables climate action by empowering transformations in clean technology, energy access, climate resilience, nature-based solutions, and other areas.

One of CIF's key programs is Climate-Smart Urbanization, which supports cities in developing countries to accelerate the implementation of ambitious and transformative investments and policy actions. These actions significantly contribute to transitioning to low-carbon and climate-resilient urbanization pathways.

The concept of Climate-Smart Urbanization recognizes the close link between urbanization and climate change. It aims to create smarter and safer urban spaces by minimizing the ecological impact of urbanization. This involves a range of measures to enhance resilience, reduce climate risk, and increase the livability and competitiveness of cities.

Strategies for Climate-Smart Urbanization:

• Regulatory and Institutional Frameworks: Establishing legal frameworks and policies that support climate-smart initiatives, such as the Paris Agreement and nationally determined contributions.
• Urban Planning and Management: Improving urban planning laws and regulations, including the development of the urban law module of the toolkit by UN-Habitat, to ensure climate mitigation and adaptation objectives are met.
• Green Infrastructure: Investing in renewable energy, public transport, electric vehicles, and green buildings. This includes projects like electric buses, vertical farming, and natural defenses such as protecting and insuring coral reefs.
• Digital Initiatives: Utilizing digital technology and data for smart city solutions, such as the World Economic Forum's Centre for Urban Transformation, which promotes public-private collaboration.
• Education and Capacity Building: Offering degrees and programs in fields like Smart Cities, providing students with the skills and knowledge to contribute to the development of climate-smart cities.

Benefits of Climate-Smart Urbanization:

By becoming more climate-smart, cities can combat climate change while also enhancing their resilience and livability. Climate-smart cities can reduce greenhouse gas emissions, mitigate the impacts of heat stress, flooding, and health emergencies, and create more sustainable and inclusive urban spaces. Additionally, climate-smart infrastructure represents a $30 trillion investment opportunity, offering economic benefits alongside environmental ones.

CIF's flexible, country-led approach

The Climate Investment Funds (CIF) are a multilateral climate fund that enables climate action in over 70 low- and middle-income countries. CIF's flexible, country-led approach is a core strength of its business model. This approach empowers countries to drive their climate agendas and address their specific needs and challenges. CIF provides concessional finance to support transformations in clean technology, energy access, climate resilience, and nature-based solutions, among other areas.

CIF's country-led approach is evident in its partnership model, where it works exclusively with six multilateral development banks (MDBs) as implementing entities. One of these MDBs is the International Finance Corporation (IFC), which co-invests concessional funding provided by CIF alongside its own funds. This blended finance partnership supports the deployment and testing of climate mitigation and adaptation projects through the private sector, addressing the critical need for climate interventions worldwide.

The flexibility of CIF's approach is demonstrated in its ability to respond to the growing demand for climate change solutions. CIF's two umbrella funds, the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF), offer a full spectrum of financing instruments, including blended concessional finance and advisory/technical services. The pricing and terms of CTF funds, for example, are structured on a case-by-case basis to address the specific barriers identified in each project.

CIF's country-led approach is further strengthened by its governance structure. CIF investments are overseen by a governing board that provides equal authority to donor and recipient countries, ensuring that the needs and perspectives of all stakeholders are considered. Additionally, official observers representing the private sector, civil society, and indigenous peoples provide input, promoting inclusivity and a diverse range of perspectives in decision-making.

CIF's flexible and country-led approach has resulted in investments in almost 400 projects across 72 countries. By empowering countries to lead their climate agendas, CIF has accelerated climate action and supported the development of cutting-edge climate solutions. This approach has also helped lower the risks and costs of climate financing, enabling the testing of new business models and boosting investor confidence to unlock additional sources of finance for climate action.

CIF's partnership model

The Climate Investment Funds (CIF) is a multilateral climate fund that enables climate action in over 70 low- and middle-income countries. CIF is the only multilateral climate fund to work exclusively with multilateral development banks (MDBs) as implementing entities. It deploys highly concessional finance to empower transformations in clean technology, energy access, climate resilience, nature-based solutions, and other areas.

The core strength of CIF's business model is its flexible, country-led programmatic approach and MDB partnership model. CIF comprises two umbrella funds: the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF).

The CTF supports projects and programs within the renewable energy, energy efficiency, and clean transport sectors, as well as other emerging clean technologies, with high GHG abatement opportunities at the country, regional, or sub-regional levels.

The SCF provides financing to pilot innovative approaches and scale-up activities aimed at specific climate change challenges or sectoral responses. It serves as an overarching framework that provides financing through several programs, including the Scaling Up Renewable Energy Program, the Forestry Investment Program, the Pilot Program for Climate Resilience, the Renewable Energy Integration Program, the Nature, People and Climate Program, the Industry Decarbonization Program, and the Smart Cities Program.

The International Finance Corporation (IFC) is one of six MDBs that can access CIF funds to implement projects. Through its blended finance practice, IFC co-invests concessional funding provided by CIF alongside its own funds. The CIF-IFC blended finance partnership focuses on responding to the growing demand for climate change solutions and supporting the deployment and testing of climate mitigation and adaptation projects through the private sector.

The African Development Bank, another implementing entity of CIF, has supported the development of 39 investment plans across 27 African countries to unlock climate action. By the end of December 2022, the bank had approved 34 projects, deploying $946 million in CIF resources and $1.99 billion of its own co-financing.

Frequently asked questions