CRAFT – Catalytic Capital for First Private Investment Fund for Adaptation Technologies in Developing Countries (GCF-FP181)

Countries
  • Bahamas
  • Brazil
  • Mexico
  • Rwanda
  • South Africa
  • Trinidad and Tobago
Where the impacts of the investment may be experienced.
Financial Institutions
  • Green Climate Fund (GCF)
International, regional and national development finance institutions. Many of these banks have a public interest mission, such as poverty reduction.
Project Status
Proposed
Bank Risk Rating
B
Risk rating varies among banks and may refer only to the particular investment and not to the risk for the project as a whole. Projects marked 'U' have an 'Unknown' risk rating at the time of disclosure.
Voting Date
Oct 4, 2021
The estimate day the bank will vote on a proposed investment. The decision dates may change, so review updated project documents or contact the EWS team.
Borrower
Pegasus Capital Advisors LP (Pegasus)
The holder of the loan, grant, or other investment.
Sectors
  • Climate and Environment
  • Education and Health
  • Infrastructure
  • Water and Sanitation
The service or industry focus of the investment. A project can have several sectors.
Investment Type(s)
Equity
The categories of the bank investment: loan, grant, etc.
Investment Amount (USD)
$ 100.00 million
Value listed on project documents at time of disclosure. If necessary, converted to USD$. Please review updated project documents for more information.
Project Cost (USD)
$ 400.00 million
Value listed on project documents at time of disclosure. If necessary, converted to USD$. Please see updated project documentation for more information.
Bank Documents
Primary Source

Original disclosure @ GCF website

Updated in EWS Oct 11, 2021

Disclosed by Bank Sep 14, 2021


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Project Description

This Funding Proposal recommends that GCF commit up to $100 million of catalytic capital to scale-up ambition in adaptation finance by catalyzing the Climate Resilience and Adaptation Finance and Technology-transfer facility (“CRAFT” or the “Fund”), the first private investment fund for climate resilience and adaptation. CRAFT addresses the “Adaptation Gap” by mobilizing capital to scale up technologies for climate resilience and adaptation and applying them in developing countries using a south-south technology transfer mechanism. CRAFT employs an innovative blended finance structure, including a Junior concessional layer that mitigates downside risk for Senior non-concessional investors.

Having achieved first close in 2019 with a combination of public, private, and philanthropic investors, CRAFT has been securing additional Junior and Senior capital, but its mobilization has been impacted by the effects of COVID19. CRAFT has mobilized over $125 million of public, private, and philanthropic investor commitments into the Fund and $108 million of non-concessional capital into CRAFT’s first investment. GCF’s catalytic capital would help to scale investment into private sector adaptation in developing countries by mobilizing up to $136 of additional Senior nonconcessional capital.


The Fund has identified multiple market segments and technologies, products, and services to manage climate variability and weather volatility, reduce physical disruption and damage from climate extremes, and reduce resource scarcity (particularly water and food). A $100 million commitment of catalytic capital from GCF would allow CRAFT to scale-up ambition in adaptation finance and accelerate development, application, and transfer of critical private sector adaptation and climate resilience technologies in developing countries, particularly in the context of promoting green recovery from COVID-19. GCF’s finance could mobilize capital in two ways: 1) encourage up to $136 million of additional Senior capital at the fund level to scale up CRAFT to its maximum size of $400 million and 2) unlock $800 million or more in co-financing at the portfolio company level. It is expected that GCF’s engagement and expertise would accelerate CRAFT’s impact by aligning its investments and applications with developing countries’ national climate action plans and accelerating the scaling up of adaptation and climate resilience technologies and solutions.

CRAFT is focused on developing countries in which private capital mobilization is broadly more challenging. These challenges are exacerbated by COVID-19, which has increased potential investors’ perceived risk of new investment strategies, particularly those aimed at developing countries. GCF’s catalytic capital commitment mobilizes capital by overcoming that perceived risk, enabling CRAFT to achieve substantially greater mobilization and impact in the postCOVID-19 environment. In addition, COVID-19 has had dramatic human health impacts and increased the fragility of society and the economy, particularly in the most vulnerable developing countries, further increasing the strain on global systems that are already susceptible to the physical risks and impacts of climate change. Additional analysis on COVID19 and its link to climate resilience can be found here.

Investment Description

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