Financing Technology Deployment for
Climate and Sustainable Development Solutions
“You are empowered to make a major difference in the future of our planet. Your
investments can encourage sustainable economic growth, strengthen global stability,
and improve world health and food supply...technologies have already been developed
which can create opportunities for growth and tackle climate change, however many
companies and projects lack the access to capital needed to implement their strategies.
Developing public-private partnerships that identify market-based approaches to
accelerate the deployment of clean technologies is central to the work of my
Foundation...and the Clinton Global Initiative.”
-- Former President Bill Clinton, as cited in the Little Rock Accord
Key Messages
i.
ii.
iii.
iv.
Today there are many proven technologies that can be deployed at scale profitably
to significantly reduce GHG emissions and advance sustainable development goals.
Examples include a battery - power control technology for diesel and gas generators,
which can cut fuel consumption, and hence emissions by 70%; the reduction in fuel
costs quickly offsets the investment.
Yet, rapid deployment of proven technologies is not happening. Small, innovative
companies often lack the working capital to produce and market these products at
scale, and the contacts to find good local partners to help further deployment and
distribution. They also do not know how to access the many governmental and
NGO related programs that could assist them in accelerating deployment.
Low carbon and clean technologies, even those with a high rate of return, face major
challenges in accessing finance, in part to challenges in bundling projects to
sufficient scale or “deal flow” to attract major investors.
Private finance must, and can, be scaled up rapidly. The world is awash in liquidity
yet mobilizing private investment has been slow. To limit an increase in global
mean air temperature to 2 C° will require hundreds of billions of dollars annually
from public and private sources. The enormous wealth and long-term horizons of
v.
vi.
vii.
I.
pension and sovereign wealth funds make them a prime source of potential
investment in commercially viable enterprises in emerging markets.
The P80 Group Foundation is working with numerous major pension and sovereign
wealth funds, and the Club de Madrid, a group of over 90 former heads of state, to
create a better financial plumbing system to finance accelerated deployment of lowcarbon and clean technologies around the world.
Several encouraging initiatives are beginning to address the challenge of scaling up
investment for accelerated technology deployment. For example, the International
Finance Corporation’s (IFC) Catalyst Fund is already operational and the Asian
Development Bank will soon launch CP3-Asia. These initiatives are designed to
operate as a “fund of funds,” taking larger investments from pension and sovereign
wealth funds and making smaller investments in professionally managed private
equity funds which, in turn, will make still smaller investments in commercially
viable, private projects and product sales enterprises. Also specialized funds are
being set up like a new P80 backed fund in Singapore, which can provide funding for
regional technology deployment.
Low-carbon and clean technology deployment projects can generate high returns
for investors and serve as a new, powerful growth engine for both developed and
developing countries.
Introduction
The P80 Group Foundation[i] and the Club de Madrid[ii] convened a joint meeting in 2012
in Little Rock, Arkansas, with the goal of accelerating deployment of proven low carbon and
problem solving technologies in areas such as energy, water, clean air, food and medical
services. They highlighted measures that would encourage pension and sovereign wealth
funds, along with other institutional investors, to finance commercially viable businesses
and projects, especially for deployment in emerging markets.
There are many proven technologies, which are needed to advance sustainable
development goals that are not being deployed at scale as rapidly as possible. Examples
include a battery-power control technology for diesel and gas generators that can reduce
fuel consumption, and hence emissions of diesel generators by 70%. The reduction in fuel
costs can offset the investment in a matter of weeks or months. New wastewater treatment
technologies can reduce operational power use by 30% or more. Other proven
technologies can reduce electricity use in buildings by more than 40%; reduce by 92% the
amount of electricity used by street lights; double the energy produced by some wind
farms without increasing the spatial footprint; produce electricity from very low
quality methane gas; and can produce electricity from cruise ship and agricultural waste
streams. More details of these technologies are provided below.
One can only imagine how much the world would benefit if every generator consumed 70%
less fuel and thereby generated 70% fewer emissions. Accelerating the deployment of such
technologies would result in immediate emission reductions, which would not only benefit
the climate but potentially make more funds available for other sectors such as education
and healthcare.
The Little Rock Accord, a key outcome of the P80 Group Foundation and Club de Madrid
meeting,[iii] created a formal CdM-P80 Group Action Plan Agreement to encourage the
managers of over $40 trillion of pension and sovereign wealth fund assets to invest a
small percentage in low-carbon and other problem solving technology business enterprises.
The Agreement unites two powerful groups – the over 90 former Presidents and Prime
Ministers of the Club de Madrid and the P80 Group Foundation - to work with institutional
investors, multilateral lending institutions, foundations, non-governmental organizations
(NGOs), government leaders, and corporate and other private sector participants in this
much needed effort.
The successful implementation of the Little Rock Accord has the potential to result in the
largest investment commitment ever made to profitably benefit the global environment and
sustainable economic and social development outcomes. The Little Rock meeting built on a
2007 initiative by HRH Prince Charles to encourage pension and sovereign wealth funds to
finance commercially viable projects and enterprises in emerging markets that would
accelerate the deployment of proven technologies. Pension and sovereign wealth funds are
considered a prime source of potential investment because of the enormity of the funds
under management as well as their long-term horizons. Additional pension and sovereign
wealth fund investment could potentially make large-scale impacts in deploying low-carbon
and clean technologies.
II.
Overcoming Barriers to Accelerated Technology Deployment
Meeting growing demands for basic necessities and a higher standard of living throughout
the world is a moral imperative, but doing so is simply not feasible given current carbonand resource-intensive consumption patterns.[iv] New technologies, business models and
financing mechanisms will be required to meet these challenges.
Financing is key as technological solutions for many of today’s energy and sustainable
development challenges already exist and more are coming on line every day. With
financing and innovative business models, these technologies could be deployed and
diffused much more rapidly.
In view of the fiscal constraints in most OECD countries, public funds to finance these high
priority low carbon and clean technology projects and programs are either stagnant or
dwindling. Therefore, private finance, especially from pension and sovereign wealth funds
as well as other institutional investors, needs to be mobilized and deployed in collaboration
with innovative public private partnerships. Low-carbon, sustainable development
enterprises and projects can generate high returns for the investors and serve as a new,
powerful growth engine for both developed and developing countries. In some cases, the
benefits to serving these emerging market customers are referred to as the “Fortune at the
Bottom of the Pyramid.”[v]
We are now seeing a distinct opportunity (i) to deploy readily available and new sustainable
technologies; (ii) to develop and finance new businesses and business models for scaling up
diffusion and deployment; and (iii) to generate high rates of return, while providing vital
goods and services in large, rapidly growing markets. Unfortunately, three distinct barriers,
or “broken circuits” are stifling these nascent opportunities, in finance, technology
deployment and bundling projects to a scale that can attract large investors.
a.
Barriers to Increased Finance
The world is currently awash in liquidity -- interest rates for top-rated securities are near
all-time lows. Although much of this liquidity is concentrated in pension and sovereign
wealth funds, there are few conduits for financing the deployment of low carbon and clean
technology projects and enterprises.
Impact investors and various multilateral development bank initiatives are making some
laudable progress in breaking this financial logjam, but they have not overcome the
challenge of bundling projects to a scale that will interest major investors.
Repairing this specific broken circuit is primarily a financial engineering task – developing
new conduits for moving money from one place to another, deploying the large investments
that pension and sovereign wealth funds need to make into smaller investments that can be
absorbed by local project and businesses, and finding local agents and organizations who
have sufficient knowledge of the national and local political, legal and commercial
conditions and who can also handle due diligence, oversee the management of funds, and
supervise the local investments.
Several encouraging initiatives are already beginning to address these issues. For example,
the International Finance Corporation’s (IFC) Catalyst Fund is already operational and the
Asian Development Bank will soon launch CP3-Asia. Both of these funds are designed to
operate as a fund of funds, taking larger investments from pension and sovereign wealth
funds and making smaller investments in professionally managed private equity funds
which, in turn, will make still smaller investments in commercially viable, private projects
and enterprises. The US-based Small Enterprise Assistance Fund (SEAF) and the IDB, via its
Innovar Program, have been helping to establish local private equity funds and encouraging
pension funds to invest in and alongside SEAF or the IDB in those funds. These local funds,
in turn, have made a number of successful investments in local projects and businesses,
including a number of run-of-the-river hydroelectric projects in Peru. Certain private sector
funds are beginning to examine how they can structure funds to serve as effective conduits
to help move investable assets to where they can be utilized to finance technology
deployment.
But financial structuring while necessary is not sufficient. Sustainable, scalable progress
requires repairing the other broken circuits in parallel.
b.
Barriers to Accelerated Technology Deployment
There is no organized global mechanism to move technology from the place of invention
and initial deployment to other places around the world where it is needed. Small
businesses with potentially game changing renewable energy or clean water technologies,
for example, often lack the financial, managerial, and organizational capacity to start
marketing their solutions. Hence, many potentially lucrative business opportunities and
potentially viable investment opportunities are missed.
There are at least four basic barriers to accelerated technology deployment:
1. The Technology Company (TC) does not have a comprehensive strategy and
specialized support to enter multiple markets simultaneously;
2. The TC lacks sufficient capital for additional staff and other resources necessary to
participate in e international markets;
3. The TC lacks a qualified and well capitalized local in-country "franchisee" to distribute
and service the TC's products and/or to act as a local project developer;
4. The TCs and local "franchisees" do not know how to access or do not have the time and
resources to access government, NGO and public/private assistance that is available.
The solution to this broken circuit lies outside the realm of financial engineering and
outside the direct province of most pension funds and institutional investors. It requires
innovative business models and technology deployment mechanisms which, in turn, can
attract financing directly and indirectly from pension and sovereign wealth funds and other
institutional investors including insurance companies via the newly engineered financial
conduits.
The Club de Madrid - P80 Little Rock Accord Implementation Task Force is working with
the Global Technology Deployment Initiative to reduce or eliminate all of these barriers.
c.
Barriers to Scaling-Up
Many foundations and development agencies support successful pilots in one village or
region. To have a truly transformative impact on climate and sustainable development,
each successful pilot has to be deployed in scores or hundreds of towns, cities, and
regions. Scaling up can be a daunting task. Cloning a successful, financially sustainable
enterprise requires innovative organizational models, such as franchising[vi] coupled with
innovative financing mechanisms. It also requires mechanisms that "pass the baton" from
grant financing from foundations to commercial financing.[vii] These innovative
organizational and financing mechanisms should be complemented by deliberate efforts to
cultivate dynamic local innovation ecosystems so that new enterprises can more easily
thrive and prosper.[viii] Indeed, each initiative will be more effective if coupled with the
other.
The sheer magnitude of the financing and administrative effort involved in such a complex
scaling-up endeavor can easily challenge the capacity of the foundation or consortium of
foundations and aid agencies that sponsored the initial pilot. But surmounting these
organizational and scaling challenges will help pilot projects become candidates for larger
amounts of pension and sovereign wealth fund financing.
III.
Low-Carbon Technologies Ready for Accelerated Deployment
1. A battery power control technology which can cut fuel consumption of diesel and gas
generators by 70% thus reducing emissions by 70%.
This technology has a battery system which powers the item needing the power (such as a
village or cell tower). The fossil fuel powered generator is turned on and off as needed by
the “smart control system” which senses when the battery system needs to be recharged or
needs more power. The net is that the generator can run 60%-70% less, thus using less fuel
and producing fewer emissions.
2.
Technology that can double the production from wind farms using the same land.
This is a vertical axis wind turbine much like a push lawn mower with its bladed turned on
its side. It is shorter than conventional tower wind generators and thus can be placed
underneath them on the same land mass. The actual turbine in at ground level, so it is easy
to maintain and does not require a crane to service the unit. In many cases the deployment
can double the capacity of an existing wind farm.
3. Two or three technologies that when combined can reduce energy consumption of
building by 60% or more.
These technologies include an IT device which when installed in a company’s computer
system better manage the power consumption of computers including desk top units and
severs. In some buildings powering computers is 40% of the total electricity. This system
can reduce this by 70% or more thus creating a net power savings of 28% for a building.
Another IT technology can better manage the other electricity consumption of buildings
with smart sensors which indicate when power is needed without requiring any building
power or batteries. Such a system can reduce the electricity consumption by 30% to 40% or
so. Still another technology fits in AC duct work and reduces the amount of outside air
needed to refresh the system. Since outside air must be heated or cooled that requires
power. Still another technology reduces the electricity needed to power the AC blower
motor by 70%. By combining these technologies and others dramatic power savings can be
achieved thus lowering the amount of electricity needed and thus lowering the emissions
needed to make that electricity.
4.
Technology that enables even very low quality methane gas to produce electricity.
This technology enables many different sources of biogas to be converted to electricity
thereby destroying the methane from dry fermentation of solid waste, waste water methane
capture, animal waste capture, poor performing land fills, etc. Before this technology gas
had to be of a certain concentration or quality to make electricity and thus was often flared
or just emitted to the atmosphere. Other technology can be combined with this system
where the “waste heat” can be used to produce 15% more electricity from the same waste
gas.
5. The technology that can reduce the capital and operational energy consumption of
water and wastewater utilities by 30%.
These technologies include an IT technology which optimizes the conventional engineering
which designs water and wastewater utility projects. It suggests options which can reduce
pipe size, pump size and other components of utility systems often resulting in cost savings
of capital and operations of 30% or more. This saves electricity needed to run the systems
by a like amount. Still another technology can make all sorts of pumps operate more
efficiently in the 15%+ range which means smaller pumps can be used for irrigation, pools,
water systems, etc. which results in less electricity consumption.
IV.
Next Steps to Spur Action
The Little Rock Accord (LRA) pledged cooperation between the signing groups and other
participants to encourage more financing for the accelerated deployment of low carbon and
problem solving technologies. A LRA Implementation Task Force was created to work with
the P80 Group Foundation to:
1. Develop examples of (i) proven technologies, which if deployed at scale, could help
address growing shortages in resources and (ii) innovative business models for
deployment.
2. Develop a "financial plumbing system" to move financial resources from large pension
and sovereign wealth funds to smaller more specialized funds that actually invest in
technology companies and projects which can deploy technologies at scale. The first of
the financial plumbing system has already been created as discussed above.
3. Organize a facility where technologies can be exhibited and demonstrated by companies,
cities and non-profits. This Center for Global Technology Expo for Deployment
Demonstration (GTED2) will also house the secretariat of the Little Rock Accord
Implementation Task Force. Key parts of the GTED2 Development Team include NGOs
such as Winrock International, the Clinton School and Center, Aspen Institute, National
Geographic, and Heifer International. GTED2 will be located near the Clinton
Presidential Library and will house a "one stop shop" where accelerated technology
deployment will be represented and a website containing a database of relevant
information will also be made available.
Agreements with www.globalcleantech.org and others have been reached and more are
in process to assure the development of more technology company examples.
4. This Center has been named the Global Technology Expo for Deployment
Demonstration or (GTED2). GTED2 is being organized and design plans are being
developed with input from NGOs, companies, participating countries and other
interested parties. It will be a dynamic museum of innovation and a technology
deployment showcase.
It will have a developing world section with replicas of small communities from 20-25
countries showing how technologies have been deployed by NGOs and others to make
lives better in many different ways. This section builds on earlier plans known as the
Heifer Global Village Project, which was to be located near the Clinton Presidential
Library. GTED2 will also have (i) a “Cities” section which will show how many
technologies used by C40 (www.c40cities.org) and (www.ICLEI.org) sustainable cities
are making lives better and (ii) a corporate section where corporations can see and
meet technology companies which can make corporations more efficient and lower
their costs.
Endnotes:
[i] See Annex 1 for a description of the P80 Group Foundation
[ii] The Club de Madrid and its Members are uniquely positioned to support and lend
independent, practical, strategic leadership experience to this initiative. This leadership
experience, their convening power is invaluable. Club de Madrid Members have a long track
record and experience in Climate Change, Energy, Sustainable Development and financing
issues, among these Ricardo Lagos (President of Chile, 2000-2006; and UN Special Envoy
on Climate Change), Gro Harlem Brundtland (Prime Minister of Norway, 19861989/1990‐1996; chair the World Commission on Environment and Development (WCED);
UN Special Envoy on Climate Change; and Member of the UN Secretary General’s High‐level
Panel on Global Sustainability), Mary Robinson (President of Ireland, 1990‐1997, United
Nations High Commissioner for Human Rights, 1997-2002, and now Secretary General Ban
Ki-Moon’s recently name Special Envoy for Climate Change), Han Seung Soo (Prime
Minister of Rep. Korea 2008-2009, President of the 56th session of the General Assembly of
the United Nations, 2001-2002; UN Special Envoy on Climate Change; former Chair of the
Global Green Growth Institute), Luisa Diogo (Prime Minister of Mozambique, 2004-2010;
and Member of the UN Secretary General’s High‐level Panel on Global Sustainability),
etc. For a description of the Club de Madrid please see: http://www.clubmadrid.org/
[iii] Participants included representatives from: Multilateral Development Banks: World
Bank, IFC, Inter-American Development Bank, Asian Development Bank, African
Development Bank; US Government agencies that facilitate cross border financial
flows: OPIC, Ex-Im; Foundations and NGOs that support renewable energy and sustainable
development projects, especially those targeting base of the pyramid populations in
emerging markets: Heifer International, Winrock, National Geographic, Peace Work, Green
Science Exchange, the Aspen Network of Development Entrepreneurs, the Milken
Foundation; Institutional Investors including the Korea National Pension Service, SEAF,
HarbourVest Funds, CLSA Fund-Singapore; the State Department, USAID, US Department of
Commerce; Clinton School of Public Service and the Clinton Foundation; Mayors and
representatives of the C40, ICLEI, and other sustainable cities initiatives; Companies with
sustainable development technologies that could be deployed in emerging markets such as
Blue In Green, EnergyXtreme, SN Tech, Renovable; Officials from the Club de Madrid
representing more than 90 former Presidents and Prime Ministers; and, The Global
Technology Deployment Initiative dedicated to developing innovative business models for
deploying and diffusing technology to support sustainable development, renewable energy,
clean water, clean air, food security and low cost health care delivery.
[iv] Failure to address these looming resource constraints can have serious adverse
consequences for pension funds and insurers. For details see, Aled Jones, et.al., “Resource
constraints: sharing a finite world --Implications of Limits to Growth for the Actuarial
Profession,” The Institute and Faculty of Actuaries, January 2013,
http://www.actuaries.org.uk/news/press-releases/articles/new-research-institute-andfaculty-actuaries-shows-continuing-ignore-re
[v] See, for example, C.K. Prahalad, The Fortune at the Bottom of the Pyramid, Wharton
School Publishing, 2006 and also Ted London and Stuart Hart, Next Generation Business
Strategies for the Base of the Pyramid, FT Press, 2011.
[vi] One possible solution to this scaling dilemma is to adapt the franchising model to
technology deployment. Franchising, for example, would aggregate a large number of
smaller investments to a size where government agencies like US Ex-Im and OPIC coupled
with pension and sovereign wealth funds might be interested in financing the larger-scale
franchise venture. These same financiers, however, would most likely not be interested in
conducting the due diligence required to finance a much smaller-scale, one-off investment
in a single village.
[vii] For more on this scaling issue see, Matt Bannick and Paula Goldman, Priming the
Pump: The Case for a Sector Based Approach to Impact Investing, Omidyar Network, 2012,
http://www.omidyar.com/sites/default/files/Priming%20the%20Pump_Omidyar%20Net
work_Sept_2012.pdf; Harvey Koh, Ashish Karamchandani and Robert Katz, From Blueprint
to Scale: The Case for Philanthropy in Impact Investing, Monitor Group and Acumen Fund,
2012, http://www.mim.monitor.com/blueprinttoscale.html and John Kohler, Thane Kreiner,
and Jessica Sawhney, Coordinating Impact Capital: A New Approach to Investing in Small
and Growing Businesses, Santa Clara University and the Aspen Network of Development
Entrepreneurs, 2011, http://www.scu.edu/socialbenefit/resources/upload/CoordinatingImpact-Capital.pdf
[viii] These issues were discussed in depth at the Global Solutions Summit which convened
in Washington, DC at the US State Department in April of 2014.
Mark W. Grobmyer
Chairman
Global Technology Deployment Initiative
Managing Director
P80 Group Foundation
1 501 960 8564