US$5bn climate fund prepares for launch at COP25

The Capital Cities Coalition against Climate Change (CC35) plans to present a portfolio of 500 green infrastructure projects for Latin American and Caribbean cities during the COP25 conference in Madrid next month, which are expected to mobilize between US$5bn and US$8bn.

Sebastián Navarro, general secretary of CC35, talked with BNamericas about the organization's financing mechanism, the potential of subnational governments in the green transition and the place of Chile in the process after the switching of COP25 from Santiago.

BNamericas: How will the CC35 fund operate?

Navarro: First I have to explain who the players are, since there are several. The initiative is from R20, the organization created by Arnold Schwarzenegger when he left the California government. This focuses on subnational governments. It focuses on the search for new financing mechanisms to accelerate green infrastructure and, with the support of the Leonardo DiCaprio foundation, the 100 Climate Solutions initiative was launched in 2016. US$1.3bn was mobilized.

I convinced both foundations to launch the CC35 within the framework of the COP25 that was going to be held in Santiago, as a way to bring those funds to Latin America.

The CC35 mechanism works through two funds. One is BlueOrchard in Geneva, the other is Pegasus Capital in New York. These finance 49% of the project through the private sector, which will be executed with the signature of the mayor or leader of the beneficiary subnational government.

What we're talking about here is accelerating the funds needed for a serious transition to a green economy that complies with the Paris Agreement. Today there are plenty of funds in the world but there are no mechanisms for them to be executed at the subnational level. We're talking about US$3.3bn. Basically, what we have is a fund that will finance the companies in charge of specific projects in sectors such as renewable energy, energy efficiency, electromobility, eco-construction, water treatment and waste management.

We already have about 300 projects in the portfolio for Latin America and the Caribbean. By December we'll try to have 500. Each municipality or other subnational government can opt for two projects.

What was done was to accommodate the 33 countries in the region according to their bankable feasibility. Chile has a quota for 40 projects, Uruguay 19, Mexico 80, Colombia 67, Ecuador 50, Peru 30, Brazil 70.

This is structured according to who the counterparts are. IDB Invest is playing a very important role with us. The Independencia fund in Chile is interested in projects in Chile and Uruguay.

To that end, a network of financial players is assembled throughout the hemisphere.

BNamericas: What will be the initial financing capacity of CC35?

Navarro: There are two funds, Sub National Climate Fund for the Caribbean and Sub National Climate Fund for Latin America. The two expect to mobilize between US$5bn and US$8bn.

BNamericas: Are those projects going to be announced during COP25?

Navarro: In Madrid we'll announce 50 hotel projects, and then there will be announcements with organizations that are interested in certain sectors such as energy, construction and water.

BNamericas: Do you think Chile can still lead the green initiatives in Latin America after the cancellation of COP25 in Santiago?

Navarro: Totally. I worked with the people of the environment ministry, the presidency and local governments in Chile.

Involved in the financial ecosystem for the 40 authorized projects in Chile was [state development agency] Corfo, the energy sociability agency, the environment ministry, the Chilean Association of Municipalities, there are many players willing to put projects on the table.

BNamericas: In the case of Chile, the rise in the metro fare that triggered social protests was apparently due to the purchase of electric buses at a premium. Could the CC35 fund intervene in cases like this to reduce costs for the State?

Navarro: Absolutely. We have electromobility projects, as well as the purchase of vehicles for municipalities.

BNamericas: How damaging is the US's exit from the Paris Agreement?

Navarro: Hopefully [President Donald] Trump won't get reelected, so he won't continue to delay the implementation of the agreement. The exit has to be approved by congress, and since it's not an executive order but a law, it's not so easy to get out of the agreement.

We don't believe institutionally that the transition of the system can be guaranteed by national governments. So far they have never met the goals of the Paris Agreement, and not only that but they've increased emissions.

National financing mechanisms have become obsolete. The subnational process will go it alone.