For a woman that manages an $8.3 billion fund that supports clean energy projects around the world, Mafalda Duarte is rather under-the-radar.
Duarte is the manager of the Climate Investment Funds (CIF), a financial mechanism that was created in 2008 and has amassed billion-dollar pledges from developed countries — like the U.S., the U.K., Japan, and Germany — for a variety of projects that lower carbon emissions. The funds are also used to kick start new markets in developing countries like, for instance, a large solar thermal farm in Morocco, a geothermal plant in Indonesia and energy efficiency upgrades for buildings in Turkey.
The CIF isn’t a regular fund in the traditional, private sector sort-of-way. The money is dispersed by development banks (like the World Bank and the Asian and African development banks) that work with local governments, regional developers and private investors. A big chunk of the funds that are allocated to these projects are in the form of low-cost loans, but some are also given as grants (depending on the project and a country’s economy).
What success looks like
I caught up with Duarte — who took over as head of the CIF last summer after working as a coordinator for the African Development Bank — on the phone last week to talk about her role at the organization.
When asked about what success for the CIF looks like, Duarte explained it was “when we’re not needed anymore.” When the organization can stimulate a market that can later develop enough money to operate on its own is when it’s reached success, she added. The Department of Energy Secretary Ernest Moniz gave me a similar answer when I asked him the same question last year in reference to the DOE’s loan program.
One of the major goals for the CIF is to use its billions of dollars to attract additional private investments. According to the agency, 30 percent of its total funds are expected to stimulate private sector participation, and the group says it’s anticipating $23 billion in co-financing for its clean energy projects (though, these figures are a little controversial).
The idea is that together CIF funds and private sector funding can launch local markets in developing countries that are on the edge of being economically sustainable. For example, the CIF’s recent contribution to solar thermal technology that aims to make it more affordable in the future.
Solar thermal technology uses mirrors and lenses to heat the sun ray’s to make electricity, in contrast to solar panels that convert sunlight directly into electricity. Currently, solar thermal technology is significantly more expensive (although more efficient) than solar panel technology, which means far fewer solar thermal power plants are being built across the globe.
But CIF investments, through low-cost loans for solar thermal projects, could help set up about “one third of the current global installed capacity,” of solar thermal power plants and help lower the overall global cost of the technology. If solar thermal technology becomes less expensive, the private sector could take over more future funding for these projects, similar to what the private sector currently does for solar panel farms; at least that’s the goal.
It’s complicated
Some of the group’s funding isn’t about market creation, it’s about aid. About 60 percent of the fund is focused on getting clean energy projects (like solar and geothermal) developed, but there’s also $1.2 billion being allocated for helping communities adapt to climate change (infrastructure for rising seas and extreme weather). Another $785 million is slated for helping countries reduce deforestation and forest degradation (a core way to curtail carbon emissions).
The organization is involved in a lot of projects, and is such a unique entity that a lot of what they do can be experimental, really. Over the last seven years the group — which calls itself a “living laboratory for climate finance” — has learned a great deal as arguably the biggest experiment of this kind.
Duarte says one of the most important lessons she’s learned is to “be mindful that there are no blue prints.” Each country is in a different phase of development and each country has different challenges. “You have to tailor the investments,” she says, there’s no one-size-fits-all.
Another important lesson, she says, is that when entering a brand new country with new project ideas, you could be in for a “bumpy” ride. Often in a developing country, if there aren’t regulations supporting clean energy and energy efficiency projects, infrastructure can take a long time before getting the official go ahead. About a third of the 140 clean energy projects in the CIF’s pipeline are moving substantially forward toward deployment.
That number illuminates one of the biggest unknowns, and controversies, with the CIF: they’ve only been around for seven years, so many of their clean energy projects — which can take years to move from idea to fully operation — have yet to be finished. The funds have also been criticized for being unaccountable and undemocratic, and an evaluation later conducted about the fund found it lacked transparency in some instances.
The CIF is also controversial because it isn’t overseen by the United Nations Framework Convention (UNFCCC) on climate change. In 2010, the UNFCCC created another fund, Green Climate Fund, to finance lowering climate emissions. The future of the CIF is now uncertain in that they have a “sunset clause,” which means they could transform or be phased out.
But in countries where the CIF funds have delivered results and even created new markets, there’s been high demand, says Duarte. “Countries want to do more,” and there’s a pipeline of projects that won’t actually get done unless the CIF actually gets more funding, which means more pledges from developed governments.
With the United Nations talks coming up in Paris in December, attention is once again returning to how to address climate change globally. It’ll likely be at that meeting that we find out what happens to the CIF in the long run.
