Green Climate Fund (GCF) backing has been crucial in an emergency relief fund launched today that shields clean energy companies in developing countries from COVID-19 economic shocks to keep low-carbon trajectories on track.
The USD 80 million Energy Access Relief Fund (EARF) has drawn together a unique coalition of financial support for 90 companies in Africa and Asia that have been filling energy access gaps with low-carbon solutions but now face bankruptcy form the COIVD-19 fallout. EARF will keep these companies financially solvent by providing them with short-term loans.
GCF is the largest contributor to EARF, providing a USD 30 million investment. While the relief fund covers Africa and Asia, GCF funding is focused on maintaining mitigation momentum in nine sub-Sharan Countries which face acute challenges in tackling climate change.
In sub-Saharan Africa, 548 million people do not have access to electricity and instead have to rely on kerosene and diesel generators for lighting, presenting family health and safety hazards. Another 900 million (85 percent of the population) lack access to clean cooking fuels and technologies, with the reliance on firewood by many leading to rapid deforestation.
Broken supply chains, increased costs of solar components and continued COVID-19 lockdowns have crippled the energy access industry, which provides renewable energy solutions such as solar lanterns, household solar, mini-grids and modern energy cooking equipment to power-deficient customers. An analysis of energy access companies eligible for relief funding across 50 countries shows that 77 percent of potential borrowers require emergency financial assistance to stay afloat.
“The EARF is a critical tool to help us build back better and tackle climate change. It will ensure that social enterprises can continue to provide renewable energy solutions and advance climate mitigation and resilience across sub-Saharan Africa and Asia,” said GCF Executive Director Yannick Glemarec. "GCF is proud to be part of this innovative partnership, and delighted that it is moving ahead to launch.”
“Access to clean, reliable and affordable energy is essential in lifting communities out of poverty. We could see that the pandemic was adversely impacting those who were most vulnerable, and that we needed to take action. We couldn’t do it alone—it would take all of us,” said Jacqueline Novogratz, the founder and CEO of impact investor Acumen, a GCF Accredited Entity. “The launch of the EARF illustrates the power of partnership and the moral imagination in a time of crisis.”
The launch of EARF today follows agreements by co-financers to support this financial fillip for developing countries by generating a green resilient recovery to COVID-19 while tackling the climate challenge. It represents a major step for GCF as an anchor investor to help overcome COVID-19 blockages in financing developing country climate action.
EARF, managed by managed by Social Investment Managers and Advisors (SIMA), is a partnership of 16 governments, foundations and investors. Though its support for energy access companies, it is expected to reduce 1.33 million tonnes of greenhouse gases over its four to six year lifetime, with estimated benefits to about 16 million people in the target countries.
EARF aims to safeguard gains made in the once-booming energy access sector. In the last decade, the industry has grown six-fold, providing 470 million people with energy access, employing more than 370,000 in green jobs and avoiding 74 million tonnes of greenhouse gas emissions.