Based in Luxembourg, the International Climate Finance Accelerator is a unique programme that aims at “developing the climate finance leaders of tomorrow”. Its managing director, Stephan Peters, tells us about the latest investment trends, the goals of the programme and the joys of working at the bleeding edge.
What is ICFA and what is its mission?
We’re a unique programme globally, part of a public-private partnership under the Luxembourg Climate Finance Strategy. Since 2018, we’ve accelerated 23 fund managers and given them financial and non-financial support designed to help them launch their own climate fund. This includes helping them with fundraising, approaching potential investors and structuring their fund to maximise their chances to reach first close, among other things.
Our mission statement is very clear: we are developing the climate finance leaders of tomorrow.
Why are climate funds so important to achieve our climate goals?
It is estimated that investments of 100 billion dollars every year are required to help economically less developed countries cope with climate change. Much of this capital has been pledged but is waiting to be deployed.
This is where climate funds and fund managers come in. With the right strategy to implement climate effective solutions, they would be able to invest it in the right climate solutions. They’re essential to translate high-level policy goals into concrete solutions. Only when these projects are running will we see greenhouse gases being mitigated.
What climate investment trends have you observed in the past years?
In the past, the plain vanilla type of investment strategies were a lot more common. Things like solar, wind, and hydro energy. Now advanced recycling, circular economy solutions, carbon mitigation technologies, agroforestry and biodiversity are being incorporated into investment strategies.
But we’re also working on the bleeding edge of investment innovation. So convincing investors to boost agroforestry and ensure healthy levels of biodiversity can be difficult. These investments bring up interesting questions such as what is the value of biodiversity and how does it contribute to human health? These fund managers are pioneers who are putting capital into ground-breaking strategies.
“Climate is global, so climate investing is never only localised. The consequences will always be felt both locally as well as internationally.”
Stephan Peters, Managing Director of ICFA
What should aspiring fund managers who want to apply to the ICFA know?
A lot of applicants already have experience in developing projects or in fund management so they should know that fundraising is a tough job and can be a long process to go through.
From the moment you start conceiving your funds and developing the investment strategy to the point where you reach first close and actually have cash flow into your business – that can take a while.
If you’re hesitant to apply because you feel like you’re not there yet, do reach out to us and just apply anyway. We already provide training and support to applicants. We also provide detailed feedback on your fund concept along the selection process. So in that respect, it’s an excellent way to get a first assessment of your fund project in a safe environment.
What is your biggest selling point for applicants?
Next to our unique programme, working with a community of like-minded fund managers provides applicants with a great resource. Every cohort member brings in their own network and expertise and is willing to share best practices with their peers. Fund managers get invaluable advice, tips and tricks on how to approach their fund project. Building a community of fund managers is really important for us.
What are some popular misconceptions about climate investing?
They are twofold. On one hand, many people lack a proper understanding of climate change and its impacts. Climate is global, so climate investing is never only localised. The consequences will always be felt both locally as well as internationally. A severe drought in a poor country might trigger a food crisis and cause climate refugees to travel to the developed world, putting stress on their support systems and their society as a whole.
On the other hand, while governments are deploying significant capital, it is still not enough to address all the climate issues. The challenge is so big that even governments are not able to tackle all it by themselves. This is why it’s important for funds and governments to work together to de-risk projects and increase the flows into climate projects.
Historically, many climate strategies have been perceived as high-risk low return and, as such, less investable. More and more strategies are proving to be feasible but might still not be able to generate market-level financial returns while having significant sustainable outcomes. We should start valuing these non-financial returns in a more rigorous fashion.
What changes do you hope to see in the local ecosystem in the next few years?
We hope to attract more funds to Luxembourg and make our country a centre of excellence for climate finance. Having these fund managers based here, engaging with our programme and the whole impact investing ecosystem would be a major outcome for us.
NB: Next application window starts in December 2022. Interested parties should follow the ICFA on LinkedIn and Twitter.
This article was first published in the Silicon Luxembourg magazine. Read the full digital version of the magazine on our website, here. You can also choose to receive a hard copy at the office or at home. Subscribe now.
