Unconditional pledges made by governments in their Nationally Determined Contributions (NDC) under the Paris Agreement to date are not sufficient to limit global warming to well below 2°C but are instead likely to lead to an increase in global temperatures of between 2.5 and 2.8°C above pre-industrial levels[1]. This substantive gap requires a significant increase in ambition today to avoid infrastructure and technology lock in. These necessary investments far exceed the annual 100 billion USD in climate finance committed to date and can only be achieved if significant levels of private finance can be leveraged.

UNDP and Climate Mundial have recently joined forces to address the global NDCs investment gap and help countries to increase access investment capital through public-private investment structures that leverage multiples of private capital at an early stage of development.

The objective of this new partnership is to support NDCs actions by addressing critical market failures in an efficient but transparent manner, going beyond a total reliance on grant funding initiatives. The aim is to create a pipeline of sector programs and projects that can access investment from international capital markets in developing countries. To ensure transparency under the Paris Agreement, programs and projects shall demonstrate measurable and verifiable climate and sustainable development results.

One of the first countries that is benefitting from the new partnership is The Gambia:

The Gambia needs electricity. Power outages are frequent across the country, as the fossil fuel-powered generators owned by the National Water and Electricity Company (NAWEC) struggle to meet the growing demand of Gambian consumers. NAWEC is facing the challenge of meeting the growing electricity demand with limited generation capacity and high production costs.

The Gambia’s NDC details the country’s strategy to shift from Heavy Fuel Oil (HFO) to renewable energy sources such as solar power. The project will deliver around €25 million investment in solar energy – leading to an addition of around 15% to national generating capacity in the country - contributing directly to The Gambia’s NDC target.

“The project is a key part of The Gambia’s NDC targets and the National Development Plan 2018-2021. Working with the private sector to increase electricity generation capacity and improve the supply of renewable, affordable and sustainable modern energy services throughout the country is among our very top national priorities.”, said Mr. Pateh Jah, Permanent Secretary, Ministry of Environment, Climate Change & Natural Resources, The Gambia.

In The Gambia, UNDP, Climate Mundial and United National Capital Development Fund are raising finance from public and private sources to support NAWEC, the Ministry of Environment, Climate Change and Natural Resources and the Ministry of Energy to address the growing electricity needs in a sustainable and environmentally friendly manner. The provision of affordable financing options will overcome barriers to private sector investment and have a catalytic effect. Through the structured finance approach, costs of capital for solar technology will decrease to a level that will make future solar PV additions bankable for private sector investors.

UNDCF is working with UNDP and Climate Mondial to enable the appropriate financial instruments to be put in place, and in a wider sense helping the project to take advantage of different mandates and competencies  within the UN system, says Anders Berlin, Head of the Least Developed Countries Investment Platform at UNCDF.

The finance mechanism being deployed will lead to rapid uptake of solar PV investments in the existing regional grids and the involvement of the private sector in generating solar power will reduce the current cost burden on NAWEC.

“Strategically, UNDP is focused on working with countries mobilize finance through the private sector to address the huge financing gap that exists in a sustainable and responsible manner. Through new partnerships with private sector, we can transform the nature of development across the African continent”, said Noura Hamladji, Deputy Regional Director for Africa.

Most significantly, the successful utilisation of solar power in rural Gambia will lift people out of energy poverty, improve energy services in rural areas of The Gambia, strengthen businesses, increase income opportunities and ultimately lead to sustainable rural development.

UNDP’s work in The Gambia is a landmark in public-private cooperation in energy access. Through our partnership with Climate Mundial, we are engaging the financial markets to invest in the achievement of outcomes under the Sustainable Development Goals (SDG), said Seraphine Wakana, Resident Representative, UNDP The Gambia.

Daniel Rossetto, CEO of Climate Mundial confirms: “Globally, investors are looking for yield. SDG-linked projects in Africa can offer a great opportunity. Working with UNDP, we are able to structure projects to deliver the right risk-return balance and attract private investment”. “In the Gambia is a great example and we have a host government that really wants to move the dial.”

[1] Operationalising Article 6 of the Paris Agreement, EBRD 2017