Overview

The Climate Finance  Facility (CFF) is intended to increase climate related investments in Southern Africa by addressing market constraints and playing a catalytic role through a blended finance approach. The CFF will use its capital to fill market gaps and crowed-in private investment, targeting projects that are potentially viable, but cannot currently attract market-rate capital at scale without “credit enhancement”. It will focus on infrastructure projects that mitigate or adapt to climate change.

The CFF is a structured finance platform that has an initial committed debt funding of R2 billion, co-funded equally by DBSA and Green Climate Fund (GCF). The CFF aims to catalyze private sector funding by co-funding alongside private sector financial institutions. The target of the CFF is to reach an overall portfolio leverage ratio of 1:5. The CFF offers credit enhancement in the form of a first loss/subordinated debt funding and tenor extension (up to 15 years) by taking a blended finance approach. 

Eligible Countries

The CFF will focus on projects located in the Common Monetary Area, consisting of the following countries:

• Kingdom of eSwatini
• Kingdom of Lesotho
• Republic of Namibia
• Republic of South Africa

Financing

• Project size: The CFF funds infrastructure projects valued between R150 million and R1.0 billion.
• CFF Ticket size: The CFF funds up to 30% of the project costs, offering funding from R45 million (minimum) to R250 million (maximum) as a subordinated loan.
• Equity contribution: Minimum 20% equity contribution from project sponsors/investors.
• Senior debt*: 50% of the project costs in senior debt from private sector financial institutions.

*Please note: To qualify for funding under the CFF the project needs to demonstrate that at a minimum 30% of the project costs is funded through senior debt by private sector financial institutions. 

Key Selection Criteria

• Climate Impact Potential: The project must contribute to low emission and /or climate resilience infrastructure. For mitigation projects, the CFF can only finance projects that promote efforts to reduce or limit GHG emissions. Accordingly, projects would need to clearly demonstrate that net emissions GHG reductions would be realized over the project life.

• Development Impact: The project must demonstrate consistency with UN Sustainable Development Goals and meet climate, developmental, ESG and gender objectives as determined by the DBSA.  The project should illustrate that it is designed to benefit local communities, with a particular focus on women and vulnerable groups, the environment and illustrate that there are no anticipated adverse social or environmental impacts.

• Private Sector Leverage: The project must demonstrate the ability to crowd-in commercial investment in the form of senior debt from private sector financial institutions. 

• Increase Market Efficiency: The project must demonstrate that it has not been able to secure financing from the commercial market due to specific financing gaps and barriers and demonstrate that there is need for support from the CFF (CFF funding is additional). 

• Market Transformation: The projects must contribute to market transformation and demonstrate that the project can materially and sustainably expand markets in terms of scale, improved private sector participation and confidence in climate mitigation and climate change adaptation investments.

• Paradigm Shift Potential: The project must show a paradigm shift potential; the degree to which the proposed can catalyse impact beyond a one-off project or programme investment.

• Country ownership: The project must align to the specific country’s priorities, climate strategies and Nationally Determined Contributions (NDCs).

• Project Stage: The project must be technically and economically viable, be ready for implementation and demonstrate an interest from private sector financial institutions to fund it. Project sponsors should provide a detailed PIM (project information memorandum) and financial model on the project. 

Enquiries

To apply for funding, please download and complete the CFF Project Concept Note Template and send an electronic introduction of the project to cff@dbsa.org.

For more information, please see the CFF Overview Presentation. 

Disclaimer

Please note that applications will be required to demonstrate commercial viability and will be assessed through a competitive process. The CFF will only consider projects which are  implementation ready. The DBSA has the sole discretion to respond to multiple objectives in making its selection, including climate and environmental impact and gender mainstreaming potential for the project.