NDF - Financing for climate change and development projects

New impact investment instrument targets cloud forests and energy security in Latin America

Photo: Jeff Gale
Photo: Leonardo Saenz

With the potential to sequester 11.4 million tons of CO2 by restoring degraded cloud forests, the model is the first of its kind to target developing countries

NDF has approved support to the Cloud Forest Blue Energy Mechanism (CFBEM), a first of its kind impact investment instrument developed by Conservation International and The Nature Conservancy (TNC).  The project consists of the development of three pilot projects across Latin America. The Cloud Forest Blue Energy Mechanism brings together payment for environmental services with a pay-for-success model to create an innovative financing technique that targets developing countries. The mechanism aims to restore and conserve degraded cloud forests while increasing hydropower profitability. Initial target countries for developing pilots include Bolivia, Colombia, Peru and Ecuador.

Incubated by the Global Innovation Lab for Climate Finance, the Cloud Forest Blue Energy Mechanism recently reached its USD 1 million fundraising target to finance the development of three pilot projects through financial closure across Latin America. Participants in the funding consortium include the Dutch development bank FMO as lead anchor, the Nordic Development Fund, the Global Environment Facility as a member of the Latin American Water Funds Partnership and Conservation International.

According to Vice President and Deputy Managing Director of the Nordic Development Fund Leena Klossner, "The Cloud Forest Blue Energy Mechanism has significant potential in establishing an innovative financial instrument to support sustainable hydropower production in Latin America. Moreover, the project is well-aligned with NDF's Mandate and Strategy, given its strong focus in identifying and addressing emerging climate change issues. At NDF, we value the potential to scale-up and replicate the mechanism's model in different ecosystems, and particularly in Africa."

More information
Cloud Forest Blue Energy Mechanism [NDF C113]
Conservation International’s press-release