Nexus and GERES at the Marketplace Financial Solutions

Monday, 08 February 2010 16:20

GERES news - Press releases

Innovative Financial Solutions for Development

NEXUS and GERES are finalist of the competition organized by AFD (Agence Française de Développement), the Bill & Melinda Gates Foundation and the World Bank, to be held on March 4-5 at Cité des Sciences et de l’Industrie in Paris

In the 20 initiatives that were shortlisted out of 800 project proposals, Nexus has been selected for the creation of its ethical and innovative financial mechanism, dedicated to the sustainable development projects supported by its members.

A the Marketplace on Innovative Financial Solutions for Development, Nexus and GERES will present the details of this financial mechanism to an international jury composed of 110 experts from the finance and development sectors. The competition, which seeks to garner and highlight fresh ideas on the use of innovative financing mechanisms to solve development challenges at local, country, regional, or global levels, offers five grants of up to US$ 100.000 to be awarded to the winners.

Nexus has been selected for its innovative financial approach to addressing projects developer’s needs for funding.  Indeed, as the first-ever non-profit alliance of pro-poor carbon project developers to enter a carbon market dominated by high profile financial institutions seeking to maximize profits, Nexus is already an innovation in itself. More specifically, it is the use by nexus of existing financial instruments in a creative way that seduced the jury of the Marketplace.

Access to energy is an essential component of poverty reduction and climate change mitigation strategies.  Low-cost clean technologies use less fuel, thus reducing households’ energy expenses and emit fewer or no GHG (Greenhouse Gases), thus improving people’s health. They also contribute to improving environment sustainability. Yet projects involving technologies such as biogas, improved cooking stoves, water filters, or solar lighting often lack appropriate funding mechanisms for scaling up and mass dissemination.

The carbon market has considerable untapped potential to contribute to the financing of these projects. However, inappropriate methodologies, high transaction costs and cultural gaps between the development world and the finance world can prevent development stakeholders from accessing carbon finance.

Nexus is the first-ever non-profit alliance of pro-poor carbon project developers to enter the carbon market, dominated by high profile financial institutions seeking to maximize profits. Nexus has been selected for its innovative approach to the financing of clean technology projects, in service of development.

Moving away from existing pre-finance deals, Nexus innovates by combining 2 funds in a creative financing package, providing long-term sustainability and tailored to developers’ needs.

• An innovation fund to provide grant funding at projects’ early stages (feasibility studies, market studies, etc.)
• An investment fund providing loans to enable mass dissemination of eligible, successful projects

The second innovation consists in leveraging traditional finance through risk reduction

• Nexus oversees carbon asset management, and uses future carbon credits generated by the projects as collateral for the loans, protecting investors against the risk of default
• Nexus deposits a percentage of credits generated each year into a reserve account in order to build a safety net against delivery failure
• The innovation fund will also reduce risk in investing in different project types in different countries

Lastly, Nexus implements a fair trade approach to the carbon market: its direct access to the carbon market allows it to cut down middle men, thus reducing transaction costs and increasing value for Nexus members.

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