In collaboration with the Peace Department and Open Earth Foundation, Metabolic developed a playbook that outlines an innovative approach to accelerate decarbonization through Place-based Transition Funds.
By adapting climate frameworks to local contexts and employing systems thinking, the playbook provides a replicable method for financing the transition of diverse locales, including cities, regions, and island economies.
The method can be used and adapted by fund originators, investors, and community leaders aiming to develop unified, impactful place-based transition portfolios.
- Partners: Metabolic, Open Earth Foundation
- Date: September 2023 – April 2024
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Challenge
Overcoming financial barriers in climate action
Communities worldwide face significant challenges in accessing the necessary capital to implement sustainable and impactful climate projects.
The climate crisis cannot be subdued by single-point solutions; it demands a multifaceted strategy based on the location of where investments will occur. The current landscape is marked by a concentration of funding in a narrow range of investments, leaving a wide spectrum of essential asset classes in climate infrastructure overlooked. Additionally, there’s a glaring mismatch between ambitious national policy commitments and their practical implementation at the local level. Too often, solutions are imposed top-down, failing to resonate with or effectively address communities’ unique needs and potential.
Approach
Crafting a resilient, reinforcing path forward
In addressing the climate crisis, our approach merges deep systemic understanding with innovative financial strategies to catalyze a universal transition to low-carbon communities.
We developed this playbook by analyzing over 30 city and national decarbonization plans, sector-specific frameworks, and an array of geopolitical, humanitarian, and economic studies. Through extensive interviews and program evaluations, we’ve honed strategies for stakeholder engagement, pilot testing, and scalable replication.
This groundwork enables us to leverage philanthropy through loan guarantees, drawing substantial market-rate capital into the fold. Our proposed method ensures not only the identification of profitable and impactful projects but also their longevity and stability by directly engaging with community needs. This dual focus on financial innovation and community support forms the cornerstone of our strategy, promising a more sustainable and equitable future for all.
Outcomes
Place-based Transition Funds: A playbook for systemic portfolio construction
The research has been translated into the “Place-based Transition Funds Playbook”, a recipe for transformative impact on communities and the broader landscape of climate finance.
Focusing on specific stages—from geographic selection to the implementation and replication of projects— the playbook outlines a set of design principles to build a diverse and resilient portfolio that transcends traditional investment barriers.
An indicative portfolio, qualifying as a Place-based Transition Fund, is multi-asset: combining predominantly infrastructure (e.g. real estate, solar, nature-based solutions, agriculture, waste, transport, and industry) mixed with a minority position of small-to-medium enterprises and ventures. The portfolio is designed with a loan guarantee wrapping 5-10 related investments delivering strong risk-adjusted returns for investors. This type of portfolio would offer investments and philanthropic opportunities for a variety of investors and donors, based on their risk-return-impact preferences.
The playbook offers opportunities for replication, through building in a locally-led foundation to create a series of Place-based Transition Funds after the initial investment from external sources is in place. These funds are designed to scale over time, offering three distinct types of securitized investment opportunities:
- Geographic Investments: These are focused on a single location, such as Puerto Rico or Hawaii, allowing for targeted investments in one specific area.
- Thematic Investments: Aimed at specific sectors, like housing or agriculture, this approach supports investments across various locations.
- Multi-Transition Investments: A comprehensive approach that combines investments in different funds and locations.
Want to learn more?
- Find out more information about our partners: the Peace department and Open Earth Foundation.
