Funded

Unlocking Sustainable & Structural Investments For An Inclusive & Green Development of Madagascar

Country
Madagascar
Region
Africa
Impact Areas
Energy and climate action
Status
Set-up phase
Credits © UNICEF/UN0340244/Ralaivita

Financials

Progress in funding
10.095535293711%
8,983,345 of 88,983,345 USD
Total requested (USD)
7,733,345
Allocated by Joint SDG Fund (USD)
7,733,345
Co-Funding (USD)
1,250,000
Total Funding (USD)
8,983,345
Leverage Target (USD)
80,000,000

Results

The joint programme is expected to start in April 2022, after the completion of the design and pre-feasibility phase in 2021.



The programme

Why

Despite Madagascar's rich natural resources, and its potential for renewable energy, it is one of the top 20 countries with the largest number of people unable to access clean fuels and technologies. Only 16.5% of the population has access to an electricity grid, a number that drops to 6.2% in rural areas. Because Madagascar's renewable energy potential remains largely untapped, many people rely on kerosene and other inefficient sources for energy, which has contributed to the loss of 70% of Madagascar's forest cover and causes 10.7% of premature deaths through the resulting indoor pollution.


What

This programme takes an ecosystem approach to finance renewable energy projects in Madagascar. By 2030, this programme aims to ensure that at least 5% of Madagascar's energy grid uses renewable energy, while simultaneously expanding access to electricity and supporting renewable energy businesses. The programme aims to provide access to affordable and sustainable energy to at least 80,000 individuals, while simultaneously increasing Madagascar's solar capacity by at least.


How

The programme targets three different needs in the renewable energy sector. The sovereign fund will finance large sustainable energy infrastructure projects, while the de-risking facility provides concessional capital to medium sized businesses, and the incubator will provide technical assistance and grants to smaller energy start ups. A pipeline of 59 projects has already been identified as candidates for the Sustainable Energy Incubator.



Financial instruments

Malagasy Sovereign Fund

  • Grants and technical assistance will support the initial set up of the Malagasy Sovereign Fund. The Fund will use its initial capitalization of US $40 million from the Madagascar state budget to invest debt and equity in priority projects, with a special focus on rural electrification projects and medium to large hydropower projects. The projects identified for support from the Sovereign Fund have a median CapEx of US $66 million.

The Derisking Facility

  • The Derisking Facility, managed by UNCDF under the Bridge Fund, is a revolving facility that will provide concessional loans, guarantees, and grants to projects with a ticket size of US$ 0.4 million - US$ 1.5 million. Identified projects include small renewable energy projects, including solar mini grids; clean cooking; and energy efficiency. The Facility is expected to manage US$ 4 million in assets and is expected to support 4 - 10 projects.

UN Implementers


undp-logo
UNIDO logo
logo UNCDF

Partners


Ministry of Energy and Hydrocarbons
ANKA Madagascar
GEF
GIZ
 Rurale Electrification Agency (ADER)

Latest

Impact Areas

Energy and climate action

This impact area covers financing solutions that leverage public and private resources for cleaner and more efficient energy systems and climate adaptation and mitigation action.

Energy accounts for two-thirds of total greenhouse gas, being the main contributor to emissions production. Despite 70% of clean energy investments are privately financed worldwide, in accordance to a special report developed by energy investments on clean energy in developing economies needs to expand by more than seven times, to above US$ 1 trillion, to put the world on track to reach net-zero emissions by 2050. Catalytic grants from the Joint SDG Fund are a critical bound to development finance institutions lending and attract private capital injections. Our portfolio brings financial solutions that span from lending and impact investing to insurance and smart subsidies. It aims to attract private investment to markets and sectors at early stages of readiness – or in situations where the risks are hard to mitigate, such as energy access projects for vulnerable communities or in remote areas.

Blue Economy

This impact area scopes financing solutions that leverage public and private resources for the blue economy.

The monetary value of the world’s oceans has been estimated at US$ 24 trillion by the World Wide Fund for Nature. This wealth is at risk because overfishing, pollution and climate change put an unprecedented strain upon marine ecosystems. Oceans are getting warmer, stormier and more acidic, impacting the health of sensitive marine ecosystems and the lives of human communities that rely on them. Ocean reefs, the home of the planet’s most diverse ecosystem, contribute to the livelihoods of at least 500 million people worldwide generating US$ 36 billion per year for the global tourism industry. Our programmes and pipeline in the blue economy space bring financing solutions that are adapted to the needs of island nations and coastal communities to preserve marine resources and coral reefs while offering income opportunities to coastal populations. They support scalable blue economy businesses, through equity and debt finance, risk guarantees, performance grants, incubation and technical assistance, to build resilience in coastal ecosystems and create jobs not only to allow us to save our planet, but also to build more resilient economies.

Food systems and agriculture

This impact area consists of financing solutions that leverage public and private resources for sustainable agricultural systems and enhanced food security.

Poverty is deeply intertwined with successes or failures in agriculture and food security, with the majority of the rural poor depending on agriculture and natural resources for their livelihoods. Recent estimates from FAO show that nearly 10% of the world population is still undernourished. The impacts of climate change, conflicts and Covid-19 pandemic take an even higher toll - resulting in an estimated 118 million more people suffering from hunger and one in three people not having access to adequate food in 2020. On the other hand, the ecological footprint of the global food system continues to grow in terms of energy, resource use, and the contribution to greenhouse gas emissions. To address these issues, the traditional approach to food policy must be reoriented towards food-system-wide approaches that provide incentives for investments in inclusive and sustainable development of food systems and for steering consumer behavior and food preferences toward healthier and more sustainable diets. Investments in food system innovations are key in driving change towards more a more sustainable and food secure future. Our programmes and pipeline in this area include solutions financial solutions that include microcredit and microinsurance, downscaling schemes from multilateral development banks, and a variety of blended finance facilities supporting agricultural supply chains, smallholder farmers, rural development, nutrition, and sustainable farming transitions. repurpose finance to support sustainable and resilient food systems, reduce finance that is destroying/degrading food systems, optimize finance to mobilize investment and increase access, and scale up public and private finance flowing to healthier diets. Examples include blended finance facilities, de-risking and collateral support mechanisms, sovereign and impacts bonds, business incubators, among others.

Social Impact

This impact area covers financing solutions that leverage public and private resources for social impact sectors including health, education, waste, water, and sanitation. These include Innovative financing concepts that improve the well-being of people and communities, especially vulnerable groups.

Leave no one behind (LNOB) is the central, transformative promise of the 2030 Agenda for Sustainable Development. LNOB not only requires the elimination of social practices that leave particular groups of people further and further behind, but it also demands equal access to basic services, resources and opportunities for all. This will come at a cost. Achieving LNOB will require significantly more financing than is currently invested in human and sustainable development, and for these funds to be channeled towards improving the lives of those who are furthest away from reaching SDG targets. Focusing on the social sectors, the Overseas Development Institute estimates that global financing requirements for education, healthcare, and social protection transfers alone amount to US$ 137 billion annually in low-income countries. While these sectors require large investments to make the required transition, they often rely on public funds. These are rarely the sectors that private funds invest in, as their objective is to earn a return that is higher than the initial investment, no matter how minimal. Therefore, our programmes and solutions focusing on LNOB innovate the way we finance and address these barriers and close the financing gap, by offering viability gap financing, early stage capital investments, de-risking mechanisms, smart subsidies, and technical assistance to empower people and early stage enterprises driving impact in key social sectors.