Pioneering a Climate Finance Instrument in Africa: Lessons from Two Years of the Green Outcomes Fund
To address climate challenges and crowd in finance for innovative solutions, a pioneering and collaborative effort was initiated in 2016 that resulted in the creation of the Green Outcomes Fund (GOF). The GOF is a first-of-its-kind climate finance structure, designed to incentivise local South African fund managers to use new approaches and financing models to target high potential and fast-growing SMMEs operating in South Africa’s green economy.
The GOF enables this by paying for green outcomes, such as green job creation, climate mitigation, and improved water and waste management. The green outcomes funding enables lending and investment to SMMEs which would not be feasible without the GOF’s support. The model blends concessionary funding with private capital, thus enabling participating local fund managers, called Catalytic Finance Partners (CFPs), to develop and adapt their SMME investment criteria and support services in ways that were not previously possible – realising greater impact in terms of the types of SMMEs funded and green outcomes created. In doing so, the GOF aims to address the many systemic challenges that South African green SMMEs face as they try to access capital and support for growth. Simultaneously, it creates demand for verified, pre-agreed green outcomes generated by SMMEs and a common base for growing the South African green impact investing market.
South African society faces a host of environmental and socio-economic problems and burdens – high levels of unemployment, insufficient, unreliable and unsustainable forms of energy generation and supply, water scarcity and drought occurrence, high levels of environmental pollution as well as waste contamination, to name a few. Despite their complexities, each of these issues presents a possibility to offer innovative models that stimulate economic growth that is not detrimental to the environment and its natural ecosystems, whilst supporting climate change mitigation pathways. In South Africa, this means investment in green businesses that can generate verifiable green outcomes whilst creating jobs in sectors such as energy, water, waste, infrastructure, and land management.
The growth of green small, medium, and micro-enterprises (SMMEs) has the potential to unlock significant impact and grow a thriving green economy. These businesses, however, face major challenges in accessing the investment capital and support they need to grow and scale. The Green Outcomes Fund was launched in 2020 to address these challenges and incentivise investment into South Africa’s green economy.
Please see below the full GOF External Knowledge Report.