Unlocking billions in climate finance for developing countries

The Green Guarantee Company (GGC), the world’s first climate-focused guarantee company, celebrated the launch of its operations with a Market Closing Ceremony at the London Stock Exchange (LSE) this past Friday.

GGC is set to unlock billions in climate finance for developing countries by providing guarantees for institutional investors buying green bonds issued and listed on the LSE and green loans issued in the private credit market.

The company is receiving capital from the United Kingdom's Foreign, Commonwealth and Development Office (FCDO) through its MOBILIST Global programme, the Green Climate Fund, the NSIA: Nigeria Sovereign Investment Authority (NSIA), the United States Agency For International Development (USAID) with Prosper Africa, and Norfund.
 
GGC will leverage an initial $100 million from these investors to provide up to $1 billion of guarantees underpinned by an investment grade rating of BBB/Stable from Fitch Ratings. Initially, it will focus on private credit and the LSE green bond market but plans to expand to other major exchanges. It will seek to raise additional capital from the private sector as it scales its operations, targeting a guarantee capacity of $5 billion or more by 2035.
  
Christopher Marks, Board Director at GGC, says: “GGC will provide pivotal support to enable issuers from developing countries to gain the financing they need to combat the impact of climate change on their populations, particularly the poorest. This support is critical as both increased fiscal pressure post-pandemic and downward pressure of sovereign ratings of developing countries will limit their private sectors’ access to global debt capital markets at a time when climate action is becoming increasingly urgent.”

But how does it work?