Subnational Climate Fund Earns Gold Standard’s Design Certification, Boosting Credibility in Sustainable Finance

Certification Validates SCF’s Impact on Sustainable Development, Guards Against Greenwashing.

In a significant development in the realm of sustainable finance, Gold Standard has awarded the prestigious Design Certification to the Subnational Climate Fund (SCF), making it the world’s first fund to achieve this recognition under the Gold Standard for the Global Goals.

This certification provides independent verification of the fund’s impact on sustainable development, effectively safeguarding against greenwashing practices.

The growing concern surrounding “sustainable finance” and its actual impact on global climate and development targets has prompted the need for more stringent measures. Gold Standard’s certification of SCF, a global blended finance initiative, ensures that the fund aligns with the requirements for impact funds and bond issuers. These requirements help investors and bond holders manage, measure, and maximize the positive impact that their investments have on sustainable development, thereby providing validation for impact results and encouraging private capital investments in sustainable projects.

Achieving the design certification involved thorough scrutiny of SCF’s governance structure, impact strategy, and investment screening criteria to ensure their alignment with the Gold Standard for the Global Goals (GS4GG). Notably, all key investment decisions made by SCF must now consider the impact they will have, thus guarding against greenwashing – the practice of making misleading or false claims about environmental impact.

The recent announcement of SCF’s first investment into Grupo LUXUN, a prominent Mexican renewable energy company, showcases the fund’s commitment to positive change. SCF is currently developing solar photovoltaic assets to provide clean energy to commercial and industrial clients with limited electricity supply options. The project is expected to contribute significantly to Sustainable Development Goals (SDGs), including access to affordable and clean energy (SDG 7), decent work and economic growth (SDG 8), and climate action (SDG 13). Moreover, SCF’s investments are also assessed for their Nature-based Solutions and biodiversity benefits.

To attain the design certification, SCF had to meet several critical criteria:

  1. Integration of the UN’s SDGs into its decision-making practices, with a focus on SDG 5 (gender equality) and SDG 13 (climate action).
  2. Assessment of potential negative impacts through GS4GG safeguarding principles and requirements.
  3. Inclusion of an exit strategy to ensure that investments align with the principle of “do no harm” throughout their lifetime.

Gold Standard’s pilot fund requirements are designed to complement other leading standards, such as the Operating Principles for Impact Management (OPIM), UN Principles for Responsible Investment (UN PRI), and UNDP SDG Impact Standards, minimizing reporting burdens for funds. The comprehensive approach includes performance reporting and assurance, surpassing traditional practices.

Margaret Kim, the CEO of Gold Standard, expressed her satisfaction with SCF’s achievement, stating that the fund’s focus on impact would lead to tangible and verifiable differences in achieving the UN’s Sustainable Development Goals.

Craig Cogut, CEO & Founder of Pegasus, praised SCF’s certification, emphasizing that it would ensure that SDG impacts are genuinely achieved in the real economy, and mitigate the risk of greenwashing. The stringent requirements set by Gold Standard, including stakeholder inclusivity, approved methodologies for SDG impacts, safeguards against unintended negative effects, and mandatory third-party audits, are expected to raise the bar for investors committed to sustainable development.

David Albertani, CEO of Catalytic, acknowledged the significance of credible measurement in attracting additional investments for sustainable infrastructure projects. He commended Gold Standard’s efforts to push the boundaries of impact measurement further by introducing the “design certification” for funds, which is deemed a crucial step in the industry.

The certification of the Subnational Climate Fund marks a significant milestone in the pursuit of genuine and impactful sustainable investments, fostering confidence in the global effort to combat climate change and achieve sustainable development goals.