Annual Review
Annual Review - Summary Sheet Title: Global Innovation Lab (continuation of Capital Markets Climate Initiative (CMCI))Programme Value: ?807,692 for Lab (2018-2021) Review Date: December 2019Start Date: August 2018 End Date: August 2021Summary of Programme Performance Year20182019Programme ScoreAARisk RatingMinor MinorThe Global Innovation Lab (the Lab) is a public-private partnership, which brings together and catalyses government and private sector efforts to scale up climate finance. It provides advice and support to innovative ideas to make them ready to be implemented on the ground. The UK provides ?269,000 per year to the Lab. A similar amount is provided by the other donors, making the total annual contribution of approximately ?1 million. Six instruments were developed and endorsed in 2018. Instruments that have passed through the three Lab processes (Global, India, Brazil) have, between 2015 and September 2019, gone on to mobilise $1.9 billion (40% of which comes from the private sector). Instruments endorsed by the Global Lab contributed $1.4 billion of this amount (37% of which comes from the private sector). This mobilisation cannot be directly attributed to BEIS’ investment or the Lab, but rather is an indirect indication of progress. For example, some of these projects received Lab support several years previously and have been developed further since then. The amounts mobilised last year have been $620 million and $420 million respectively1 The increase in the funds mobilised in the last twelve months is consistent with the trend from previous years and, as noted by Advisors and Observers to the Lab, this mobilisation demonstrates the investment appetite for these kinds of instruments. As noted in previous reviews, it is difficult to determine the amount of funding that would have moved forward without the support of the Lab; however, there are good indications that Lab network activities have played an important role in enabling this funding to increase. These activities refer to the convening power of the Lab, the analysis provided by the Secretariat and the feedback to proposals from the range of involved experts. In its five years of operation the Lab (before 2018 known as the Capital Markets Climate Initiative (CMCI)) has built a strong brand and a proven idea incubation model. In the fifth-round endorsement meeting, Lab donors and other members underlined how the discussion between governments, civil society and private sector investors that the Lab facilitates continue to be vital for raising ambition and scaling up investment. This year the amount of funds catalysed through the Global Lab from private sources has risen by 43%, demonstrating good alignment with the UK International Climate Finance (ICF) objectives on mobilising private finance towards achieving the Paris Agreement’s targets.BEIS officials conducted a mapping exercise that looks across all the instruments endorsed to date, to identify cases of success, where more work is needed and where the gaps are in terms of sectors and regions targeted. This analysis forms the basis for reviewing investment opportunities for BEIS and more broadly across UK departments. An important aspect of this analysis has been assessing the market readiness of each instrument. This has helped to pinpoint at which stage of development instruments attract finance and understand better where the Lab can best provide support. This analysis shows that the level of finance leveraged varies across the different instruments and is largely concentrated in a small number of instruments. These instruments are now in advanced stages of readiness. However, there are also other instruments in relatively advanced readiness stages that have not yet raised finance and these warrant attention and further analysis on why they have been less successful.For the fifth round, proposals were invited against four workstreams: sustainable agriculture, blue carbon in coastal and marine ecosystems, sustainable cities and sustainable energy access. The Secretariat received 250 proposals, an increase on last year’s 180. Following two stages of analysis, 33 ideas were shortlisted to be reviewed by Advisors and move to the selection stage. The group of instruments endorsed in the fifth round included six ideas in total: one on blue carbon, one on energy access, two on agriculture and two on cities. Following selection, the six instruments moved to Phase Two. Working groups were set up with experts from the wide network of the Lab, who provided feedback and suggestions on how to improve the design of the models. The quality and innovative nature of most proposals has received positive feedback from Lab members and Advisors. This is reflected in members’ comments throughout the year and particularly in the endorsement meeting and the increasing finance leveraged for Lab instruments.Summary of progress and lessons learnt since last reviewThis past year also saw increased discussion about the governance arrangements and strategic direction of the Lab. CPI have proposed giving regional Labs a greater input in the selection and support of proposals developed for their region, while at the same time ensuring that exposure to the Global Lab’s expertise, brand and opportunities increases. Workstreams will continue to cover energy access, land use and agriculture, cities and nature-based solutions, including blue carbon. As well as existing regional programs in India and Brazil, the Lab is launching a new regional stream for Africa (including Kenya, Rwanda, West Africa and South Africa). These changes are welcomed by BEIS as an expansion of regional expertise within the Lab, and a recognition of the need for Africa specific proposals developed by regional experts. The changes also mean that more proposals will be endorsed per round. CPI has reassured BEIS that this expansion will be possible within existing resources.Responding to last year’s recommendations the UK has continued to review endorsed Lab proposals and has funded more ideas graduating from the Lab through other ICF channels. In addition to proposals funded through the Green Climate Fund, the UK also supports proposals directly through UK PACT, Partnerships for Forests and other International Climate Finance programmes. The Lab logframe was also updated in 2019 to better capture the technical assistance and innovation outputs and outcomes of the UK investment in the Lab. With the UK contribution remaining at the same level as in previous cycles, the Lab continues to provide a good value for money route to stimulating innovation and leverage. While the Delivery Partner continues to perform well in selecting proposals, providing analysis, developing proposals and convening Lab members, delays did occur in the delivery of lessons learned material against the expected timescale. Some improvement is needed in this area to meet recommendations from previous annual reviews and share lessons that will help all members including governments, private investors and the proponents to ensure that the Lab delivers maximum benefits. The programme is assessed as scoring an A in this Annual Review, but it is acknowledged that some data (mainly detailed Lab surveys) have not been available for the Review.The table below provides a summary of progress on recommendations from the 2018 AR.Progress on Recommendations from the Previous Annual Review Explore the possibility to organise a lessons learned specific workshop to provide the opportunity to past and current proponents to share more detailed lessons on barriers and enablers. This can include lessons on what proponents find useful or what does not work. We also recommend exploring the reasons why some proposals have moved into implementation (besides stage of development) and others have not and which ones are likely to attract financing. For example, perform a qualitative assessment on which ones attract private investment, which ones do not and why. Recommendation partially met. CPI will publish a Lessons Learnt Report in February 2020 including barriers and enablers and reasons for success. BEIS officials have reviewed and mapped all Lab proposals over the past five years in combination with a market readiness assessment, using a readiness scale. They have identified those proposals that are successful and at which stage. BEIS is considering ways to disseminate the findings of this study, alongside the Delivery Partner’s lessons learned. This recommendation is expected to be met by spring 2020.UK ICF to continue reviewing progress of endorsed Lab proposals with a view to fund more of them.Recommendation met. Funding of Lab endorsed proposals by BEIS has increased to six programmes (from two). The UK now funds Lab proposals directly through its existing programmes. Our mapping of all Lab proposals, to be completed by June 2020, is also helping us to identify opportunities for funding. Consider a working capital facility to provide support to Lab instruments beyond endorsement or a similar mechanism (awards or similar).Recommendation met. During the Strategic Session of the 2019 Endorsement Meeting, Principals considered and responded positively to the idea of establishing a catalytic capital facility to provide early stage capital and further technical assistance to Endorsed instruments. The key challenge now is setting an appropriate scope and structure for the Facility in a way that can attract significant finance.Showcase the Lab work to the City of London and explore more ways of inviting UK private investors to fund Lab instruments.Recommendation partially met. CPI hosted a successful event Driving private finance to Achieve 1.5-degree objective at the London Climate Action Week showcasing the Lab. Representatives of City institutions had the opportunity engage with the current round proponents. Evidence of UK private investors funding Lab instruments is unclear. This engagement should be on-going to promote Lab instruments to the City. We do not report this as a specific recommendation for next year as we consider it to be an already existing activity of the Lab cycle yearReview KPI15 sub-indicators for the Lab and improve wording to make it more appropriate to an innovation/ incubator programme.Recommendation met. The KPI 15 sub-indicators were reviewed and used to develop the outputs, outcome and impact indicators for the updated log-frame. These are now more specific to the Lab. We envisage a further review of the logframe to be completed by March 2020 to ensure the indicators are as relevant and simple as is possible and to improve impact measurement in the log-frame.Summary of recommendations for the next year BEIS officials to improve the logframe. This will include updating the log-frame indicators at output and outcome level, clarifying the impact assessment, reviewing the existing indicators, the output weighting, and setting all baselines using 2019 data (by March 2020).CPI to ensure that good quality Lessons Learned material is published in February 2020 that highlight the barriers past endorsed instruments faced, and what the most critical conditions are for promoting success. CPI and BEIS officials to agree, by June 2020, on a plan for using the readiness levels scale (a critical output indicator that looks at how ideas progress on a scale from 1 to 9). CPI to ensure that the reporting needed for the next Annual Review (progress reports, statistics on report downloads, updates on lessons learnt, financial information, survey results etc) is available to support a good quality Annual Review (October 2020). BEIS will further clarify the material needed from CPI as soon as it finalises its log-frame review.CPI to request an assessment of gender, environmental, social and governance risks from selected organisations passing through the Lab process in the implementation phase and to develop mitigation measures for these (by January 2021).A. Introduction and Context Link to Business Case: Lab Business Case Extension available hereLink to Log frame: Tbc [provide link to published logframe]Link to previous Annual Reviews (if appropriate) Outline of the programmeThe Global Innovation Lab (the Lab) is a public-private partnership that brings together experts from Governments, investors and civil society to discuss and help understand the barriers to investment. It works to identify, refine, and launch innovative financial instruments to attract private investment in climate change mitigation and adaptation at scale. It aims to drive billions of dollars of private investment into low-carbon, climate resilient economies. The Lab was established in 2014 under the name of CMCI with funding from the UK, Germany and the U.S. Since then it has attracted further funding support from Denmark, France, the Netherlands, Australia, philanthropic foundations such as Bloomberg Philanthropies and the Rockefeller Foundation .The Lab now includes over 60 Lab member institutions and has expanded to include regional Labs in India, Brazil and more recently in Africa to cover also Sub-Saharan Africa, rather than only focusing on Central and West Africa. With the six proposals endorsed last year, the total Global Lab endorsed proposals has reached 21, while 41 ideas have been endorsed across all three Lab programmes. While BEIS funding is provided to the Global Lab only, the model’s replication in other regions and countries remains an additional positive indicator of success. The Lab provides benefits beyond mobilising significant public and private finance. The Lab:Provides profile and networking opportunities for donors and proponents to increase support for the Lab and for the various instruments.Facilitates a public-private dialogue to build understanding between investors/ entrepreneurs and government about how best to catalyse climate investments including from the private sector.Stimulates innovation, acting as an incubator of ideas that enables them to be tested in the market and fundable.The Secretariat of the Lab is run by Climate Policy Initiative (CPI). The process runs on yearly cycles, which starts with the announcement of a call for innovative climate finance ideas, usually in October. The call lasts up to two months and usually closes at the end of the UNFCCC Conference of Parties (COP). The Secretariat then begins the analysis and shortlisting of the most promising ideas. The shortlist is then presented to the Advisors, who are representatives of the member institutions. They select a small number of ideas to support through provision of technical advice. CPI provides further analysis and development support over the following nine months with Advisors also contributing to strengthen the commercial viability of the ideas. Instruments are then endorsed at the end of the Lab cycle, which closes with a Principals’ endorsement meeting. Endorsement means that Lab members, including Principals, have voted to launch the ideas for piloting, based on their ability to meet the Lab criteria of innovation, actionability, financial sustainability and catalytic potential. B: PERFORMANCE AND CONCLUSIONSHas the logframe been updated since the last review? Up until 2018, because the programme was of limited size, a logframe was not required. However, as the Lab has developed, BEIS has refined its monitoring processes for the investment and developed a logframe. Last year, the Lab was monitored against the KPI15 indicator, which relates to “transformational change” defined as “…change which catalyses further changes, enabling either a shift from one state to another (e.g. from conventional to lower carbon or more climate-resilient patterns of development) or faster change (e.g. speeding progress on cutting the rate of deforestation).” This approach has been reviewed this year, and the logframe developed further. Indicators combining qualitative and quantitative measures are being developed to capture the outputs, outcomes and impact of the investment. Some of these indicators require baselined data against which to measure progress, and not all baselines are yet in place. It is expected that the methodology for setting the baselines will be in place by March 2020, to make a full assessment through an updated logframe against which to assess progress for the December 2020 Annual Review.Impact is assessed by looking at the extent to which Lab instruments, through CPI's support, are likely to have a transformational impact. The methodology for calculating the transformational impact will draw on KPI15 methodology, and will be finalised by March 2020.The outcome statement is: ‘mobilising private finance for climate investments by developing and implementing innovative, replicable and sustainable instruments and by bridging the knowledge gap between public and private sector’. This will be assessed with the following indicators:Public and private finance raised, factors that were tracked in previous annual reviews. Note that these figures cannot be directly attributed to BEIS’ funding, but rather are an indirect indication of progress. We expect an increase year-on-year. Membership of the Lab, which we amended to put more emphasis on its diversity. This will also be complemented by a survey to assess to what extent learning is created and shared between the private and public sector and between developed and developing countries. The methodology for this survey needs updating and the survey will be completed by March 2020.Number of ideas replicated within the cycle year in different countries, regions or sectors;Number of proposals that move into implementation.Output 1 looks at ideas that mature and move across readiness levels. This is measured with the following indicators:Number of proposals within the cycle year that move by one readiness levelHow useful and relevant Lab proponents found the process in developing the readiness level and in implementing their concepts. The methodology for assessing this indicator will be finalised in March 2020. Output 2 measures whether knowledge is created and shared between proponents, the Lab, the public and the private sector. This output uses the following new indicators:Satisfaction levels of people attending Lab events and how much they put the knowledge they gain from them into practice. This will be assessed by using feedback forms and a survey. The methodology for this indicator will be finalised in March 2020.Number of independent articles published in well recognised journals newspapers and magazines. Well recognised articles are listed in the Annex below.Report downloads from the Lab website. CPI will track these from 2020, when data will be baselined, with targets. A further log-frame review will be completed by March 2020, to make any necessary refinements to indicators and methodologies. Annual outcome assessment: The outcome statement is: Mobilise private finance for climate investments by developing and implementing innovative, replicable and sustainable instruments and by bridging the knowledge gap between public and private sector. Since the log-frame baselines are set for 2019, it is not possible to fully measure progress as yet. The following indicators are used to assess progress at the outcome level: 1. Total public and private finance catalysed: the total amount of finance mobilised by projects that have passed through the Lab process has increased from $1.28 billion in 2018 to $1.9 billion in the 2018-2019 cycle. This mobilisation cannot be directly attributed to BEIS’ investment or the Lab, but rather is an indirect indication of progress. 2. Membership, engagement: membership by diversity of organisations, diversity of participants reflecting learning from the private sector as well as learning from developing countries. Over the last year, the total number of members, including funders, across the Lab programmes increased from 64 to 67, with 9 Secretariat funders and 9 non-funding members. Members representation was broad and included governments (UK, Germany, US, Australia, the Netherlands, and Rwanda), Development Finance institutions and private sector representatives (including The Rockefeller Foundation, Willis Towers Watson, and Blackrock). Just over 50% of members were developing countries representatives. Survey results to assess the learning component of this indicator are not yet available and the baseline has not yet been set.3. Number of ideas replicated in different countries or regions (in comparison to initial proposal / pilot). This refers to a project or instrument being implemented in a different country, region, or sector if relevant. The Socio Climate Benefits Fund in the last year has worked on various pilots in the Amazon and Atlantic rainforests. This is an early sign of replication considering that the initial focus of this Brazil Lab instrument is in the Amazon region. Furthermore, Savings Insurance continues to raise interest in other regions like China, Vietnam, Mongolia, the Caribbean, Chile, Mauritius, Turkey and India and has already been replicated in six Latin American countries. In 2019 one idea has been replicated.4. Number of proposals that move into implementation: Three out of the nine proposals endorsed in 2018 moved to implementation (pilot or actual fund) and six out of nine proposals have progressed across readiness levels. Two of the three that did not progress are from the India Lab and one is from the Global Lab. CPI categorises projects depending on their level of readiness. BEIS is developing this methodology further (see footnote page three). The results achieved in 2019 for each indicator (apart from the Survey component of the Membership indicator) are in line with the planned baseline set in the log-frame. Overall output score and description The Overall Output Score for the Lab programme is A. The overall score reflects the Lab progress in supporting ideas to move across readiness levels as all the proposals selected last year have matured to a higher level, namely progressing from basic ideas to a more developed and researched stage. There is also sufficient evidence that knowledge has been created and shared between proponents, the Lab, the public and the private sector. The UK ICF and CPI will jointly produce a methodology for surveys, with clear guidelines and target audience, scoring and sampling methods and will establish baselines by March 2020. Furthermore, CPI will start tracking data on report downloads from the beginning of 2020.Key Actions and progress:This section covers progress in the past cycle (and against recommendations specific to output indicators, where applicable).The 2018 Annual Review suggested that different instruments are at different development stages and some need further development support beyond the Lab cycle they participated in. The ICF team conducted a mapping exercise that has looked across all Lab endorsed proposals to identify:Which proposals have been successful;Which proposals have been less successful;At what stage of development do proposals attract funding;Which key sectors attract funding against others;Where the funding gaps are.This progress will feed into a Lab lessons learned exercise and help Lab members to understand where to focus and how the Lab and its members can support innovative proposals at stages where funding is more difficult to achieve.As mentioned above, the UK has also made progress with funding Lab proposals. In the past year, an additional four concepts received UK ICF funding (see more details in the Efficiency Section). Therefore, although we continue to look for new ways to fund Lab proposals, existing ICF facilities are already contributing to the development or direct funding of Lab instruments beyond endorsement.Output 2 of the logframe covers lessons learned and the sharing of ideas. The Lab continues to share progress made in the development of instruments widely through the Lab website and between proponents and members in the Lab events (selection meeting, working groups, endorsement meetings). CPI have also attended various global events including COP side events and global climate and energy conferences (SE4ALL, BENF) to share what they have learned from the Lab process. In the 2018 Annual Review, it was recommended that, given that different ideas are at different incubation stages, proponents and future proponents would benefit from a more specific lessons learned exercise to consider the barriers and solutions to successful project development. CPI has been working on such a lessons learned exercise and expects to publish its findings in February 2020. BEIS officials have been considering how to measure the market readiness of Lab concepts, as a tool to help measure the progress of projects. This readiness scale broadly aligns with the assessment CPI uses to consider concepts when they enter the Lab process. This could help broaden the understanding of where investment gaps lie, and help identify funding opportunities for the future.Source: CPI Strategy Update, August 2019.C: DETAILED OUTPUT SCORING Output Ideas mature and move across readiness levelsOutput number per LF1Output Score A (based on assessing one of the two indicators)Risk rating (Minor, Moderate, Major or Severe) MinorImpact weighting (%):66%Risk revised since last AR? N/A, this is a new indicatorImpact weighting % revised since last AR? N/AIndicator(s)Milestones from Business CaseMilestones from LogframeProgress OI1.1: Number of proposals within the cycle year that move on the readiness scaleWhere possible, include original milestones from business case (if this differs from the milestones in the current logframe)At least 1 proposal moving by a readiness level from baseline.Achieved Each of the six proposals selected last year (in February 2019) progressed across readiness levels.OI1.2: % of proponents of Lab that state the Lab capacity building is relevant, useful and helpful in advancing instruments across readiness levels'. Where possible, include original milestones from business case (if this differs from the milestones in the current logframe)To be set when the methodology is developed.Methodology for this indicator will be finalised by March 2020 and so there is no formal measurement against this indicator in this annual review. Evidence based on a basic proponent satisfaction survey suggests that the Lab contributes to capacity building, through analysis, working groups and dedicated outreach. Key Points Progress made by proposals endorsed in September 2019:Six instruments were endorsed in the fifth cycle. The section below describes the instrument and their progress over the past year:1. Blockchain Climate Risk Crop Insurance (automated weather insurance): This aims to enable affordable and accessible crop insurance for smallholder farmers at scale, which can pay out quickly and transparently, and reduce transaction costs. It is a digital platform for weather-index crop insurance for smallholder farmers. It will facilitate transparent, timely, and fair pay-outs in extreme weather events, to increase resilience to the effects of climate change.Working groups provided feedback on the financial model and challenged supporting software and the financial sustainability of the concept, which were addressed in subsequent amendments. By the end of the round of discussions with potential investors, progress had been made against three components of the model: insurance, user interface and the blockchain application; distribution channels also been developed. The instrument moved on the scale of readiness by one level, from basic idea to developed and researched idea. 2. The West African Initiative for Climate Smart Agriculture (ECOWAS) (Forest / Agriculture): This is a facility to support the uptake of climate-smart agricultural practices through the provision of technical assistance and subsidised-rate loans or guarantees for smallholder farmers’ organisations and agribusinesses. Initial feedback highlighted the need to think about gender impact, financial impact, the challenge of negative returns projections and the challenge of replicability and drawing in private finance in the long term. While some further work is required to fully develop the concept, research work through the development phase of the Lab, focusing on challenges and possible solutions, ensured that the concept move one level on the readiness scale, from basic idea to developed and researched idea. 3. Restoration Insurance Service Company (RISCO) for Coastal Risk Reduction (Blue Carbon): This is a social enterprise that finances and manages the implementation of mangrove restoration and conservation. It captures the financial benefits generated by reducing property damage risks and by storing blue carbon. It was noted that proponents responded well to Lab advisor questions, comments and suggestions, leading to an early concept being progressed to a more concrete idea. The idea has moved one level from a basic idea to the developed and researched stage.4. Breathe Better Bond is a debt instrument, paired with technical assistance, intended for local governments to finance projects that reduce current and projected short-lived climate pollutants in emerging market cities. At the selection stage, it was noted that Green House Gas (GHG) emissions reduction was not emphasised enough in the proposal compared to the prevention of pollution. Throughout the development phase, proponents made the link between pollution and the mechanism to reduce greenhouse gas emissions clearer. The Breath Better Bond instrument moved one level from a basic idea to a developed and researched idea because of this work and due to increased links with climate change outcomes as a result of Lab working group meetings.5. Cooling as a Service is a pay-per-service model where customers pay per unit of cool air consumed. This decreases energy consumption and hydrofluorocarbon gas emissions from cooling systems in cities, by increasing the competitiveness of cleaner and more efficient technologies. This was considered to be one of the best performing proposals. It has moved from late concept stage to preparation stage and the project proponents are now starting to identify target businesses in selected cities.6. Solar Securitization for Rwanda is an initiative that pools loans from multiple solar developers into a tradable, asset-backed security, freeing up capital that can be used to expand the solar home system market. It provides energy developers and households with access to lower-cost, long-term, off-balance sheet finance, while enabling institutional investors to access the local solar loan market. It is less clear than with the other concepts how significantly the Lab has contributed to the proposal’s development. The instrument still presents some challenges, similar to the challenges identified at the beginning of the Lab process. In terms of readiness and based on the research work it has moved by one readiness level: from basic idea to idea developed/researched.More detailed surveys are needed to fully assess the contribution the Lab process has made to the development of concepts. However, the activities described above constitute good broader evidence that Lab analysis and network feedback helps proponents to develop the design of their instruments. Output Ideas and lessons learned shared widely: knowledge created and shared between proponents, the Lab, the public and the private sector. Output number per LF2 Output Score B (based on a limited set of data) Risk rating (Minor, Moderate, Major or Severe) MinorImpact weighting (%):34%Risk revised since last AR? N/A, this is a new outputImpact weighting % revised since last AR? N/A, this is a new outputIndicator(s)Milestones from Business CaseMilestones from LogframeProgress OI2.1: Satisfaction levels of people attending the Lab events throughout the yearN/A as logframe has been developed after the Business Case.To be set when the methodology is developed.Methodology for this indicator will be finalised by March 2020 and so there is no formal measurement against this indicator in this annual review.There is indication from basic survey data gathered by CPI that the Lab’s events network and the opportunity to connect to it in the regular roundtable discussions positively influences the exposure ideas get to the network. However, a more detailed survey is needed to assess this fully.OI2.2: Number of independent articles about the Lab published in well recognised journals newspapers and magazines N/A as logframe has been developed after the Business Case.At least 10 per yearAchievedAt least 10 independent articles have been published to August 2019 on journals such as Bloomberg News, Financial Times, Los Angeles Times, amongst others. OI2.3: Report downloads [number of downloads of Lab Impact Report]N/A as logframe has been developed after the Business Case.Data on report downloads is not yet available. Over 58,000 unique visits to from September 2018 – September 2019 Lab Twitter followers have reached 2,400 Key Points Progress from past and current cycle Lab instruments is shared widely and between proponents, Governments and the private sector in working groups and Advisor and Principal meetings. Membership to the Lab from both private and public organisations is increasing. Initial surveys undertaken by CPI targeting proponents, included positive comments about the Lab’s role as an intermediary matchmaker suggesting that the Lab process was essential for getting projects off the ground. The communications focus of the Lab and the availability of highly skilled people to provide technical support have also been identified as positive benefits. On lessons learned, one proponent suggested that the Lab has been instrumental in providing updates and lessons for the development and implementation of their project. Proponents also found benefit in connecting with funders and the wider Lab network, and in support to build business plans. The Lab’s ability to identify subject matter experts for the working groups helped strengthen and validate concepts.Proponents have proposed improvements to the process. One suggestion was to create a network of linkages between proponents and existing successful implemented projects. This is in line with the aims of the Lab lessons learned exercise, coming in 2020, and the UK ICF’s mapping exercise, both of which aim to consider the reasons why some projects succeed and share these lessons more widely. This feedback is a helpful indication of the Lab’s contribution to the development of innovative ideas. However, a more detailed survey, with clear guidelines and methodology, needs to be developed and implemented to obtain more detailed results for this output.Access to the Lab and article showcasing the work of the Lab have been in line with expectations. The Lab has been mentioned in a number of publications during the last 12 months including in articles by Bloomberg News and the Financial Times. Additional mentions are made in the IISD Knowledge Hub, a discussion paper prepared by Climate Finance Advisors and the Natural Resources Defence Council (NRDC), as well as in a report by the International Development Committee on UK aid for combating climate change. Access to the Lab website remains high with 58,000 unique visits to the website.A lessons learned report covering learning from past instruments was due in Autumn 2019. However, this has been delayed to February 2020. This output will be instrumental in sharing the lessons from the Lab more widely. Furthermore, the Secretariat has demonstrated the convening power of the Lab by presenting its work in various global events throughout the year. These include Innovate4Climate 2019 conference in May 2019, the San Giorgio Group meeting in April 2019, where Lab proponents had the opportunity to talk about their instruments; and a number of Lab related events in COP25 in Madrid in December 2019. During COP25 new funding announcements to the Lab were made and were widely distributed to the public. Work will continue in the coming Annual Review period to refine the understanding of how this is impacting on the behaviours and decisions of key actors. E: VALUE FOR MONEY & FINANCIAL PERFORMANCE Key cost drivers and performance The UK contribution to the Lab for last year’s cycle was ?269,000 in line with the business case and previous round contributions. This contribution is in line with the budget agreed with CPI. This matches contributions by Germany and the Netherlands. The total annual contribution to the Lab from all donors and philanthropic sources is $1.05 million. The UK contribution funds CPI analysis on evidence and effective design and potential impact of climate change instruments. CPI estimates the value of this analysis at $250,000 per instrument. The remaining $100,000 contributes to management and communications expenses, travel, convening and other costs. BEIS will continue to pay close scrutiny to CPI’s budget and costs. VfM performance compared to the original VfM proposition in the business case Assessment of whether the programme continues to represent value for moneyThe Lab is a key forum for BEIS to engage directly with entrepreneurs and investors about solutions to incubating new ideas for climate financing. The Lab continues to feed into the BEIS pipeline of innovative projects to finance. The number of Lab endorsed projects the UK now funds has risen to six. These are:Climate Investor One, funded by Green Climate Fund Energy Saving Insurance, funded by Green Climate Fund TCX, supported by DFID,Climate Smart Lending Platform, supported by Partnerships for Forests, DFIDPay as you Save for Clean Transport, Supported by PACT, ICFResponsible Commodities Facility, supported by Partnerships for Forests, BEIS Because the logframe for this investment is in the process of being refined, results against all indicators were not available for this Annual Review. However, when measured against outcome indicators performance was in line with the planned baseline set in the log-frame. When measured against output indicators, performance was scored as ‘Good’ (e.g. A) but acknowledging that there is a limited data set on which to base the assessment and that this data will be improved in the coming period. Based on this evidence, and the two additional points illustrated below, the programme is ensuring value for money.BEIS’s share of the cost has not increased relative to the number of projects supported by the Lab. While BEIS and the Lab cannot attribute the $1.9 billion in private and public funds raised by instruments, this is an indirect indication of progress. The Lab has continued in this past cycle to share ideas widely. As described above, based on initial survey evidence, participants have learned from the Lab process and analysis provided by CPI has helped improve their instruments. In addition, the six instruments that went through the cycle have improved in design and, while they are at different readiness points, they have all moved across the readiness scale. 1. Economy To support the economy case for continuing to fund the Lab and provide assurance on the ability of the Delivery Partner, CPI, to meet expectations, BEIS commissioned a Delivery Partner Review (DPR), which looked at CPI’s Governance structures, travel, environmental, procurement, HR and finance policies. The DPR highlighted five risks of low impact (rated green), which the delivery partner accepted and mitigating actions have been put in place to address them. The actions are mainly improving their existing processes and reflecting this into their Global manuals. CPI has provided a timeline within which mitigating actions will be complete. BEIS money contributes to the delivery of the key activities undertaken by the Lab Secretariat including:Staff time in supporting proposals (including providing technical analysis);Preparation of working group calls and follow ups;Organising events;Coordination between proponents and Lab members.2. Efficiency: Governance: The Secretariat reviewed the Governance of the Lab and following discussions with donors a new structure is being implemented. This brings regional Labs under the Global Lab umbrella (e.g. ensuring exposure to the Global Lab’s expertise, network and opportunities) and gives regional Labs more inputs over proposals developed for their regions. Regional experts will be given the opportunity to contribute with specific knowledge. This provides efficiency as less inputs and resources are required by donor Advisors who will concentrate on Global proposals.??? Travel:? With the implementation of the new Governance, travel will also be minimised as regional experts will input in proposals developed by the Lab based in their region.? In addition,?most meetings, like working groups, take place over telephone conferences hence minimising travelling. Convening: The Lab utilises its members’ network to organise convening.? This includes holding meetings in spaces provided by Lab donors or other influential Lab members free of charge. Members and advisors: Adviser and Principal meetings took place as expected and Lab working groups continue to take place with stakeholders, including some businesses and NGOs, participating on a pro-bono basis.? The number of member organisations of the Lab has reached 67 and high-level representatives of donors and key organisations, including Ministers, government officials and CEOs, take part in Principals’ meetings.?? The variety of members inputting to proposal developments means more diverse advice.? This leads to a broader range of views expressed by technical experts on barriers and issues that proponents face. 3. Effectiveness:Over the last year, the following high-level progress has been made by Lab instruments:They have attracted both public and private finance;Three proposals have moved into implementation; The number of representative members has increased from last year ensuring a balanced representation of developed and developing country representatives.One of the key achievements of the Lab in support of transformational change is, as envisaged in the Business Case, incentivising others to act on climate change. It remains important to be proportionate in demonstrating the link between the Lab’s activities and longer-term leverage and evidence of replication. The three proposals that moved into implementation in the last year and lined up funding are an indication that the Lab is continuing to be effective in helping proponents develop commercially viable projects. Furthermore, the new Governance structure mentioned above is designed to improve the effectiveness of the Lab, as it uses regional experts to input into proposals developed to address specific barriers in the regions.?4. Equity: BEIS does not have evidence of the extent to which the Lab takes into account environmental, social and governance (ESG) considerations in its work. This is an area where more effort should be focused. CPI should ensure that these factors are taken into account in the implementation phase - requesting proponents to consider any gender and/or ESG risks when the projects get implemented on the ground, and any related mitigating strategies. The business case proposes monitoring the gender of the Lab members and the proponents. BEIS officials will work with CPI to include this as an area to address when developing proposals.Quality of financial managementFinancial management for this project refers to the management of the grant agreement and payments to CPI. Payments are made in arrears. BEIS assures itself of programme progress following discussions with CPI and others, and receipt of progress reports associated with each invoice. The grant agreement confirms a payment schedule of two tranches each year before making relevant payments. Progress reports cover the work completed for each phase. Deliverables for each phase are set in the grant agreement. BEIS as a major donor and active participant in the Lab process routinely monitors the programme closely with frequent contact with CPI.BEIS recently commissioned a full Delivery Partner Review (DPR) of CPI to investigate delivery partner risks. The DPR concluded that there are no medium or major risks. The review recommended improvements to the policy manual of CPI, as well as the travel and procurement policies. CPI has accepted these recommendations and put mitigation actions in place with deadlines by which to address them, including improving travel and procurement policies. F: RISK Overall risk rating:MinorOverview of programme risk The Lab is a programme that seeks to improve the quality of innovative private finance concepts by providing technical advice and feedback: this is a relatively low-cost activity.The recent Delivery Partner Review (DPR) report has highlighted minor risks with the Delivery Partner’s processes and mitigating actions have been put in place. The main risks reported previously for the Lab have now been closed, including that the UK might not fund Lab proposals. This is now superseded. A risk that remains but is minor in likelihood is that the Lab does not secure funding beyond round 7.There is a risk that the new structure and Governance arrangements will require more HMG resources to cover an increasing number of proposals being developed. The Secretariat has ensured HMG the process will reduce resource requirements and that we will not need to participate in all working groups.Outstanding actions from risk assessmentN/AG: COMMERCIAL CONSIDERATIONS Delivery against planned timeframeBEIS relationship with CPI is managed through an accountable grant agreement, managed with a set of payment milestones. CPI has met the milestones for all Lab rounds so far. The Lab has met fifth round milestones and has started on the sixth-round milestones with a new call for ideas. CPI are working on a wider lessons-learned deliverable that will collect the knowledge accumulated in the Lab in the last five rounds to make it more accessible to donors, other governments, proponents and private sector actors. This, as noted, has been delayed. Performance of partnership (s)BEIS’s Grant Agreement with CPI sets out the deliverables expected for each phase of the Lab cycle. These include the launch for ideas, meeting materials, convening, analysis and input to proposals, reports and others. CPI has launched the call on time and provided timely analysis of proposals including shortlisting and more detailed analysis for selected proposals. Meetings have taken place on time and CPI has submitted the reports on progress as expected. CPI have an effective process of capturing meeting outputs and results and sharing these with Advisors. They have also delivered a detailed communications plan, which they shared at the beginning of the Lab cycle. In addition to the meeting material, CPI delivered a detailed report for each instrument developed during the round that covered the initial design, barriers and changes to the design. The communications plan helped the UK Government align Lab events with showcasing UK’s involvement. The cycle concluded with the Principals’ meeting in New York in September 2019, where instruments were endorsed. As mentioned previously, the lessons learned outputs expected in September 2019 have been delayed and are due to be delivered in February 2020. H: MONITORING & EVALUATIONEvidence and evaluation The main data sources used for this Annual Review are:Lab Impact information for the UK prepared by CPI. This sets out the preliminary findings from the Lessons Learnt Report CPI is due to publish in February 2020. This includes: ICF Study on Readiness Levels and Instrument Progress used to assess Output 1;Media statistics and Articles used to assess Output 2.2019 Endorsement Meeting Summary.2019 Shortlisted Ideas Document.LAB Strategy Slides.2019 LAB Progress Report.Monitoring progress throughout the review period Progress has been monitored through quarterly calls with CPI. CPI has released the 2019 Progress Report which summarises the Lab’s progress over the last 12 months. See Section: Has the logframe been updated since the last review? (p.8) for more details on the development of the log-frame, a key monitoring tool.I: TRANSFORMATIONAL CHANGE Rating We are finalising a methodology at impact level to assess transformational change to update the broader methodology used in the previous Annual Review. This update aims to make transformational change more relevant to the specific investment BEIS has made to the Lab. This will be completed by March 2020.Last year, the program was assessed as achieving a score of ‘Three’ on the KPI15 methodology scale, meaning that tentative evidence points to likely change. This year there is sufficient evidence to state that Transformational Change has not decreased from last year.Indicators at outcome level are drawn from the KPI 15 transformational change methodology and are:Total public and private finance raised;Membership by diversity of organisations, diversity of participants reflecting learning from the private sector as well as learning from developing countries;Number of ideas replicated in different countries or regions (in comparison to initial proposal / pilot);Number of proposals that move into implementation.A full assessment of KPI 15 will be undertaken in the spring as part of the results collection exercise.Evidence and evaluationDue to the relative size of BEIS’s investment in the Lab a dedicated evaluation intervention is not included in this programme. However, KPI 15 is arguably a high order impact indicator and this therefore a crucial indicator for judging performance, outside a formal evaluation. This Annual Review looks into the performance of the Lab and analyses performance against KPI15 and specific indicators as listed above. The methodology for KPI 15 was reviewed and updated prior to the 2017 Annual Review, taking into account the ICF’s theory of transformational change and how the Lab outcomes relate to it. As covered in the logframe section, the logframe was updated in summer 2019 to improve sub-indicators for KPI15 and will be finalised by March 2020. ................
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