Innovation Centers Help Developing Countries Capture Climate Change Opportunities

WASHINGTON, May 11, 2016—Climate change presents prodigious challenges to developing countries but also tremendous opportunities. A key part of the World Bank Group’s approach to the global climate change agenda lies in helping these countries cope with the challenges while exploiting the opportunities.

The opportunities are considerable. The Bank Group estimates that investments in 15 clean technology sectors in 145 developing countries are expected to exceed $6.4 trillion over the next decade, with a quarter of that market accessible to small and medium enterprises. These sectors include renewable energy technologies, energy-efficient irrigation and water purification, climate-resilient crops, public transit, and electric vehicles.

It is with those numbers in mind—and the idea that big things have small beginnings—that the Bank Group has launched a network of Climate Innovation Centers (CICs) in the developing world. This month, Ghana formally joins the Caribbean, Ethiopia, Kenya, Morocco, South Africa, and Vietnam in hosting a CIC that will offer seed financing, policy interventions, network linkages, and technical and business training to new enterprises in the climate change space.

“We are seeing keen interest from developing countries in supporting initiatives that help their industries innovate and deploy new solutions for economic development and environmental protection,” said Ganesh Rasagam, who oversees the CIC program. “The Climate Innovation Centers are supporting a rapidly growing roster of new and growing businesses turning clean-tech ideas into economic growth opportunities.”

COP21 Commitments

Two Bank Group initiatives seek to maximize the impact of the CIC Network in contributing to the commitments reached in Paris at the 21^st Conference of the Parties (COP21) during which countries agreed to reduce greenhouse gas emissions and develop national climate action plans to hold global temperature increases this century to well below two degrees Celsius. One involves expanding the CIC Network by launching new CICs in countries requesting them. The other involves developing an enhanced system to identify clean-tech startups with the greatest potential to grow and deliver significant economic as well as environmental benefits.

Anabel Gonzalez, Senior Director of the Bank Group’s Trade & Competitiveness Global Practice (T&C), summed up the challenge at a recent gathering of CIC chief executives.

“So the question becomes,” she said, “How can we take the many exciting climate innovations emerging around the world and scale them up to achieve the environmental and economic potential that they promise?”

New CIC in Ghana

The Ghana CIC, developed with the support of the Bank Group in partnership with Ashesi University and the governments of Denmark and the Netherlands, will provide local companies with the knowledge and resources they need to prototype, develop, and market innovative clean technologies in a variety of sectors, including agriculture, waste water treatment, and off-grid renewable energy.

Fred McBagonluri, CEO of the Ghana CIC, emphasized the basics in discussing the key to successful business incubation: “The idea must solve a customer’s problem. It must be technologically feasible within a short period of time—two years.”

Scaling up for Impact

With many climate enterprises already scaling up with the help of CICs, a key next step involves identifying the most promising ones and helping them accelerate their growth, create more jobs, and possibly export products or services. Another way of achieving scale-up involves replicating in other countries a successful micro-business concept incubated by one of the CICs. Scale-up could involve helping clean-tech businesses accelerate the pace of technological development and changes in practice that have been hampered by economic or political barriers. And yet another form of scale-up involves expanding the capacity to innovate within a city or country or region by the fostering of an entrepreneurial culture.

In Ghana, a “Green Innovators Bootcamp” held in advance of the CIC launch identified 20 of the country’s most promising clean-tech startups selected through a competitive review process. During the bootcamp, participants refined their business concepts, identified customer bases, and competed in a pitching contest judged by a panel of local investors and industry experts.

The well-established CIC in Kenya, presented in this video, has become the country’s leading support center for climate technology entrepreneurs by incubating more than 100 businesses in fields ranging from waste-to-energy solutions to off-grid solar power.

The ultimate test for any new commercial solution will be whether the level of market demand supports scaling. Therefore, the Bank Group project will analyze both the emerging technologies with the most promising climate applications for developing countries and the demand for those emerging solutions. The Bank Group’s work in this field to date strongly supports the conclusion that the market for climate innovation is strong.

“There’s a tremendous demand for new innovative climate products,” said Jonathan Coony of T&C’s Climate Technology Program (CTP). “New products, such as solar energy to provide energy access, solve a serious problem in a profitable, commercial way.”

Local Solutions to Global Challenges

Many new climate innovations emerge from the local enterprises that know market conditions best. While these companies use the latest technology advances from industrialized companies, they apply them in innovative ways that are appropriate for their countries.

In developing a concept for identifying the most promising clean-tech ventures, the CTP team has visualized a screening process as a series of funnels that flow business applicants and entrepreneurial ideas through multiple levels of review, starting with the Climate Innovation Centers and extending to a board of technical advisers. As the illustration below shows, the process would trim as many as 800 initial ideas down to a priority group of five to 10 of the most promising concepts ripe for scale-up.

Expanding CIC Networks

CIC’s have assembled a strong cohort of young enterprises providing clean-tech solutions in developing countries. But the reach, resources, and scope of the work is limited, as is the capacity to identify and scale promising business ideas. For that reason, the concept for evolving the program for greater impact seeks to link the innovation centers with partners with the ability to identify and the inclination to value proven solutions generated by the program.

The task of expanding the network of CICs in developing countries is being organized by T&C under the ‘Launchpad’ banner, according to Rasagam. The goal, in addition to adding to the CIC network, is to support innovative projects dubbed “green rockets” that address climate challenges through market-driven solutions.

Bank Group teams selected through a competitive process will receive funding, mentoring, and training for the design of CIC projects that will help client countries increase the competitiveness of their industries and supply chains by promoting climate efficiency and clean technology development.

Central to all of this work is the idea that the private sector has an essential role to play in addressing climate change, since the investment levels identified by COP21 cannot be met solely by international institutions or country budgets—particularly developing countries.

The CICs represent an important manifestation of the public-private dialogue (PPD) idea already up and running in the developing world. The gathering of Climate Innovation Center chief executives brought together developing country business incubators with specialists from a number of successful U.S.-based incubators, including 1776, Greentown Labs, Hawaii Energy Excelerator, LA Cleantech Incubator, the Incubatenergy Network, and the U.S. Department of Energy.

“The opportunity for us to develop new partnerships with state-of-the-art incubators in the United States is exciting, with limitless prospects,” said Rasagam, head of T&C’s Innovation and Entrepreneurship team.

The momentum established by the gathering of Climate Innovation Center CEOs and the launch of the Ghana CIC continues later in May with a Dialogue for Climate Action organized by the Bank Group to bring together business leaders, policymakers, and civil society representatives. A key focus of the global conference (in Vienna, May 24–25, 2016) is the importance of establishing structured forums for public-private dialogue to help governments and the private sector work in mutually beneficial and collaborative ways to identify and recommend solutions to the climate challenge.