Project: Unlocking and Increasing the effectiveness of climate spending with OBF in Kenya
State of development: Current
Stage of development: Scoping
Type of instrument — Impact Bond: No; Outcomes Fund: No; Social Impact Incentives (SIINC): No; Social Impact Guarantee: No; Payment-by-results (no pre-financing): Yes; Technical Assistance and Market-building program: No; Other: 
Rationale for using outcome-based finance: This project has the potential to unlock substantial and critically needed funding flows for climate programs in LMICs, by demonstrating the potential for OBF modalities to deliver highly cost-effective programs through donor support from organizations such as GCF. At present, while 71% of GCF accredited entities are from LMICs, they only receive 13.1% of GCF funding, a gap that reflects the scarce capacity that many of these entities have to meet the high standards of GCF's funding approval processes and criteria, such as cost-effectiveness. By providing the ability of OBF to guarantee GCF cost-effectiveness by ensuring all funding is only disbursed for results, this project has the potential to provide a test case to enlarge the application of this model, enabling GCF and other donors to scale up their funding for LMIC partners and programs.
Key challenges to launch: While there is substantial funding available to pay for climate programs, progress is constrained by a lack of funding available for the necessary structuring and design required to develop rigorous programs that meet GCF's high standards.
Social/developmental challenge: The challenges of climate change represent a classic and clear-cut market failure: the harmful effects of activities that emit or release carbon dioxide represent unpriced negative externalities causing them to exceed their socially desirable levels, ultimately driving the present climate crisis. At the same time, the lack of pricing of activities that reduce or absorb carbon dioxide emissions and other GHG emissions drives their underprovision of resources to be properly funded. Responding to these needs, global actors have established various mechanisms and funds, like the GCF, aimed at reducing or removing emissions. In this context, it is critical that we identify cost-effective programs that can respond to this market failure (such as Protected Areas) and effective funding modalities (such as Outomes-Based Financing (OBF)) which can drive effective programming. 
Expected intervention model: High-Income Countries have pledged USD 100 billion to respond to the climate crisis through mitigation and adaptation spending to Low- and Middle-Income Countries (LMICs). While there is a long way to go in securing all these resources, questions of the efficacy as well as the quantity of spending are of increasing importance given a concerning lack of evidence on the effectiveness of significant parts of climate spending and the widely diverging results found from the little evidence we have. Additionally, vulnerable countries that need climate finance the most are often the least likely to receive it given capacity gaps. This situation is slowing the globe's response to the climate crisis and depriving LMICs of critically needed for adaptation to preserve development gains. 
In this context, Instiglio has developed a partnership with Kenyaâs National Environment Management Authority (NEMA) to prepare highly cost-effective mitigation and adaptation programs that would entail RBF payments linked to climate results and be funded by the Green Climate Fund (GCF) and other partners. Specifically, Instiglio is supporting NEMA with the development of an evidence-based Protected Areas program that would achieve substantial climate mitigation and environmental benefits.
Policy sectors — Employment and private sector development: No; Education: No; Social protection: No; Criminal justice: No; Health: No; Agriculture: No; Environment and climate change: Yes; Water, Sanitation and Hygiene: No; Energy: No; Humanitarian: No; Early Childhood Education: No; Other: 
Primary SDG goal: 13, 15
Country income classification of beneficiaries — Low-income: No; Lower-middle-income: Yes; Upper-middle-income: No; High-income: No
Notes: Data for this pipeline project was last updated in August 2024
Delivery location: Kenya