Description

Pooled financing mechanisms support local governments that are too small to undertake debt structuring and negotiations on their own, or at least to achieve a lower cost of funds than they could achieve alone. These funds usually come with specific eligibility criteria and may have a particular sector focus. Governments also often channel grant funds for project development and subsidies to specific activities through such entities.

Instrument category

Aggregation models

Implementation status

Low - limited evidence available

Enabling conditions and success factors

• Strong coordination between stakeholders, ideally by a neutral party without conflict of interest, for example, in the energy efficiency services or products that can be purchased.

Instrument benefits

• Overcomes high upfront costs.
• Increases investor interest and confidence due to higher returns and greater stability than financing individual entities.

Challenges and risks to implementation

• Many stakeholders don't realise the beneficial impact of energy efficiency improvements on buildings and equipment, so it is important also to raise awareness and promote pooling finance options.
• Building consensus, trust and a shared approach among stakeholders can be challenging. A neutral enabling agent is often important to broker such relationships.

References

Case studies

Pooled finance and a blended finance approach in the Water and Sanitation Pooled Fund (WSPF) in Tamil Nadu, India

Pooling finance for energy efficient buildings in South Africa