Place Based Transition Funds: a playbook for systemic portfolio construction

While it has been readily acknowledged that new approaches are needed to finance the climate transition, there are no formalized guidelines or clear process for designing, financing, and implementing a coordinated effort for policymakers and investors seeking to activate capital for climate action at a geography-wide scale. Local governments are key actors to implement climate transition plans for their jurisdictions, but often lack the budget and financial capacity to fund them. Traditional finance often optimizes for single proven assets, such as solar, rather than multiple assets that align with community needs. To address the disconnect between local communities and finance for climate transitions, the Peace Department's Carbon Residency program advances an approach based on  "Place-based Transition Funds,” which can use this playbook for constructing their systemic portfolios. The steps in this playbook represent a replicable method for financing the transition of distinct places, like cities, regions and island economies. It was designed by integrating climate frameworks that align Paris Agreement goals with local contexts, and uses systems thinking to pinpoint and prioritize enabling conditions for investable projects and interventions. Key highlights and unique components presented in this work include: a geographic selection scorecard, an integrated framework for portoflio construction, a project screening scorecard, loan guarantee approaches to de-risk investments, and community empowerment through steward ownership. 

This Playbook introduces this method as a tool for fund originators, investors, mayors and governors, and community leaders to formulate unified, attractive, and impactful place-based transition portfolios. It also serves as a resource for philanthropic program officers, fund managers, and family offices engaged in climate finance, by providing opportunities for creating bankable decarbonization projects that deliver profit, environmental, and social benefits. This process strategically guides the flow of investments by designing resilient and effective investment portfolios that align with local climate initiatives, policy goals and community needs.