The two biggest challenges that investors face in providing seed capital financing to early stage projects and companies are the higher transaction costs and insufficient returns offered by these small, less mature and more risky ventures. SCAF is designed to address these two issues, offering investment fund managers two types of cost-sharing support for those willing to include a seed investment window within their overall investment strategy.
SCAF's enterprise development support shares costs associated with sourcing deals, enterprise development services and seed scale investment transactions. As part of this arrangement, the fund manager commits to providing enterprise development services to qualified local entrepreneurs to identify and develop a pipeline of early stage clean energy investment opportunities.
SCAF also offers seed capital support to offset the hurdle of higher perceived risks and lower expected returns when dealing with early stage clean energy project and enterprise developments. SCAF support ranges from10% to 20% of each seed capital investment and is used to cover some of the elevated project development costs that normally are financed by the project developer, such as technical assessments, environmental impact analyses and other aspects of the permitting process.
SCAF is implemented through the United Nations Environment Programme, the Asian Development Bank and the African Development Bank, with support from the Global Environment Facility and the United Nations Foundation. Technical support for SCAF activities is provided by the Nairobi office of the Frankfurt School of Finance and Managemen