Request for Proposal

Understanding the use of guarantees by donors/impact investors

to catalyse commercial funding and bridge capital continuum
March 2024
Context
Shell Foundation and CASEE
Shell Foundation (SF), an independent UK charity registered in England and Wales, and the UK
Government’s Foreign, Commonwealth and Development Office (FCDO) launched the £30m, seven-
year Catalysing Agriculture by Scaling Energy Ecosystems (CASEE) programme in 2019. In 2022, it
extended the CASEE programme to unlock greater flows of capital into the energy-for-agriculture
ecosystem. Capital will be unlocked by bridging the current capital continuum gap between
Development Finance Institutions (“DFIs”) and other institutional investors understanding and risk
appetites of early-stage investment and the needs of high-impact, scalable businesses supporting
productive, climate-resilient, low-emission and sustainable solutions.
The extension builds on CASEE’s work during the first three years of operation, which has shown that
there remains a significant lack of capital to support early-stage businesses focused on agriculture in
low- and middle-income countries. This reflects high (real or perceived) risks of investing in these
markets, precluding many venture capital or other market-based investors from engaging.
Background
Blended finance/catalytic capital often refers to the deployment of investments that are distinct
from “market-rate” impact investments. That is, that they have expected financial returns that are
“below-market-rate” and that this type of finance is designed to play a key role in enabling or
‘catalysing’ investors that may not otherwise have made an investment but for the catalytic capital
invested. This type of capital plays a key role in bridging the capital continuum gap that remains
present in market.
Multiple investment instruments can be deployed as blended finance/catalytic capital products,
including grant, debt, equity and guarantees. Guarantees are instruments used to mobilise private
resources – be they from private companies, banks, NGOs or investment funds. For a fraction of the
potential cost of the risk exposure undertaken, considerable liquid resources can be deployed for
investments to improve economic and social conditions in developing countries.
Within the development space, guarantees can be used to address the market and information
asymmetries that prevent DFIs and other private capital investors from investing in early-stage
impactful businesses. Their use can also help improve the pipeline of investment opportunities for
commercial investors.
Objectives
SF would like to commission research that assesses the role and use of guarantees as a type of
catalytic capital instrument, identifies how donors and impact investors have been able to deploy
guarantees in their transactions and demonstrates how effective its use has been to catalyse funding
from other stakeholders (e.g., DFIs, private capital, institutional investors).
High-level research objectives are to:
• Set out the current literature and landscape around blended finance and catalytic capital –
definitions, instruments, deployment in market to-date, quantitative assessment of impact
(where possible).

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 • Provide an overview and assessment of various tools and instruments that can be deployed
by donors/impact investors (visual mapping/analysis).
• Understand how donor agencies/impact investors currently deploy guarantees in their
transactions and how they use them to reduce the risk profiles of their transactions.
• Assess how effective donor agencies have been able to use guarantees to catalyse more
funding for their transactions.
• To provide evidence, data, and tools of how donors have used guarantees to catalyse
funding, including case studies with quantitative and qualitative analysis of both effective
and ineffective use.
• Provide an assessment of how effective guarantees are and have been in unlocking capital.
• Provide an assessment and recommendations of what will make guarantees more effective
in unlocking capital from the perspective of DFIs and other commercial investors.
• Understand the role that guarantees must play within the blended finance tool kit and key
recommendations for donors/investors going forward.
The specific research questions would be defined during the planning phase by the consultant/
research organisation along with SF portfolio enterprises working on financing solutions, but at a
high level would seek to address the following:
• How effective are guarantees in unlocking capital alongside other available instruments and
what are the optimal structures for guarantees to support customers (e.g. percentage
coverage, first loss or second loss or pari passu, for what kind of losses?).
• How do donor agencies/impact investors deploy guarantees in their transactions?
• How have donor agencies/impact investors been able to use guarantees to catalyse funding
for their transactions? What other mechanisms have they sought to use?
• How successful have they been in utilising guarantees and what challenges have they faced
in doing this? When they haven’t worked what was the diagnosis (investor too distant from
SME lending/specific products/wrong structure/insufficient coverage?).
• What from the perspective of DFIs and other investors will make guarantees more effective
going forward?
• How do we see guarantees fitting into the blended finance tool kit and key
recommendations?
Target Audience
SF is looking to commission this work with a target audience of funders (commercial, donors,
institutional and impact investors). This research will provide insights to stakeholders to effectively
use guarantees to unlock capital and develop the blended finance toolkit.
Methodology
The research should focus on the perspectives of donors that have utilised guarantees to unlock
capital and investors (institutional, impact, etc). The research would combine both primary and
secondary data, with secondary data being used to collate existing evidence about the use of
guarantees by stakeholders to unlock capital, along with in-depth key informant interviews (KIIs)
with these stakeholders. However, the research organisation will define and provide the best
approach within the scope of work.

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Deliverables
The expected deliverable for the project would be a high-quality written report which would be
published online, with a robust methodology that clearly situates the work in the existing academic
and non-academic literature. The exact format and length would depend on the findings, but we
expect the finished output to be robust enough to be reviewed by a group of sector experts and be
considered rigorous enough to have moved the field forward.
An interim report is also expected to be delivered that includes initial research findings for review
and input from SF ahead of the final report being prepared.
Proposals will be assessed based on a combination of the methodology and knowledge and
experience of the team in conducting research on similar topics.
This research project is expected to be conducted over a three month period, beginning in April
2024.
Next Steps
If you are interested, please submit a proposal explaining how you would approach this work to
Habib Nuhu (habib.nuhu@shellfoundation.org) by 12 April 2024.
Please ensure that you include:
• A summary of your methodology.
• Your specific ideas with relation to:
o How you would produce high-quality outputs for the project.
o How you would ensure that the output from this work is action-oriented and
relevant for our target audience.
o What you would bring to this work that no-one else would.
o Your ideas on dissemination, follow-up conversations and how to spur broader
conversations on the research and sector more broadly. How could you support or
facilitate this?
• Any examples of similar or parallel work that you have conducted in the past, including
examples of consumer research/impact evaluations with a gender lens.
• Team profiles of the team that would work on this project, with links to their past work in
this field, if available.
• Details on how you would facilitate in-person data collection as we would prefer an in-
person/hybrid approach rather than purely telephonic/online data collection.
• A proposed budget and payment schedule of the research in USD.

Evaluation Criteria
• Proposals will be evaluated against the following criteria:
o Depth and quality of prior experience in undertaking similar research projects.
o Quality of the project team that will undertake research.
o Understanding of needs and methodology (additional consideration will be given to
proposals that strengthen the objectives and needs of the research).
o Proposed timeline and budget.