Climate Possible: How funders can accelerate innovation for a resilient future

Climate Possible How funders can accelerate innovation for a resilient future

About Challenge Works Challenge Works is the new name of Nesta Challenges.

We are a social enterprise founded by the UK’s innovation agency Nesta. For a decade, we have established ourselves as a global leader in the design and delivery of high-impact challenge prizes that incentivise cuttingedge innovation for social good. In the last 10 years, we have run more than 80 prizes, distributed £84 million in funding and engaged with 12,000 innovators.

The world finds itself at a critical juncture. Together, we face multiple compounding problems, but there is enormous opportunity to discover solutions and expand innovation frontiers. The impact of climate change is felt more harshly by the year, but innovation can mitigate this impact; the growth of chronic health conditions and the widening global inequity in access to healthcare can be reversed; an ever more complex, connected and digitally driven world poses a multiplicity of societal challenges but also makes rapid, positive, life-changing technological change possible – if harnessed and directed properly.

We believe no challenge is unsolvable. Challenge Works partners with organisations, charities and governments around the globe to unearth the entrepreneurs and their innovations that can solve the greatest challenges of our time.

Challenge prizes champion open innovation through competition.

We specify a problem that needs solving, but not what the solution should be. We offer large cash incentives to encourage diverse innovators to apply their ingenuity to solving the problem. The most promising solutions are rewarded

To discuss this paper, please contact authors Charlotte Macken and Kathy Nothstine.

We are grateful for the many thoughtful contributions from Constance Agyeman, Tris Dyson, Piotrek Gierszewski, Sarah Holliday, Haru Majengwa, Janet Southern McCormick, Kasia Murphy, Olivier Usher, and Naomi Whitbourn.

Design: Green-Doe Graphic Design Ltd Illustrations: Festoon Studio Photography: Shutterstock on page 11, otherwise from Unsplash

with seed funding and expert capacity building support, so that they can prove their impact and effectiveness. The first or best innovation to solve the problem wins. This approach levels the playing field for unknown and previously untested innovators so that the best ideas, no matter their origin, are brought to bear on the most difficult of global challenges.

Challenge Works is the trading name of Nesta Challenges. Visit us at challengeworks.org

Climate Possible How funders can accelerate innovation for a resilient future

Urgent action is needed to accelerate innovation

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Innovation can help us through the climate crisis

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The choices we make in the next decade will determine our future Water and food Urban development Energy Call to action

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Unlocking climate innovation is necessary to achieve systemic change

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Systems-level transformation Mission-driven innovation Funding innovation

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Challenge prizes create pathways to developing, testing and scaling innovation

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When is a challenge prize the best option?

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Selection of our climate response challenge PRIZES

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Example ideas of climate response challenge PRIZES

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Climate Possible: How funders can accelerate innovation for a resilient future

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Urgent action is needed to accelerate innovation The science is clear: we need to cut global carbon emissions to limit the worst impacts of climate change and adapt to a changing world.

The urgency of this problem creates a resounding call to action to accelerate innovation to meet our emissions targets whilst building global communities’ resilience to the worst consequences of a changing climate.

Despite the undeniable need, the multiplicity of the problems we face, and the many brilliant individuals and institutions working to solve these problems, we risk failing to develop, test and scale profoundly transformational solutions that will help planet Earth and its inhabitants tackle the climate crisis.

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We need to challenge innovators to tackle the world’s biggest crisis with bold calls to action centred around clear goals – because we don’t have time to take modest, piecemeal steps.

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We need to reward and nurture the most promising ideas – because we don’t have the time or resources to spend on anything that is not moving the needle forward.

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We need to support new and different actors, including people and organisations from outside the environmental sector with unexpected approaches and radical ideas – because we’re wasting talent by overlooking good ideas and there’s no excuse for wasting talent in an emergency.

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We need to support a diversity of solutions that can achieve systemic change – because solutions are more resilient and effective if they work in tandem to tackle problems from different angles.

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We need to create pathways for the best solutions to rapidly scale – because funding one-off solutions will never achieve global impact.

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To meet the scale and urgency of this crisis, funders – whether public, non-governmental or private – must take a courageous approach to not only what but how they fund. We have agreed that we need to devote at least $100 billion a year to climate finance – and that is just a fraction of what is truly required – but these targets have not been met. Not only do we need to increase financing, but also need to prioritise how funding is deployed and remove barriers to access.1

Before defaulting to the same old approaches and funding mechanisms, it is imperative that funders ask themselves: •

How can we most effectively support the creation of breakthrough solutions?

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What do we need to do to quickly and effectively test promising solutions so that we can drive adoption and transfer?

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How can we supercharge the process to enable urgently needed solutions to scale?

In the following pages we set out the gaps in climate innovation problem-solving. As challengedriven innovation experts, we articulate the role that challenge prizes can play in a funder’s portfolio to advance net zero emissions and reduce the harmful effects of climate change – particularly for our most vulnerable communities.

Closing the climate funding gap is not enough; we must also think critically about how funding is deployed to deliver the transformative change we need.

1.

E. Ares and P. Loft, COP26: Delivering on $100 billion climate finance. UK Parliament: House of Commons Library, (2021).

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Innovation can help us through the climate crisis The choices we make in the next decade will determine our future According to reports from the United Nations Intergovernmental Panel on Climate Change (IPCC)’s sixth assessment cycle, the world is currently under-prepared for the coming impacts of climate change, particularly beyond 1.5°C global warming. If we are to address the climate crisis, transformative mitigation and adaptation measures are needed.

Average annual greenhouse gas emissions were at their highest level in human history between 20102019.2 Based on current projections, limiting warming to 1.5°C is beyond our reach unless there are immediate and deep emission reductions across all sectors.

More than three billion people already live in hotspots of high vulnerability.3 Increases in temperatures as well as the frequency and severity of extreme events such as droughts, floods, wildfires, crop failure and continued sea level rise have already pushed many ecosystems, people and infrastructure to the limits of their adaptive capacity. While the level of climate vulnerability varies across regions, nowhere is untouched by the impacts of climate change, which are even more widespread and disruptive than the IPCC predicted 20 years ago. We need urgent, accelerated and ambitious action in adaptation efforts alongside significant cuts in greenhouse gas emissions across all sectors.

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H. Ritchie et al., CO₂ and Greenhouse Gas Emissions, Our World in Data, (2020).

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H.-O. Pörtner et al., Climate Change 2022: Impacts, Adaptation, and Vulnerability, IPCC

Globally, we are starting to see evidence of change and ambition to change. Zero emissions targets have been adopted by at least 826 cities, 103 regions and 1,565 companies across all continents.4 Some countries have already achieved a steady decrease in emissions consistent with limiting warming to 2°C, and many cities and countries have designed and implemented adaptation plans to address things like food production, water conservation and extreme weather.

The IPCC has also identified options in every sector which could at least halve emissions by 2030. We think that focusing innovation around a diverse set of outcome-focused challenges can turbocharge innovation to deliver on these ambitions.

(2022).

4.

T. Day et al. Navigating the nuances of net-zero targets, NewClimate Institute & DataDriven EnviroLab, (2020).

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Water and food Climate change constitutes a major barrier to achieving the Sustainable Development Goals (SDGs). For example, nearly two thirds of the world’s population currently experiences severe water scarcity at some point in the year, in part due to climate change, and is projected to get much worse.5 At the same time, both flooding and drought risks are increasing exponentially, and the associated impacts will disproportionately affect places with low adaptation capacity.

Combined with the escalation in other climate hazards, progress on food security and nutrition (SDG 2), is undermined. Climate change is already affecting crop yields through changes in temperature,

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precipitation patterns and extreme weather events, as well as risks to food safety during transport and storage.6 We need to ensure secure food systems for the growing global population, but unfortunately our industrialised food systems are also a major contributor to climate change. With current farming practices, agriculture and land use change account for over a quarter of global greenhouse gas emissions.7 Rapid innovation for a dramatic overhaul in the way we grow food is needed to reduce emissions from agriculture, whilst maintaining production in a changing climate.

Innovation enabled the world to produce and distribute food at

scale; now we need to mobilise this same innovation and ingenuity to not only grow the food we need but reduce our food systems’ impact on the planet.

With the right approach, agriculture and land use practices can not only reduce the sector’s climate impacts but can go even further, allowing us to harness the full potential of nature based systems to act as carbon sinks and counteract the emissions via photosynthesis.8 If we can build on our rich datasets about land use and the environment, and then innovate and adapt agricultural processes accordingly, our food systems can go from being a major source of emissions, to one of our most valuable ways to counteract it.

M. Mekonnen et al. Four billion people facing severe water scarcity, Science Advances, 2, 2 (2016).

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IPCC Working Group (WG) II, Special report on climate change and land: Food Security, IPCC (2019).

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D. Laborde et al., Agricultural subsidies and global greenhouse gas emissions, Nature Communications, 12, 2601 (2021).

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Z. Sha et al. The global carbon sink potential of terrestrial vegetation can be increased substantially by optimal land management, Earth and Environment Communications, 3, 8 (2022).

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Urban development Cities represent one of humanity’s greatest defences against the climate crisis: they are centres of innovation and knowledge-sharing and models for breakthrough technology, whilst being our global economic engines. Systematically changing how we build and run our cities will have immense global impact.

However, urban environments are particularly vulnerable to climate change, facing risks from extreme weather events and natural disasters, grappling with rising temperatures, ageing infrastructure, and buildings not suited for changing conditions. For example, more than a billion people living in cities and settlements in lowlying coastal areas will be at risk of coastal-specific climate hazards by 2050.9 Moreover, cities are

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contending with significant social and economic inequalities that are only compounded by the climate crisis.

By mid-century, roughly two thirds of the world’s population will be living in urban areas,10 but current building practices are far too carbon intensive to support net zero ambitions. The building sector alone (including constructing and operating buildings) accounts for nearly 40% of global emissions,11 meaning we must adapt building practices to future climate conditions while ensuring wellbeing for all. Further, most future urban population growth will occur in rapidly growing low- and middleincome countries, where, if we don’t institute new practices, emissions will increase exponentially and people will be at even greater risk of climate vulnerabilities.

Transport contributes another 16% of global emissions,12 the majority of which is generated from road vehicles, and that figure is rising rapidly in low- and middle-income countries. We urgently need to explore and scale better ways to build homes and businesses and improve how people and goods move.

Rapid industrialisation and urbanisation have driven global innovation and economic growth.

Now, we need to tap into humanity’s remarkable creativity and ingenuity to develop, test and rapidly scale ways to transform how we live.

Cities urgently need solutions that will help them to adapt to climate change and build climate resilience alongside equitable growth.

H.-O. Pörtner et al., Climate Change 2022: Impacts, Adaptation, and Vulnerability, IPCC (2022).

10. Department of Economic and Social Affairs Population Division, World urbanisation prospects: 2018 revision, United Nations (2018).

11. I. Hamilton et al., Global status report for buildings and construction: Towards a Zero‑emission, Efficient and Resilient Buildings and Construction Sector, UN Environment Programme, (2021).

12. H. Ritchie et al., CO₂ and Greenhouse Gas Emissions, Our World in Data, (2020).

13. H. Lee, Energy is at the heart of the solution to the climate challenge, IPCC Newsroom (2020).

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Energy The global energy system is the largest source of CO2 emissions, accounting for over two-thirds of global greenhouse gas emissions.13 The acceleration of clean energy technologies is encouraging but massive system transformation and scaling is required to achieve net zero, particularly in sectors where carbon is entrenched such as transport and heavy industries.

Increased warming will affect low-

carbon energy creation, storage and distribution systems,14 and the energy transition will alter investment patterns and create new markets and opportunities.

The industrial revolution was fuelled by the rapid development of fossil fuel energy systems that resulted in monumental innovation from modern health care to transport, but it also led to the challenges we now face.

We now need that same spirit of innovation to transform our energy systems: we urgently need to both source new energy supplies, and create energy systems that are self-sufficient and resilient to climate impacts. Importantly, we need to develop and encourage not just breakthrough technology, but also new clean energy generation and trading systems that are equitable and sustainable.

Call to action The scale and scope of mitigation and adaptation actions have increased worldwide. This good news is tempered by the fact that progress is uneven and there are still large gaps between work underway and what is needed to cope with the challenges facing us. Current adaptations typically prioritise immediate and near-term risks rather than the transformational action we need. Additionally, as the world warms, current adaptation measures will become less effective.

The IPCC has found that many ecosystems are already near or beyond their hard adaptation limits and the people who rely on these systems are pushing past their soft adaptation limits. If temperatures exceed 2°C of warming, meaningful adaptation to climate change will become impossible in some regions of the world.

To realise the potential of the critical decade ahead of us, bold and decisive action is needed

across all fronts. Such wholesale transformation is challenging and threatened by conflicting priorities within the system, which risk leading to greenwashing and maladaptation, where adaptation interventions lead to increased vulnerabilities.

For funders, the challenge is how to deploy their resources so that they are meaningfully contributing to transformational change while minimising the risk of missed opportunities and missteps.

Where proven solutions exist they must be enabled to scale. Where such solutions do not exist, funders must galvanise innovators to action to create the urgently needed breakthrough technologies.

14. R. Entriken and R. Lordan, Impacts of extreme events on transmission and distribution systems, IEEE Power and Energy Society General Meeting, (2012).

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Unlocking climate innovation is necessary to achieve systemic change Remarkable creativity and innovation created the systems underpinning the modern world, but in some ways have also brought us into the climate crisis.

Now, we need to harness that same power of innovation and human ingenuity to solve these problems.

Funders must act decisively to support the changes we need by 2030. Helping to bring about necessary adaptations and sharp reductions in emissions means recognising that climate is critical

to the delivery of every funder’s mission and each action must be optimised for success. The time for action is now and this means that the world cannot afford for funders, whether public, non-governmental or private, to default to traditional approaches or not move at pace.

Making progress on net zero emissions means changing how our societies and economies work, how we live our daily lives and manage ecosystems. This means developing new solutions or supporting promising solutions to test and scale. In doing so we must also minimise the risk of maladaptation and tackle existing inequalities that increase climate vulnerabilities.

Systems-level transformation The climate crisis requires engaging a broad spectrum of actors – including governments, businesses, philanthropy, regulators, and most importantly, citizens – to develop, test and scale solutions.

The interconnected nature of the many spheres affected by and contributing to climate change mean that systems-level transformation is necessary.

We don’t need one-off solutions reliant on grant funding; we need

to direct our resources to stimulate innovations that are commercially viable and capable of transforming business as usual approaches. The challenges facing our food, energy, water and urban systems require a suite of interconnected solutions.

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Mission-driven innovation Using a mission-oriented approach as a framework for the required systemic change will help to contextualise the many challenges to be solved in addressing the climate crisis.

Mission-oriented innovation focuses funding around impact, measurable change and clearly defined outcomes, rather than processes. Rather than deploying

a variety of funding instruments in a piecemeal approach, missionoriented innovation concentrates activity around a defined set of goals and generates a portfolio of investments building toward these goals.

Through creating clear goals, incentives and rewards, missionoriented innovation can provide

support and recognition to the innovators that are most willing to engage with societal challenges.

This enables funders to play a more active role in shaping the direction of innovation, invites unusual suspects to contribute new solutions, and helps to break down silos within and between government, industry sectors and stakeholder groups.

Funding innovation What we do in the next decade will define our future. For funders, this means that there is a moral imperative to maximise the impact of each action. Where new or innovative solutions and approaches are needed to tackle a problem, it is crucial to consider which funding mechanism will be most effective at:

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Effectively supporting breakthrough solutions to this problem.

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Quickly and effectively testing promising solutions so that we can drive adoption and transfer.

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Supercharging the process by which urgently needed solutions can scale.

The same funding mechanism will not be the best route to all of these outcomes and that is why it is essential that funders are able to call on different tools and approaches, to select the most suitable for a given problem and context.

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Challenge prizes create pathways to developing, testing and scaling innovation Challenge prizes are a way to deliver innovation around a specific mission.

They are well-suited for complex problems that lack obvious, straightforward solutions: challenges set out a problem to be solved, but don’t specify the route to the desired outcomes (unlike procurement exercises, where the solution is readily defined). They allow a wider range of actors to propose solutions, and welcome proposals

that are potentially more risky and experimental, but only reward those that work best. Challenge prizes offer a series of incentives and support to develop, test and scale solutions, with a final prize given to whoever can first or most effectively meet a defined goal.

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When applied to the right kind of problems, challenge prizes can:

Create breakthrough innovations Radical new solutions are needed to respond to the climate crisis – to generate and scale cleaner energy production, to produce enough food, to build and rebuild our cities better. Challenges guide and incentivise the smartest minds to create the solutions we need quickly.

Because challenge prizes only pay out when a problem

has been solved, you can support a cohort of long shots, radical ideas and unusual suspects. This allows funders to make the ambitious bets that the climate crisis requires without losing precious time to solutions that do not deliver expected results.

Mobility Unlimited Challenge In partnership with the Toyota Mobility Foundation, we designed and delivered the Mobility Unlimited Challenge, a $4M global challenge to support radical improvements in the mobility and independence of people with lower-limb paralysis through smarter assistive technology.

The challenge aimed to harness creative thinking from across the world to accelerate innovation and encourage collaboration with endusers, in order to result in devices that will integrate seamlessly into users’ lives and environments,

enabling greater independence and increased participation in daily life.

Ten promising entrants were supported to develop their solutions and five finalist teams accessed further funding and support. The

final winner, who created an ultralightweight manual wheelchair made from carbon-fibre using smart sensors, was awarded a $1M prize to develop their innovation further and take it to market.

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Help innovators thrive Through cash and capacity building, challenge prizes help to develop a cohort of thriving innovators around a problem. It’s not just about one winner, but about supporting and cultivating a collection of promising innovators by providing funding, expertise, profile raising,

investment and networks. The urgency of the climate crisis means that we must remove the barriers solvers face and expand the community of innovators acting to tackle the crisis.

Climate Smart Cities Challenge In collaboration with UN-Habitat and Viable Cities, we designed and delivered the Climate Smart Cities Challenge, a €300K, two-stage global innovation competition to accelerate the shift to climate neutrality in cities and create a better future for all, by empowering innovators and communities to collaborate in designing and demonstrating solutions to the climate crisis.

In partnership with four cities – Bogotá (Colombia), Bristol (United Kingdom), Curitiba (Brazil), and Makindye Ssabagabo (Uganda) – we engaged a broad collection of public officials and industry stakeholders to define specific climate-related challenges. We launched an open innovation competition to invite innovators globally to solve the city challenges (focused around

climate neutral, affordable housing; optimising freight systems; and creating zero-carbon neighbourhoods integrating waste, energy and mobility).

The four cities worked closely with 45 finalists in an intensive cocreation phase to target different aspects of the cities’ climate and sustainability challenges with the

purpose of achieving multiple, largescale and transformative outcomes.

Four winning teams will go on to plan a system demonstrator in each city, a portfolio of connected innovations that uses multiple levers – not just technological innovation, but also institutional, legal, regulatory, cultural, and behavioural change.

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Unlock systemic change The high profile of a challenge can guide policy and investment decisions and shape the future development of markets and technologies. Challenges are a route to identifying best practice, shifting regulation and sparking policy change. Given the transformational change needed to address the climate crisis, challenge prizes can

simultaneously support better solutions while unlocking other enablers, such as signalling funder intent, creating new markets or informing the development of better regulation.

Open Up Challenge We designed and delivered the £4.5M Open Up Challenge, backed by the Competition and Markets Authority together with the UK’s five biggest banks, to radically improve the financial services available to the UK’s five million small businesses, by creating a more vibrant and innovative marketplace for banking services.

Applicants were invited to develop new products and services enabled by recently-introduced open banking regulations. Innovators gained access to an exclusive data sandbox, funding and expert capacity-building support covering legal and regulatory considerations, user experience, investment readiness and marketing. Insights from the challenge informed the evolution of open banking regulations.

We followed up with a second challenge, Open Up 2020, a £1.5M challenge in partnership with the Open Banking Implementation Entity, to transform and open up the UK banking industry by giving people control over their financial data and enabling the development of innovative, personalised products. The challenge highlighted the potential that open banking has

to revolutionise financial services — bringing significant benefits to both consumers and small businesses and holding particular promise for people partially or entirely excluded from access to fair financial services. Fifteen innovators were supported with funding and other types of support, and four were selected as winners.

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When is a challenge prize the best option?

Challenge prizes can be applied to any issue but not every problem. Like any funding mechanism, they need to be designed and deployed thoughtfully and with consideration given to their problem fit. Building on a decade of experience designing and delivering challenges across a wide range of sectors, we can help funders and partners understand when to use a challenge prize. Further guidance on how to design a challenge prize can be found in Challenge Prizes: A practice guide.

Green light criteria We developed the challenge prize ‘green light criteria’ to identify if a problem is a good fit for solving through a prize. Typically, during the process of researching and framing a challenge, multiple problems are identified and must be prioritised or discarded. The green light criteria help to sense-check whether a problem is suitable to designing an impactful innovation challenge.

They can also highlight where further work is needed to articulate the barriers and opportunities for innovation.

The green light criteria are: The problem is well defined and there’s a clear goal for innovators to work towards. The ideal challenge is open for lots of innovators to solve, in quite different ways, so you don’t want to be prescriptive about the method. But if you can set out unambiguous success criteria, so that people know what they are aiming for, then the expectations will be much clearer.

The best solutions will be generated by opening up the problem to a wider pool of innovators.

Sometimes it’s really clear who is best placed to solve a problem – where there’s a market leader, or wellestablished incumbents who do a good job. But some problems, particularly those that are open to being solved in multiple different ways, benefit from fresh thinking from a wider set of people than are currently working on them.

A challenge could provide the incentives needed to motivate innovators. Challenge prizes often provide both financial incentives and capacity-building support for innovators, coupled with the profileraising benefits of being a finalist or winner of a major prize. If the opportunity is attractive, and there aren’t insurmountable barriers to taking part then a challenge prize could be a good approach.

Solutions will be adopted or taken to market. In a challenge prize, innovators will get funding if they win – but that funding is an incentive, not a grant, and the money will eventually run out. Challenge prizes work best when they can spark innovations that are financially sustainable, regardless of the prize money itself.

A challenge will accelerate progress. A challenge prize can turbocharge impact by ensuring it’s focused on accelerating progress rather than funding work that would already be happening.

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Selection of our climate response challenge Prizes We have run a series of challenge prizes over the past decade to support climate response (in addition to the Climate Smart Cities Challenge described in the previous section).

For further details on our catalogue of past and current challenges visit challengeworks.org.

Big Green Challenge The £1 million Big Green Challenge sought to stimulate and support radical new community-led responses to climate change in the UK. The prize was awarded based on evidence of reduced levels of CO2 and community engagement plus potential for further impact. The challenge revealed some notable innovations including new and more effective ways of delivering home energy

checks; innovative use of behaviour change tools (such as pledges); entirely new measures to influence energy behaviour (e.g. a voluntary consumption limit); and new legal, financial and governance structures to support community ownership of renewable energy. The ten finalists cut CO2 emissions by at least 1,770 – 2,059 tonnes, and the winners reduced emissions by up to 46%.

Homegrown Innovation Challenge The Homegrown Innovation Challenge – a six-year, $33M (CAD) prize designed by Nesta Challenges and delivered by the Weston Family Foundation – aims to identify teams and support the development of tools and technologies that enable Canadian farmers and producers to sustainably and competitively grow berries out of season. By solving the interconnected challenges that currently prevent out-of-season production at scale,

the Homegrown Innovation Challenge will catalyse a range of solutions relevant to a broad array of fruit and vegetable crops in Canada and around the world. The initiative launched in February 2022 and an innovation team that progresses through all three challenge phases (spark, shepherd and scale) and ultimately claims the final awards would receive up to $8 million CAD to develop and scale their innovation.

Mayor's Resilience Fund Data Driven Farming Prize The $3M Data Driven Farming Prize, funded by USAID and Feed the Future, challenged innovators to develop tools and approaches that source, analyse and translate data into actionable, timely and context-specific information for smallholder farmers to improve value from agricultural productivity in Nepal. International teams of

innovators created technological solutions and engaged in a co-creation process to help farmers in Nepal use data and information more effectively to improve their productivity. Four winners from Nepal, Canada and Germany were announced in September 2017.

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disruptive and innovative gamechanger providing an intelligent solution for Lambeth and other London Boroughs to model and assess health impacts from air quality interventions. The winner of the Renewable Energy Challenge created a floating solar array in London’s Royal Docks that will provide clean renewable energy directly to London’s City Airport, as well as other local customers.

Ofwat Innovation Fund

Dynamic Demand Challenge The £100,000 Dynamic Demand Challenge Prize, run in partnership with the National Physical Laboratory’s Centre for Carbon Measurement, aimed to stimulate new products, technologies or services using data to achieve reduced carbon emissions by shifting energy demand to off peak times or through excess renewable generation. Five finalists were selected and spent eight months developing their prototypes. The winner was a

The £1M Mayor’s Resilience Fund, run in partnership with the Mayor of London, incentivised innovators to address socially impactful issues facing London and help it to emerge stronger from COVID-19. Thirty-five finalists engaged in an intensive co-creation phase with local government problem-holders, and ultimately 10 organisations were announced as winners to implement solutions to climate resilience and other local challenges.

The winner of the Air Quality Challenge created a

smart heating control product that performed scheduled demand shifts, reducing costs for homeowners and allowing electricity suppliers to better manage demand.

The product implemented a time-shifting algorithm to subtly alter domestic heating schedules, modulating electricity demand according to the needs of electricity suppliers.

Climate Possible: How funders can accelerate innovation for a resilient future

Ofwat, the water regulator for England and Wales, has established a £200 million Innovation Fund to grow the water sector’s capacity to innovate and enable it to meet the evolving needs of customers, society and the environment. Delivered by Nesta Challenges, and supported by Arup and Isle Utilities, the Fund is using innovation competitions to support highly collaborative initiatives which address some of the biggest challenges facing the sector – from reducing greenhouse gas

emissions, to building resilient infrastructure. In the first three competitions, 41 winners have been awarded more than £63 million, including an initiative to plant and restore seagrass meadows on the Essex and Suffolk coastlines to revitalise natural habitats and capture ‘blue carbon’; a scheme to turn ammonia produced from wastewater into green hydrogen gas; and a project to deliver the world’s first ‘water neutral’ housing developments.

Example ideas of climate response challenge PRIZES We have explored a number of concepts for potential challenge prizes that could accelerate innovation in mitigating and adapting to the climate crisis. We’ve talked to experts, sketched out possible designs and scenarios, and workshopped many concepts.

In the following pages, we present six of these ideas, which serve as inspiration for what a range of large-scale challenge prizes could look like in response to the climate crisis. We are keen to explore these ideas, variations on them, and other concepts further with the help of other

actors in this space. Our ultimate ambition is to launch a series of challenge prizes in the coming year that will spur transformational change, enabling us to rapidly develop, test and scale the innovations that our planet and our communities so urgently need.

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Build the City Challenge

Inclusive, climate-resilient smart cities

Sustainable Development Goals (SDG)

Imagine a world in which people are empowered to shape climate-resilient futures for their rapidly growing cities

What would a challenge prize look like?

The problem

Why a challenge prize

In the next 30 years another 2.5 billion people will call our cities home; in Africa alone, urban populations are expected to triple by 2050.15 Billions of people will be highly vulnerable to the effects of climate change, particularly in low- and middle-income countries.16 To transform how our cities respond to climate threats, we need data-driven, evidence-based, inclusive tools to both decarbonise cities and direct investments toward better resilience, shaped by the people who live there.

We need to upskill and empower the next generation of innovators and cities to rapidly create, test, implement and share data-driven planning and development tools and inclusive decision-making processes to understand, analyse and plan for future growth.

A challenge prize run in partnership with rapidly growing cities will enable cities to grow smarter and adapt to climate change. By opening locally based data sandboxes to innovators, a challenge can spark the creation of new tools, products or services with public authorities that enable more sustainable, equitable and impactful digital transformation. The challenge will empower communities that are often left out of the process to participate in the design of future cities, and to shape how breakthrough innovations such as AI or drones or other smart city technologies can manifest in their communities. Enabling innovators to iterate creative solutions in partnership with communities, under an open innovation competition, will foster innovation, support a cohort of local innovators matched with technical expertise, and unleash entrepreneurial energy to solve critical urban problems.

Local data sandboxes

Supporting local innovators

Shaping breakthrough technologies

What are the outcomes?

£15M to develop and test transformative solutions to shape equitable, climate resilient future city growth The Build the City Challenge will invite three cities in low- and middle-income countries that are grappling with rapid growth and face climate vulnerabilities to create and open up data sandboxes. These sandboxes will enable innovators to design data-driven, usercentred solutions in partnership with local residents, businesses, government agencies and services to create better opportunities for all. The city-based

Community empowerment

Smart city innovations based on local demand

Co-designed with local communities

challenges will be designed to foster specific outcomes, such as using data analytics to test interventions against different growth scenarios or create an AI-based emissions metrics tracker, or designing future transport systems based on city growth prediction models, or devising participatory planning and citizen sensing tools to understand pressing local problems.

Data-driven, usercentred solutions

INDICATIVE Timeline 15. B. Hajjar, Africa’s urban population to triple by 2050, Racconteur (2019).

16. H.-O. Pörtner et al., Climate Change 2022: Impacts, Adaptation, and Vulnerability, IPCC (2022).

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Month 1 Open call for cities

Month 12 Shaping city challenges

- Recruiting city partners

- Engage city leaders to frame call to action to innovators

- Outreach to drive applications from diverse contexts - 3 cities selected

- Establish baseline data and impact targets

Month 18 Launch of local challenges - Innovator outreach - Solution development with innovators and communities - Finalists selected for each city - Capacity building - Grant funding

Climate Possible: How funders can accelerate innovation for a resilient future

Month 36 Piloting and testing

Month 48 Winners selected

- Capacity building

- £15M to the three winning teams

- Grant funding - Demonstrations in real-world contexts - Developing business models - Final submissions

Cultivating the Drylands Challenge

Climate smart agriculture

Sustainable Development Goals (SDG)

What would a challenge prize look like?

Imagine a world where people living in increasingly arid conditions achieve food security through healthy, resilient and locally-produced food.

$

Shaping tech and innovation

The problem

Why a challenge prize

Approximately half the world’s population is experiencing extreme water scarcity, which makes growing food a complex challenge. Globally, land used to grow food may lose up to 10% of its productivity by 2050 due to the effects of severe climate change.17 This challenge is in addition to the need to satisfy an anticipated >60% increase in global food demand by 2050.18 Alongside their vulnerability to climate change, our food systems are also a leading cause of climate change. We urgently need to develop innovative ways of growing the food we need while reducing our food systems’ impact on the planet.

Unlocking systemic change will require more than technological breakthroughs. The farming communities who are most vulnerable to climate change typically have the least capacity to innovate. This means that it is imperative that we take community-driven approaches to developing, testing and scaling solutions that address problems, whilst also avoiding negative consequences for the wider system. The challenge will de-risk the innovation cycle and level the playing field so that a range of stakeholders, including those who are community-based, can engage and innovate on equal footing. It will act as a brokerage opportunity to facilitate the formation of these inclusive and collaborative partnerships. In addition to supporting innovative solutions and partnerships, the challenge will unlock systemic change by acting as a transparent platform generating evidence of what works to transition towards a more sustainable global agricultural system.

Shaping tech and innovation

Providing funding and investment

Community engagement

Supporting partnerships

Capacity building

What are the outcomes?

Climate smart solutions

$

Economic improvement Reliably increased crop yields

Fostering community based approaches

£5M to the solution that most effectively enables smallholder farmers to increase agricultural production of cereal crops in an arid location using limited resources The Cultivating the Drylands Challenge will push the boundaries of agricultural technologies and practices.

It will focus on resilient and water-savvy farming to support farmers to consistently boost crop yields and enhance food security. Solutions could include sustainable closed-loop systems and resource recycling;

smart and precise management approaches; new materials and soil innovations; to biotechnological breakthroughs. Successful solutions will work hand-inhand with smallholder farmers to sustainably increase food production while building their own climate resilience.

INDICATIVE TIMELINE 17. H.-O. Pörtner et al., Climate Change 2022: Impacts, Adaptation, and Vulnerability, IPCC (2022).

Month 12

Month 24

Developing proof of concept

Piloting and scaling

- Innovator outreach

- Capacity building

- Capacity building

- Consortium building

- Grant funding

- Repayable loans

- Submission of proof of concepts

- Piloting and testing through farm demonstrations

- Developing business models

- Semi-finalists selected

18. M. Van Dijk et al., A meta-analysis of projected global food demand and population at risk of hunger for the period 2010–2050, Nature Food, 2, 494-501 (2021).

22

Month 1 Open call

Climate Possible: How funders can accelerate innovation for a resilient future

- Finalists selected

- Generating evidence - Final submissions

Month 48 Selection of winners - £5M to the winning team

Million Hours EdTech Challenge

Insights

Imagine a world where all young people have access to quality education, no matter what circumstances they find themselves in

The problem

Why a challenge prize

Climate change is already a leading cause of human displacement that ranges from short-term relocation, whether internal or international, to permanent migration. Many low and middle-income countries (LMICs) are being disproportionately affected and this is only set to intensify. By 2050, the number of environmentally displaced people is expected to range between 25 million and 1 billion.19

Challenge prizes are effective at incentivising innovations to develop and scale in ambiguous contexts.

Traditional grant models are typically restrictive and prescriptive, requiring grantees to adhere to preset deliverables. Venture capital’s preference for proven track records and quick returns on investment limits access for unproven but promising teams and inhibits innovation cycles that require longer time periods, as is the case in education. Challenge prizes, however, encourage experimentation and innovation alongside the development of viable business models. Their focus on outcomes allows innovators to adapt and improve ideas while enabling funders to support a range of solutions.

Many environmentally displaced young people are unable to access a high quality of education. EdTech provides a promising opportunity to create and deliver flexible curricula suitable for students and communities who have been environmentally displaced.20 Although EdTech is a growing and promising market, few solutions have been successfully adapted to meet the needs of displaced people at scale. To deliver on their potential, EdTech solutions will need support to develop and adapt their technical, content and business models.

Co-creating with communities (access, innovator skillset)

Accounting for different stakeholders (teachers, learners, community leaders)

Designing for different delivery contexts (formal & informal settings)

Resources

Building a multi-disciplinary team (expertise and sectoral)

Time to iterate, user test and scale

Accessing support needed to develop a sustainable business model

£1M to the first community-centred edtech solution that delivers one million hours of quality education to young people displaced by climate change The Million Hours Edtech Challenge will support solutions that are community-centred involving caregivers, teachers and other members of the community in delivering educational outcomes.

Consortias led by LMIC innovators will be encouraged

Barriers facing EdTech innovators

Sustainable Development Goals (SDG)

with tailored packages of support provided to enable their success. The winning solution will be responsive to the complexities of delivering quality education, rapidly and at scale, to children displaced by climate change.

Design

Designing for practical realities (hardware, internet access, energy access)

Developing flexible curricula, accounting for linguistic and cultural differences

Indicative Timeline Month 1

Month 12

Month 24

Open call

Piloting and testing

Scaling

- Innovator outreach - Consortium building

19. A .Flavell et al., IOM Outlook on Migration, Environment and Climate Change, IOM (2014).

20. M. Alfarah and M. Paniagua, The role of ICTs in rebuilding education in areas of armed conflicts: The Syrian case, Edulearn16 Proceedings, 6325-6331 (2016).

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Climate Possible: How funders can accelerate innovation for a resilient future

- Submission of proof of concepts - Semi-finalists selected

- Capacity building - Grant funding - Demonstrations in community - Finalists selected

- Capacity building - Grant funding - Refining solutions - Developing business models - Generating evidence - Final submissions

Month 36 Selection of winners - £1M to the winning team

Power from Orbit Challenge

Generating solar power in space and beaming it down to earth

Sustainable Development Goals (SDG)

Imagine a world in which plentiful, reliable, affordable and clean electricity is safely beamed down from space

Satellite

5

The problem

Why a challenge prize

To limit global warming we need to decarbonise electricity production, phasing out fossil fuels by 6% every year between 2020 and 2030.21 We also need to generate more electricity than we ever have before.

Renewable energy is key to solving this, but wind and solar power are intermittent sources – they don’t generate electricity when the wind doesn’t blow or the sun doesn’t shine. But there is a place devoid of clouds, and where the sun shines virtually 24 hours a day.

Over the next decade, we need to bridge an investment gap of $4 trillion into clean energy to reach net zero.22 Space-based solar power technology needs government backing to give it credibility and crowd in public funding.

Challenges have a proven track record of incentivising innovation and setting an ambitious shared mission.

The DARPA Grand Challenges23 did this for autonomous vehicles in the early 2000s – a challenge prize could do the same for this exciting new energy frontier.

Orbital deployment and assembly

4

Microwave power transmission

£20M to the first team that generates electric power in orbit and safely beams it down to earth The Power from Orbit Challenge will drive forward the technology needed to harness solar energy in space – high above the clouds, and outside of the cycle of night and day we have on earth. The space sector is excited by the opportunity, but needs investment and government support to commit. The challenge will stimulate this nascent market and incentivise innovators to come together and experiment. Achieving its ambitious goal will require an interdisciplinary approach to R&D and bold demonstrations of achieving

At-scale tech demonstration

Stratospheric tests

3

2

milestones on the way to orbit. It will require advances in power beaming technology and spacecraft design as well as new capabilities in constructing, servicing and maintaining in-orbit facilities. And it requires the launch of the biggest satellites – by far – in history.

While smaller awards will be offered along the way for developing key enabling technologies, major funding will be funnelled to the most promising ideas that bring us closer to the goal of beaming power from orbit.

Launch

1 Antenna array Lab based R&D

INDICATIVE TIMELINE Month 1

Month 12

Open call

Developing proof of concept

- Innovator outreach - Consortia form - Semi-finalists selected

21. SEI, IISD, ODI, E3G, and UNEP, The Production Gap Report 2021 (2021).

22. IEA, World Energy Outlook 2021 (2021).

23. https://www.darpa.mil/about-us/timeline/-grand-challenge-for-autonomous-vehicles

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Climate Possible: How funders can accelerate innovation for a resilient future

Month 36 Technology development

- Lab based R&D

- Regulatory and investment support

- Grant funding

- Grant funding - Stratospheric demos - Finalists selected

Month 60

Month 72

Technology demonstration

Selection of winners - £20M for a team that successfully generates power in orbit and beams it down to earth

- Grant funding - Support with launch services - Launch and orbital demos

Smart Nature-Based Solutions Challenge

Sustainable Development Goals (SDG)

Smart tools to enable nature based carbon capture The algorithm acts as a tool to inform farmers decisions

Imagine a world in which people who manage and care for the land can harness nature’s full potential to avert catastrophic climate change

2

1 The algorithm is informed by

data collected about the land

A The climate

THE A LG O R I T H M

B The land

The problem

Why a challenge prize

To have a chance of limiting warming below 1.5°C and averting the worst impacts of climate change, we need to remove carbon from the atmosphere at the scale of 100-1000 gigatonnes by 2100.24 Nature-based solutions (NBS) are among the most low-cost and effective methods of carbon removal, offering a route to tackling the interdependent climate and biodiversity crises.

Whilst there is great appetite on the carbon market for NBS to offset carbon, many of these interventions are not meeting their full carbon sink potential based on the local environmental and land use factors of a specific area.25 To optimise land management practices for carbon removal, we need smarter, data-driven tools that can also make it economically sustainable for people who own or manage the land, such as smallholder farmers, to implement these practices.

A challenge prize is uniquely suited to create datadriven tools for implementing nature-based solutions that can lead to systemic change. By raising awareness among regulators and the public, a prize can inform and encourage an anticipatory regulation approach to redefine standards and regulations around highquality carbon offsets. Just as the Open Up Challenge26 enabled access to previously untapped sources of financial data, this prize can explore the opening of new information streams to stimulate data-driven innovation.

C Farmers decisions

Crops and ecosystem thrive

and other contextual datasets, the tool should offer farmers reliable and evidence-driven recommendations of optimised land management practices for carbon removal. The winning solution will be co-designed with farmers, building on their experience as well as relevant local and indigenous knowledge, whilst making the process financially sustainable for them via the sale of carbon offsets.

24. V. Masson-Delmotte et al., Special report: Global warming of 1.5°C (Summary for Policymakers), IPCC (2018).

25. Z. Sha et al., The global carbon sink potential of terrestrial vegetation can be increased substantially by optimal land management, Communications Earth & Environment, 3, 8 (2022).

26. https://www.nesta.org.uk/project/open-challenge

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Climate Possible: How funders can accelerate innovation for a resilient future

using data from the algorithm

farmers share data on successful carbon capture interventions

Co2

4

Co2

£3M to the best solution that enables people to plan and deliver optimised land management practices for carbon removal and financial sustainability The Smart Nature Based Solutions Challenge will empower smallholder farmers and other small landowners to participate directly in carbon offsets markets, or alternative routes to financial viability and sustainability. Solutions should provide people with a user-friendly tool to collect accurate and relevant field data from their land, and map the current carbon capture potential of their existing practice.

By combining this with biophysical, socioeconomic

Farmers implement optimum carbon capture interventions

3

Farmers benefit through sale of high-quality carbon credits

Digital insights enable maximum carbon capture

Credit Credit

High quality carbon offsets

INDICATIVE TIMELINE Month 1

Month 12

Open call

Consumer trials

- Recruiting community testbeds

- Capacity building

- Innovator outreach

- Grant funding

- Data sandbox released

- Developing business models

- 25 discovery awards disbursed

- Piloting recommended NBS, validating quality of carbon offsets

- Submission of proof of concepts

- Market demonstration of trading carbon credits or alternative financial mechanism

- Finalists selected

- Final submissions

Month 36 Selection of winners - £3M to the winning team

Step-Up Energy Access Challenge

Climbing the energy ladder towards sustainable development

Sustainable Development Goals (SDG)

Imagine a world where everyone has equal access to clean, reliable and affordable electricity

The problem

Why a challenge

Energy access remains a pressing problem for many communities in low- and middle-income countries around the world, with 759 million people living without basic levels of electricity.27 Even for communities that do have grid access, households may be subject to frequent blackouts and grid disturbances and therefore rely on diesel generators or other fossil fuel-based alternatives. We urgently need low carbon energy systems that are self-sufficient, repairable and resilient to climate impacts. At the same time, we need solutions at a price point that enables all households, businesses and services within a community to meet not only their basic energy needs but also to climb the energy ladder and contribute to local economic development.

By focusing outreach on local and underrepresented groups, including women and young people, a prize can incentivise new actors as well as new approaches to the challenge of energy access. Startups in this space often struggle to access finance, with venture capital requiring a rapid return on investment that is difficult to achieve in low-income markets. Challenge prizes can fill this gap, allowing innovators to experiment with different models of delivery to develop sustainable and scalable purposedriven business solutions.

Reliable and affordable electricity saves the family time and money, expanding children’s opportunities to learn.

Electric lighting enables children to study into the evening.

Low quality lighting from hazardous fuels impacts children’s learning.

£10M to inclusive solutions that enable communities to climb the energy ladder with clean, reliable and affordable energy Ten different city or regional authorities in low and middle-income countries will be chosen as community testbeds that span different contexts, including offgrid rural communities and urban or peri-urban informal settlements as well as more affluent neighbourhoods.

These testbeds would each invite innovators to develop decentralised energy solutions enabling households, businesses and services within that community to

benefit from an improved level of access to electricity relative to their local average baseline. Solutions may utilise new or existing renewable energy technologies and products, but they must be tailored to the local context and deliver an electricity supply at a capacity and price point that meets the diverse needs of everyone within the community.

Limited access to electricity has a huge impact on everyday life. Affordable, reliable and clean energy unlocks progress towards the Sustainable Development Goals, including quality education for all.

INDICATIVE TIMELINE 27. IEA, World Energy Outlook 2021 (2021).

Month 1 Open call for community testbeds

Month 6 Open call for innovators

Month 12 Piloting and testing

- Recruiting community testbeds

- Innovator outreach, targeting underrepresented innovators

- Finalists chosen per testbed

- Outreach to drive applications from diverse contexts - 10 community testbeds selected

- Discovery grants disbursed

- Co-designing and testing solutions within the community

- Submissions of proof of concepts

- Capacity building

- Finalists selected

- Grant funding - Developing business models - Final submissions

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Climate Possible: How funders can accelerate innovation for a resilient future

Month 24 Selection of winners £10M to the winning teams

58 Victoria Embankment London EC4Y 0DS +44 (0)20 7438 2500 info@challengeworks.org @Challenge_Works facebook.com/ChallengeWorksUK linkedin.com/company/challenge-works challengeworks.org

Nesta is a registered charity in England and Wales with company number 7706036 and charity number 1144091.

Registered as a charity in Scotland number SC042833. Registered office 58 Victoria Embankment, London, EC4Y 0DS.