Bridging the Gap How to Finance the Net Zero Transition 2025

Example of a public-private partnership (PPP) FIGURE 2 Source: Global Commission on Adaptation.UsersDevelopment finance institutions (DFIs) BanksLenders Project company (private sector)Concessionaire Sponsors InvestorsShareholdersHost government (public partner)Initiator SuppliersEquipment/material General contractorsDesign & construction Operator & maintenance contractorOperations & maintenance Blended finance Blended finance combines public and private capital to de-risk projects and attract private sector participation. According to OnePlanetLab,125 it mobilizes an estimated $15 billion annually. The strategic capital leverage potential of blended finance instruments is particularly vital in supporting climate adaptation and mitigation efforts in EMDEs and LDCs, where high risk perception routinely deters investment. Therefore, improving investment viability by utilizing concessional funds for first-loss absorption or guarantees can enhance the risk- return profile of climate-related projects, making projects in sectors such as energy, which are vital to EMDE and LDC development goals, more attractive to private investors.Public-private partnerships (PPPs) PPPs facilitate collaboration between governments and private entities by combining public oversight with private sector efficiency and innovation, to facilitate risk-sharing, resource optimization and enhanced project viability. This approach is especially tailored to capital-intensive initiatives such as clean energy and sustainable infrastructure. With government budgets feeling the strain of unprecedented spending in the wake of the Covid-19 pandemic, the risk sharing and resource optimization elements of PPPs help bridge the gaps in public funding of socially-relevant climate projects and offer the opportunity to reduce the financial burden on governments. Bridging the Gap: How to Finance the Net-Zero Transition 20