In 2023, the private sector’s climate finance in EMDEs was mainly directed as follows: –Energy sector, 75% of total flows –Buildings and infrastructure followed with 11% –Transport with 8% –Water and wastewater with 3% The remaining 3% was dispersed across agriculture, forestry, industry, waste and cross- sectoral projects. This concentration reflects the market maturity and scalability of energy-related mitigation technologies, including utility-scale renewables, distributed solar and grid upgrade sectors that offer strong risk-adjusted returns and established investment vehicles such as power purchase agreements and infrastructure debt.32 While the dominance of energy is expected, the sectoral breakdown reveals some notable regional nuances. For example, MENA shows investment priorities in water conservation and food security adaptation measures, reflecting regional priorities as the most water-scarce region in the world. Latin America shows diversification with forest protection and sustainable land use gaining significant traction, alongside agriculture and land-use management initiatives.33,34 These variations suggest early signals of sectoral diversification that could inform future strategies for scaling-up private climate finance beyond core mitigation sectors.Barriers and solutions to unlocking private climate investment in EMDEs There is no one-size-fits-all approach to private investment in climate-aligned projects. To truly unlock private capital at scale, especially in EMDEs, it is important to grasp the nuances behind why different investors choose to engage (or not) in specific sectors, geographies or risk profiles. This crucial layer of understanding has been largely absent from many climate finance reports, limiting their real-world effectiveness. This report fills that gap by incorporating insights from a broad spectrum of private capital providers, reflecting their diverse perspectives. Doing so is essential not only to address the gap in climate finance for EMDEs but also to improve its efficiency, ensuring capital flows to where it can achieve the greatest climate and development impact. The next chapter dives into the barriers restricting climate finance and offers targeted solutions tailored to different investor types. Using a mixed-methods approach, the study combines quantitative data with qualitative insights from a global survey of around 45 private investors (respondent breakdown in Figure 9 below) and in-depth interviews with over 15 thought leaders spanning private investors, development finance institutions and regulators. Additional input was gathered through the World Economic Forum’s dialogue series at major climate and finance events throughout 2025, including the Meetings of the International Monetary Fund (IMF) and World Bank Group (WBG), London Climate Action Week, New York Climate Week and Finance for Development in Seville. To truly unlock private capital at scale, especially in EMDEs, it is important to grasp the nuances behind why different investors choose to engage. From Risk to Reward: Unlocking Private Capital for Climate and Growth 15

Risk to Reward 2025