Climate finance solutions roadmap Improving project bankability and the enabling environment in EMDEs are key priorities to align investor needs with project opportunities. This roadmap offers short-, medium- and long-term solutions. 2 Investors vary in experience and strategy: some have a long history of investing in climate projects in EMDEs while others are new and hesitant, willing to invest only in the right conditions. Institutional investors and private equity firms, with established emerging markets allocation strategies, claim they have capital ready to be deployed but lack investable projects. They argue that capital will flow naturally if projects meet their risk-return profiles. Policy-makers, however, believe projects are available but underrecognized by private investors. The challenge is aligning investor needs with project opportunities. In practice, institutional investors often view deal sizes below $20-50 million as too small to justify the fixed due diligence, legal and compliance costs – and many EMDE climate projects struggle to reach that threshold. Regulations such as Basel III further incline banks towards larger, highly rated assets (e.g. sovereign bonds) with lower capital charges. This mismatch leaves few investable options unless projects are aggregated or scaled-up. Institutions with investment-grade ratings also face incentives to preserve their credit standing, which further discourages them from allocating to higher- risk assets.35 Some higher-risk, lower-return projects can be made bankable through de-risking and blended finance, but these are not universal fixes. Institutional investors prioritize partnerships, policy stability and risk-adjusted returns, while corporates and asset managers emphasize data transparency. The message is clear: there is no one-size-fits-all solution. Approaches must be tailored both to investor types and to the diverse socioeconomic, financial and policy contexts of EMDEs. In Africa and India, private investors report being crowded-out of renewables by MDBs and DFIs offering below-market rate capital. These “low- hanging fruit” projects distort markets, sidelining local capital that then seeks returns in developed economies. Better alignment is needed so that public finance targets adaptation in vulnerable countries, where risks are high and private capital is scarce. Pension funds, for example, avoid jurisdictions with political, legal and currency risks that are costly to hedge. Survey results reinforce this, with 70% of respondents to this report noting that climate finance barriers largely reflect broader systemic constraints in EMDEs, including weak pipelines, unreliable data, shallow markets, regulatory uncertainty and fragmented de-risking tools.2.1 A roadmap to prioritize interventions that accelerate capital flow As free capital flows into emerging markets, we must ask: Is concessional finance truly serving the additionality metrics? Kavita Sinha, Director, Department of Private Sector Facility, Green Climate Fund36 From Risk to Reward: Unlocking Private Capital for Climate and Growth 17

Risk to Reward 2025