MDBs are urged to make funding decisions thoughtfully, ensuring concessional resources are allocated without crowding-out private investors. Christopher Marks, Managing Director and Head of Emerging Markets, Mitsubishi UFJ Financial Group (MUFG) There’s no silver bullet to unlocking private capital. It’s about moving the whole supply chain, from macro stability to project preparation, all at once. It’s a market, and we’re working across the entire chain to drive development and climate action together. Jamie Fergusson, Global Director, Climate and Nature, International Finance CorporationThe barriers to private climate finance are not isolated but deeply interconnected, reinforcing one another in ways that erode investor confidence, inflate transaction costs and suppress capital flows. For example, opaque data exacerbates the challenge of identifying bankable projects, while shallow financial markets magnify currency risks and limit the availability of risk mitigation tools. These dynamics create a cycle where perceived risks remain higher than actual risks, deterring investment at scale. Because of this complexity, a clear phased approach is essential. Many of the solutions, such as improving data platforms, piloting local partnerships or expanding blended finance, can deliver impact in the near-term. But they cannot fully succeed without complementary medium- and long-term reforms in regulation, market depth and institutional capacity. Sequencing actions across short- (1-5 years), medium- (6-10 years) and long-term (10+ years) horizons ensures that early wins lay the groundwork for systemic shifts. This temporal lens is critical for moving from today’s fragmented ad hoc climate finance landscape towards a coherent system capable of mobilizing private capital at scale.The visual roadmap presented in Table 2 distils key steps for diverse stakeholders across the climate finance ecosystem, recognizing that different private investors face unique constraints and motivations and governments operate within varied socio-economic and cultural contexts. While not exhaustive and excluding broader macro-prudential reforms beyond this study’s scope, this framework offers a high-level guide to prioritize interventions that accelerate capital flow, improve project bankability and reduce investment risk. Detailed barriers and solutions are explored in this chapter to support tailored, effective action. The following section sets out the core barriers that investors face in EMDEs, as identified through our surveys, interviews and literature reviews. For each identified barrier we then outline targeted solutions that can help unlock private capital. To put these solutions in practice, we draw on case studies that illustrate how these approaches have been piloted in EMDE contexts, highlighting lessons that can be adapted to national contexts. From Risk to Reward: Unlocking Private Capital for Climate and Growth 18

Risk to Reward 2025