Risk to Reward 2025

Climate finance solutions roadmap: barriers and associated solutions TABLE 2 Current state Priorities Solutions: short-termSolutions: medium-termSolutions: long-termFuture state –Fragmented project pipelines, ad hoc project support –Initial reforms underway and evolving standards –Limited early-stage coordination among actors –High perceived risk, limited data transparency and insufficient local partnershipsPRIORITY 1 Improve access to bankable project pipelinesStrengthen early- stage pipelines through partnerships with developers, public-private MSME and venture platforms, and local incubators to scale up smaller climate businesses.Create demand- aggregation platforms led by corporate buyers, that link developers, project sponsors and fund managers to pool fragmented projects into larger investment opportunities. Embed climate adaptation layers into public infrastructure projects that already have established business cases.Increase the volume of syndicated climate loans between private investors, MDBs and local intermediaries to channel capital efficiently along the value chain. –Country platforms become the backbone of investable, NDC- aligned project pipelines. –Climate finance data is standardized and transparent, reducing risk perception and costs. –Local capital markets are deepened through green bonds and local currency lending. –Risk-sharing tools are simplified, standardized and embedded in mainstream finance. –Policy frameworks provide long- term stability and regulatory clarity for investors. –Blended finance evolves into scalable, standardized public-private co- investment models. –Private and domestic capital flows scale up, closing finance gaps and strengthening ecosystems.PRIORITY 2 Increase data transparency and local market intelligenceExpand access to comparable climate investment data, methodologies and market intelligence platforms. Help global investors establish local partnerships in EMDEs to reduce information asymmetry and strengthen deal flow.Adopt digital tools for credit analytics to cut due diligence costs and standardize risk assessment across developers, financial intermediaries and institutional investors. PRIORITY 3 Mobilize local capitalDeploy local credit guarantees to mobilize domestic capital and reduce risk perception for local banks, fund managers and developers.Increase access to local currency instruments and green lending facilities, channelled through domestic financial institutions to developers and SMEs. PRIORITY 4 Streamline risk-sharing mechanismsCreate an AI- powered climate finance platform to streamline access to de-risking mechanisms, by pairing investors and project developers with suitable risk- mitigation tools.Scale up climate insurance and guarantee solutions at all points in the value chain. PRIORITY 5 Improve policy and regulatory certaintyTranslate NDCs into actionable, sector- specific investment roadmaps through early public-private alignment.Create stable investment policies and country platforms that make NDCs an investable proposition, by embedding developer pipelines into national growth strategies and regulatory frameworks. PRIORITY 6 Scale up equity investment structuresDeploy more catalytic equity from donor countries, vertical climate funds, philanthropic capital and MDBs/DFIs.Use DFI platform- based investments in sustainable infrastructure to attract more local and international equity investments. Aggregate small and fragmented projects into investable portfolios via YieldCos, DevCos or developer-led vehicles to align with institutional investors’ ticket sizes. Note: The six sets of priorities and solutions are not listed in a prioritized order. From Risk to Reward: Unlocking Private Capital for Climate and Growth 19