Risk to Reward 2025

Climate adaptation finance in EMDEs remains significantly underfunded, with private capital contributing only a small fraction of total flows. One scalable solution is to embed adaptation measures such as climate risk assessments, flood resilience features or heat-resistant materials into large- scale public infrastructure projects that already have established business cases. These “add-on” components typically represent just 5-10% of total project costs but can significantly enhance asset durability and reduce long-term climate risks.This approach allows climate-first investors to co-finance the adaptation layer without bearing the full cost of the core infrastructure. For example, a government-funded toll highway could include an additional climate risk assessment and design modifications to improve resilience against extreme weather. Since the core project is already bankable, the adaptation layer becomes a low-risk, high- impact investment opportunity. Syndicated climate loans are a financial arrangement where multiple lenders – such as banks, institutional investors and MDBs – join together to provide funding for large-scale climate-related projects, such as renewable energy infrastructure or climate adaptation efforts. Instead of one bank or investor bearing the entire risk and capital outlay, these loans spread both risk and investment across several parties. This collaboration allows more substantial amounts of capital to be raised than a single lender could manage alone, making it possible to support bigger or riskier ventures that might otherwise struggle to attract financing.By pooling resources, syndicated climate loans lower the risk for each lender, making participation more attractive, especially in emerging markets where projects may be perceived as higher risk. MDBs add value to these arrangements by providing preferred creditor status, guarantees, political risk insurance and technical expertise, further reducing risk and encouraging private sector involvement. Overall, syndicated climate loans play a crucial role in mobilizing private capital for climate action, enabling investors to participate in impactful projects while managing financial exposure collaboratively.Climate adaptation in India’s highway PPP projects BOX 4 India’s National Highways Development Programme (NHDP) has increasingly integrated climate resilience into its public-private partnership (PPP) road projects. Under the National Infrastructure Pipeline and the Bharatmala initiative, several national highway corridors – such as NH-1, NH-2 and NH-8 – have been developed with private sector participation through toll-based PPP models. In response to rising climate risks, the Ministry of Road Transport and Highways (MoRTH), in collaboration with private concessionaires and multilateral partners, initiated climate risk assessments and adaptation planning for selected corridors. Measures included improved drainage systems, slope stabilization, heat-resistant materials and flood-resilient design standards. These adaptation components were embedded into the project design and financed as part of the overall PPP structure, representing a small share of total project cost but significantly enhancing asset resilience. This model demonstrates how climate-first investors and private operators can co-finance adaptation layers within bankable infrastructure, aligning with national transport goals and unlocking private capital for resilience.42Embed climate adaptation layers into public infrastructure Increase the volume of syndicated climate loansProject developers EMDE governments MDBs and DFIs Institutional investors MDBs and DFIs BanksSOLUTIONS: MEDIUM-TERM SOLUTIONS: LONG-TERM From Risk to Reward: Unlocking Private Capital for Climate and Growth 23