Risk to Reward 2025

To unlock more private capital for small-ticket and distributed climate investments in EMDEs, investors can consider adopting digital, AI- enabled credit analytics tools. Platforms such as Nithio demonstrate how advanced credit scoring, trained on local repayment, energy usage and socioeconomic data can improve risk assessment, reduce transaction costs and enable scalable co- investment (see Box 8). In practice, this requires targeted support for R&D, regulatory frameworks that promote privacy-protected data sharing and harmonized data standards across sectors. Such tools benefit local lenders and fintechs by improving borrower targeting, while institutional investors gain access to more reliable risk metrics. By embedding digital risk scoring in blended finance structures, concessional capital can be deployed more efficiently, simplifying risk-sharing and expanding access to finance in underserved markets.direct presence is increasingly seen as a “must- have” to navigate complex local environments and unlock scalable opportunities. While establishing local offices is one approach, a less capital-intensive alternative is the development of local partnerships. MDBs and DFIs can play a valuable role in this process, not as gatekeepers, but as facilitators by leveraging their country offices’ deep local footprint and networks. These offices often maintain long-standing relationships with vetted local fund managers, developers and institutions and can share due diligence insights, market intelligence and introductions that help global investors navigate unfamiliar environments more efficiently. However, sourcing local partners should not rely exclusively on MDBs and DFIs. For example, ReNew – a renewable energy company headquartered in India – has developed partnerships with international investors, even before the involvement of MDBs. To enhance accessibility, additional mechanisms such as open-access registries of pre-qualified local entities, investor matchmaking platforms and regional investment forums can help private investors directly identify and engage with credible counterparts. These efforts complement the recommendation of Brazil’s B20 Finance & Infrastructure Policy Paper to leverage local expertise throughout the project lifecycle, while also streamlining partnership formation and reducing transaction costs.54 Nithio BOX 8 Nithio is a data-driven financing platform focused on expanding energy access in Africa through decentralized solar. By using AI-powered credit risk assessment tools, Nithio enables more precise and scalable capital allocation, reducing the perceived risk of off-grid energy investments. Its blended finance structure – combining concessional and commercial capital – uses this data engine to de-risk portfolios, simplify risk-sharing and attract institutional investors. Nithio offers a replicable model for how digitized risk assessment and structured co-investment can make small- ticket investments in EMDEs more accessible to mainstream capital.55Adopt digital tools for credit analytics to cut due diligence costs Asset managers Institutional investors Banks MDBs and DFIs SOLUTIONS: MEDIUM-TERM From Risk to Reward: Unlocking Private Capital for Climate and Growth 28