InfraCredit Nigeria BOX 10 Local currency green lending in Uzbekistan BOX 11In Nigeria, the use of credit guarantees has emerged as a transformative tool for unlocking domestic institutional capital for climate-aligned investments. InfraCredit, a local guarantee facility, has mobilized over $200 million from Nigerian pension funds by providing local currency guarantees that de-risk infrastructure projects and improve their credit profiles. These guarantees have enabled domestic insurers to extend loan capital to small businesses in the renewable energy sector at interest rates 8-9% lower than those offered by commercial banks. The catalytic effect of InfraCredit’s guarantees has been further amplified by a backstop facility from FSD Africa, which acts as a “guarantee on a guarantee”, enhancing investor confidence and expanding the pool of investable projects. This structure not only reduces perceived risk but also facilitates the development of a track record for green infrastructure as a viable asset class. The example demonstrates how locally tailored credit enhancement mechanisms, especially when denominated in local currency and supported by technical assistance, can crowd-in domestic capital, lower financing costs and accelerate the flow of funds into climate-positive sectors.64 In 2023, EBRD partnered with Uzbekistan’s Ipak Yuli Bank to deliver a $20 million local currency loan under the Green Economy Financing Facility II (GEFF Uzbekistan II). The programme channels finance to households and SMEs for energy efficiency and climate-resilient technologies, while reducing exposure to foreign exchange risk – a major barrier in EMDEs.67 Beyond capital, the facility provided technical assistance to strengthen local banks’ capacity in credit appraisal, monitoring and climate risk management. By working through a domestic intermediary in local currency, the initiative both expanded access to green finance and built institutional expertise. This example demonstrates how green lending facilities in local currency can address FX volatility, improve financial resilience and position local banks as active drivers of climate finance.Survey results confirmed that macroeconomic and currency risks are major barriers to climate investment in EMDEs. Many projects earn revenues in local currency but rely on hard-currency financing, exposing them to FX volatility and higher costs. Yet only a quarter of EMDE green bonds are issued in local currency, limiting domestic investor participation. Two instruments can help: –Green bonds offer a familiar fixed-income format for domestic institutional investors such as pension funds and insurers. National frameworks that align with the principles of the International Capital Market Association (ICMA) may contribute to increased issuance; currently, cumulative EMDE environmental, social and governance (ESG)-labelled bond issuance exceeds $850 billion.65 For example, Nigeria’s sovereign green bond was followed by corporate bonds such as OneWattSolar’s NGN 3 billion bond ($2 million), which involved support from FMDQ and the Climate Bonds Initiative.66 –Green lending facilities such as EBRD’s Green Economy Financing Facility (GEFF) channel concessional capital through local intermediaries while embedding credit appraisal and risk disclosure (see Box 11). These tools reduce FX risk, build pricing benchmarks and strengthen institutional capacity. Over time, they can attract more domestic capital and position local financial institutions as anchors of climate finance in EMDEs. The ability to bring capital in, convert it to local currency for on-the-ground lending and then repatriate returns is absolutely critical. Dana Barsky, Global Head of Sustainability Strategy and Net Zero, Standard Chartered BankIncrease access to local currency instruments and green lending Corporates MDBs and DFIs BanksSOLUTIONS: MEDIUM-TERM From Risk to Reward: Unlocking Private Capital for Climate and Growth 31

Risk to Reward 2025