Private climate finance landscape1 Climate finance for EMDEs remains severely inadequate, with a fraction of required investment mobilized from private sources. Bold public-private action is essential to close the finance gap. Climate finance continues to fall far short of what the world, particularly EMDEs, urgently need. In 2023, global climate finance reached a record $1.9 trillion; however, only $332 billion flowed to EMDEs from both domestic and international sources – deeply insufficient, given it is just 14% of the $2.4 trillion per year of climate investment needed in EMDEs by 2030.3 While EMDEs can mobilize around $1.4 trillion domestically, the remaining balance of $1 trillion will need to come from external, mostly private, finance by 2030 – rising to $1.3 trillion by 2035 – to stay on a Paris-aligned path.4 To meet this challenge, international mechanisms such as the New Collective Quantified Goal (NCQG) aim to mobilize $300 billion annually by 2035. However, even if this target were achieved, this still leaves a gap of $700 billion per year. This sizeable funding gap underscores that public finance alone cannot meet the scale of investment required, which is further exacerbated by the fiscal constraints and shifting priorities of donor countries. Private finance therefore becomes the critical lever for accelerating climate action. International private finance rose from $17 billion in 2021 to $36 billion in 2023 (see Figure 1) but still forms a small part of total climate finance and must grow 28-fold to reach $1 trillion/year by 2030.5 The amount needed is a small fraction of the capital that currently exists. For example, the world’s 100 largest asset owners hold $26.3 trillion6 and the UN-convened Net-Zero Asset Owner Alliance (NZAOA) manages over $9.5 trillion.7 At the same time, the narrative around climate finance is shifting. Climate is no longer seen as a peripheral environmental issue – it is now recognized as a systemic financial risk, influencing creditworthiness, capital allocation and investment strategies. In EMDEs, this risk is increasingly shaping the macro-financial landscape. Yet despite this recognition, private investors still have small portfolio allocations for climate-aligned investments in EMDEs.1.1 Introduction $332 billion of global climate finance flowed to EMDEs in 2023 – just 14% of the $2.4 trillion needed every year by 2030. 6 From Risk to Reward: Unlocking Private Capital for Climate and Growth

Risk to Reward 2025