Understanding ‘bankability’ and unlocking climate finance for climate compatible development

This research paper by the Climate and Development Knowledge Network (CDKN) explores the concept of 'bankability' in the context of climate finance to help developing countries create project proposals that can successfully attract international funding. It argues that climate bankability extends beyond traditional financial returns to include socioeconomic and environmental impacts, and provides a checklist of determinants to guide project developers in aligning proposals with the requirements of multilateral funds like the Green Climate Fund (GCF).

• The definition of bankability for climate change projects is broader than the traditional financial definition, which focuses primarily on profitability and return on investment. In the climate context, it must encompass socioeconomic and environmental metrics, such as community resilience and alignment with national priorities, though these are often harder to quantify.
• Bankability is perceived differently depending on the stakeholder and the source of funding. Private sector actors prioritize profitability, risk-return ratios, and the ability to leverage funding. In contrast, public sector stakeholders and multilateral funds place higher weight on social returns, developmental potential, and environmental benefits like emissions reduction.
• The requirements for bankability differ significantly between mitigation and adaptation projects. Mitigation projects are typically revenue-generating and align with financial indicators. Adaptation projects are more likely to be associated with non-financial indicators, such as social impact, and are often viewed through the lens of 'eligibility' (compliance with strategic objectives) rather than financial bankability.
• The Green Climate Fund (GCF) faces challenges in disbursing funds due to the poor quality of project proposals in its pipeline. This often results in projects being approved with conditions that make implementation difficult and cause delays, which can subsequently negatively impact the project's bankability as market conditions change.
• Successful access to climate finance requires high-quality project preparation and a programmatic approach. For the GCF, bankability is linked to a project's potential for a 'paradigm shift,' which includes scalability, replication, innovation, and the creation of an enabling regulatory environment.
• The bankability of a project is influenced by the choice of financial instruments and the structure of the finance model. Some projects require a blend of grants and loans to ensure long-term financial viability. While all projects must be 'fundable' (meeting eligibility criteria), not all need to be 'bankable' in the sense of providing a financial return, particularly those seeking grant funding.

APA

Ellis, C., & Pillay, K. (2017). Understanding ‘bankability’ and unlocking climate finance for climate compatible development. Climate and Development Knowledge Network. https://cdkn.org/sites/default/files/files/CDKN_unlocking-climate-finance.pdf

Chicago

Ellis, Charlotte, and Kamleshan Pillay. Understanding ‘bankability’ and unlocking climate finance for climate compatible development. Climate and Development Knowledge Network, 2017. https://cdkn.org/sites/default/files/files/CDKN_unlocking-climate-finance.pdf.

Wikipedia

{{cite report |last1=Ellis |first1=Charlotte |last2=Pillay |first2=Kamleshan |title=Understanding ‘bankability’ and unlocking climate finance for climate compatible development |publisher=Climate and Development Knowledge Network |date=June 2017 |url=https://cdkn.org/sites/default/files/files/CDKN_unlocking-climate-finance.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ellis2017understanding, author = {Ellis, Charlotte and Pillay, Kamleshan}, title = {{Understanding ‘bankability’ and unlocking climate finance for climate compatible development}}, institution = {Climate and Development Knowledge Network}, year = {2017}, month = jun, url = {https://cdkn.org/sites/default/files/files/CDKN_unlocking-climate-finance.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }