Lessons and Innovations to Spur Green Investment in Developing Countries

This briefing by the Climate Policy Initiative (CPI) synthesizes lessons from 2015 and 2016 reports on public finance interventions designed to increase low-carbon and climate-resilient investment in developing countries. It outlines strategies for reducing risks and costs to attract private capital through fiscal policy adjustments, government-backed assurances, and public-private innovation labs.

• Fiscal policy adjustments can be used to incentivize sustainable land use and higher agricultural productivity. Specifically, taxing production areas instead of volumes or profits can encourage more efficient methods, while linking tax holiday eligibility or tax rates to sustainability indicators can reward environmentally sustainable behavior. Furthermore, reallocating tax revenue to local governments with land management authority or linking revenue support to performance standards can discourage land expansion and promote sustainability programs.
• National governments and development finance institutions can unlock private investment by addressing fundamental risk barriers. This includes the use of well-designed Power Purchase Agreements that incorporate government-backed assurances, such as letters of comfort and letters of credit, to secure the long-term debt finance required for large-scale projects.
• Public-private partnerships, such as the Global Innovation Lab for Climate Finance and the India Innovation Lab for Green Finance, can develop bespoke solutions to investment barriers. Effective approaches include targeted consultations and crowdsourcing to identify value-chain risks, as well as providing incubation assistance to accelerate the implementation of new finance solutions. Specific instruments mentioned include currency hedging solutions to mitigate foreign exchange risk and guarantees for savings from energy efficiency investments.
• There is a significant global gap in adaptation finance, particularly regarding climate-smart agriculture for small-scale businesses. Public-private instruments can increase investment in this sector by addressing knowledge, risk, and viability gaps.

APA

Climate Policy Initiative (2017). Lessons and Innovations to Spur Green Investment in Developing Countries. https://www.climatepolicyinitiative.org/publication/lessons-innovations-spur-green-investment-developing-countries/

Chicago

Climate Policy Initiative. Lessons and Innovations to Spur Green Investment in Developing Countries. 2017. https://www.climatepolicyinitiative.org/publication/lessons-innovations-spur-green-investment-developing-countries/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Lessons and Innovations to Spur Green Investment in Developing Countries |date=4 April 2017 |url=https://www.climatepolicyinitiative.org/publication/lessons-innovations-spur-green-investment-developing-countries/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2017lessons, author = {{Climate Policy Initiative}}, title = {{Lessons and Innovations to Spur Green Investment in Developing Countries}}, institution = {Climate Policy Initiative}, year = {2017}, month = apr, url = {https://www.climatepolicyinitiative.org/publication/lessons-innovations-spur-green-investment-developing-countries/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }