Energizing Private Capital: Innovations in Guarantee Offerings for Climate Finance

This policy brief by the Climate Policy Initiative (CPI) examines the role of green guarantees in mobilizing private capital for the climate transition in emerging markets and developing economies (EMDEs). It identifies key structural barriers—including complexity, lack of technical assistance, high costs, and time horizon misalignments—and presents case studies of innovative solutions from organizations such as the World Bank Group, Green Guarantee Company, TCX, GuarantCo, and a partnership between Sida and IFU.

• Green guarantees are a highly effective but underutilized tool for climate finance in emerging markets and developing economies (EMDEs). While they can mobilize up to five times more capital than loans, they represent only 4% of multilateral development bank (MDB) commitments. Furthermore, there is a gap in specialized products; as of February 2024, MDBs had only one guarantee product exclusively focused on climate initiatives.
• The World Bank Group (WBG) is addressing the complexity and fragmentation of guarantee procurement by launching a centralized Guarantee Platform in July 2024. This platform consolidates 17 guarantee products and experts under the Multilateral Investment Guarantee Agency (MIGA) to streamline processes and reduce negotiation times, with a goal to triple annual guarantee issuance to USD 20 billion by 2030 to support renewable energy in EMDEs.
• The Green Guarantee Company (GGC) tackles the lack of bankable project pipelines in EMDEs through a Technical Assistance Facility projected to be USD 10 million over 20 years. This facility supports project structuring, capacity building, and market engagement to help developers overcome technical barriers and perceived credit risks, leveraging USD 1 of capital to provide USD 10 of guarantees.
• High costs and currency volatility hinder the uptake of guarantees in EMDEs. The Currency Exchange Fund (TCX) uses a partial donor-funded guarantee facility under the European Fund for Sustainable Development Plus (EFSD+) to provide subsidized currency risk hedges. A new facility launching in early 2025 aims to support hedging for up to USD 10 billion for projects related to the Sustainable Development Goals.
• There is a significant misalignment between the long lifespans of climate projects (often 25-30 years) and standard guarantee durations, which are typically capped at 10 years. GuarantCo addresses this by offering local currency contingent credit solutions for up to 20 years, aligning loan tenors with the return profiles of climate projects in Africa, South Asia, and Southeast Asia.
• Bilateral partnerships can accelerate the creation of guarantee facilities through knowledge transfer. The partnership between Sweden's Sida and Denmark's Investment Fund for Developing Countries (IFU) allowed the IFU to leverage Sida's 15-year experience to operationalize the Development Guarantee Facility (DGF). This model utilizes the OECD-DAC framework to allow risk premium subsidies to count as Official Development Assistance (ODA).

APA

Esquinca, K. D. G., Maguire, L., Yahmed, Z. B., & Peres, T. (2025). Energizing Private Capital: Innovations in Guarantee Offerings for Climate Finance. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/01/Energizing-Private-Capital-Innovations-in-Guarantee-Offerings-for-Climate-Finance.pdf

Chicago

Esquinca, Karla D. González, Liam Maguire, Zeineb Ben Yahmed, and Taarika Peres. Energizing Private Capital: Innovations in Guarantee Offerings for Climate Finance. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/01/Energizing-Private-Capital-Innovations-in-Guarantee-Offerings-for-Climate-Finance.pdf.

Wikipedia

{{cite report |last1=Esquinca |first1=Karla D. González |last2=Maguire |first2=Liam |last3=Yahmed |first3=Zeineb Ben |last4=Peres |first4=Taarika |title=Energizing Private Capital: Innovations in Guarantee Offerings for Climate Finance |publisher=Climate Policy Initiative |date=January 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/01/Energizing-Private-Capital-Innovations-in-Guarantee-Offerings-for-Climate-Finance.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{esquinca2025energizing, author = {Esquinca, Karla D. González and Maguire, Liam and Yahmed, Zeineb Ben and Peres, Taarika}, title = {{Energizing Private Capital: Innovations in Guarantee Offerings for Climate Finance}}, institution = {Climate Policy Initiative}, year = {2025}, month = jan, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/01/Energizing-Private-Capital-Innovations-in-Guarantee-Offerings-for-Climate-Finance.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }