Accelerating Sustainable Finance for Emerging Markets and Developing Economies

The report assesses the four Vertical Climate and Environmental Funds (VCEFs)—the Global Environment Facility (GEF), Adaptation Fund (AF), Climate Investment Funds (CIF), and Green Climate Fund (GCF)—concluding that while they provide essential concessional finance, they are fragmented and often inefficient. It proposes a 'process integration' approach to shift from individual projects to country-driven investment platforms, recommends harmonizing accreditation and reporting across funds, and suggests expanding the use of diverse financial instruments like guarantees and local currency lending to better catalyze private capital in emerging markets and developing economies.

• Climate investment in emerging markets and developing economies (EMDEs) and least-developed countries (LDCs) must increase more than fourfold to USD 2.4 trillion per year by 2030 to meet Paris Agreement goals, requiring approximately USD 1 trillion in annual external finance.
• The global concessional climate finance landscape is highly fragmented, with 180 different entities tracked in 2021/2022, 75% of which provided funding of less than USD 100 million.
• VCEFs have a collective annual commitment capacity of USD 4 billion to USD 5 billion, with the GCF providing about half of this amount; however, their total contribution to concessional climate finance in EMDEs and LDCs was only about 4% in 2021/2022.
• Co-financing ratios vary significantly across VCEFs, ranging from 2.9:1 for the GCF to nearly 7.2:1 for the GEF based on 2019-2024 ex-ante data.
• The GCF's accreditation process is described as protracted and costly, with an average of 25 months elapsing between application submission and Board approval as of December 2023.
• The GEF project portfolio is highly concentrated among a few global agencies; in GEF-7, the UNDP, UNEP, and World Bank accounted for 64% of approved funding.
• The report recommends a 'process integration' approach where VCEFs operate as a system to support country-driven platforms, shifting from individual project-based funding to supporting national investment plans.
• To increase mobilization, VCEFs should deploy a full range of instruments, including grants, concessional debt, guarantees, equity, and local currency products, while increasing their risk appetite to ensure additionality.
• The report suggests establishing a cross-fund readiness facility to act as a 'one-stop shop' for supporting country-driven programmatic approaches and direct access accreditation.
• Harmonization recommendations include adopting a phased accreditation approach for Direct Access Entities (DAEs) and enabling simultaneous accreditation to the AF and GCF through a single online portal.

APA

Climate Policy Initiative (2024). Accelerating Sustainable Finance for Emerging Markets and Developing Economies. https://www.climatepolicyinitiative.org/wp-content/uploads/2000/10/G20-IHLEG-VCEF-Review.pdf

Chicago

Climate Policy Initiative. Accelerating Sustainable Finance for Emerging Markets and Developing Economies. 2024. https://www.climatepolicyinitiative.org/wp-content/uploads/2000/10/G20-IHLEG-VCEF-Review.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Accelerating Sustainable Finance for Emerging Markets and Developing Economies |date=October 2024 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2000/10/G20-IHLEG-VCEF-Review.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2024accelerating, author = {{Climate Policy Initiative}}, title = {{Accelerating Sustainable Finance for Emerging Markets and Developing Economies}}, institution = {Climate Policy Initiative}, year = {2024}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2000/10/G20-IHLEG-VCEF-Review.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }