Scaling Up Green Guarantees

The Green Guarantee Group (GGG) argues that while guarantees are highly catalytic for mobilizing private climate finance in EMDEs, they remain underutilized due to regulatory barriers, high currency risks, data gaps, and institutional fragmentation. The report proposes clarifying the supervisory treatment of guarantees under the Basel Framework, developing local currency risk markets, expanding the Global Emerging Markets Risk Database (GEMs) to include guarantee performance, and strengthening national and regional guarantee platforms. These measures aim to support the goal of mobilizing USD 1.3 trillion annually by 2035 for EMDEs.

• Guarantees are highly efficient at mobilizing private capital, with the World Bank Group reporting that they account for nearly half of the total private capital MDBs mobilize, despite representing only about 5% of their financial commitments.
• The Basel Framework's standardized approach to calculating risk-weighted assets (RWA) lacks a methodology for calculating capital relief for complex partial credit guarantees, such as those covering only political or offtake risk, which limits the ability of banks to offer lower interest rates to borrowers.
• Foreign exchange (FX) risk and the high cost of hedging deter investment in EMDEs; the report suggests that donor-provided local currency mechanisms and first-loss facilities are needed to de-risk the USD 400 billion in annual climate finance required to meet NDCs in EMDEs.
• Risk mispricing is exacerbated by a lack of transparent data on guarantee performance; expanding the Global Emerging Markets Risk Database (GEMs) to include default and recovery rates for guarantees could increase investor appetite.
• National and regional guarantee platforms are more effective at addressing local risk profiles than global platforms; the report recommends strengthening these institutions and exploring exposure-swapping arrangements among MDBs and DFIs to manage risk concentration.

APA

Climate Policy Initiative (2025). Scaling Up Green Guarantees. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/Scaling-Up-Green-Guarantees-1.pdf

Chicago

Climate Policy Initiative. Scaling Up Green Guarantees. 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/Scaling-Up-Green-Guarantees-1.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Scaling Up Green Guarantees |date=July 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/Scaling-Up-Green-Guarantees-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2025scaling, author = {{Climate Policy Initiative}}, title = {{Scaling Up Green Guarantees}}, institution = {Climate Policy Initiative}, year = {2025}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/06/Scaling-Up-Green-Guarantees-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }