The Role of National Development Banks in Catalyzing International Climate Finance

National development banks (NDBs) are positioned as critical intermediaries to bridge the climate finance gap by leveraging public funds to attract private capital. Due to their local market knowledge and development mandates, NDBs can address both demand-side barriers (pre-investment) and supply-side risks (investment phase). In the LAC region, NDBs possess significant assets and capital, and many are already utilizing a variety of instruments—including Tier 1 and Tier 2 loans, guarantees, and equity—to promote low-carbon development. The report argues that NDBs can achieve leverage factors equal to or greater than multilateral development banks (MDBs) because of their proximity to local financial institutions and ability to manage country-specific risks.

• Global annual financial flows for low-carbon, climate-resilient development in developing countries are estimated between US$70 billion and US$120 billion, which is insufficient compared to the estimated US$140 billion to US$175 billion needed annually by 2030.
• NDBs possess a unique advantage over multilateral development banks (MDBs) and bilateral agencies due to their deep understanding of local barriers and long-standing relationships with the local private sector, allowing them to access local financial markets more effectively.
• NDBs can catalyze climate finance through two primary phases: the pre-investment phase, which focuses on increasing demand by addressing sector-specific constraints and building project readiness, and the investment phase, which mobilizes the supply of finance through tailored financial instruments.
• NDBs utilize a diverse toolbox of financial instruments to leverage private capital, including grants for technical assistance, Tier 1 loans (direct to projects), Tier 2 loans (to local financial institutions for on-lending), equity investments, and credit guarantees.
• In the Latin American and Caribbean (LAC) region, NDBs are significant players with outstanding assets of nearly US$1 trillion and a capital base of US$100 billion as of the end of 2011.
• The theoretical leverage factor for NDBs is potentially higher than for MDBs, particularly for guarantees and equity, because NDBs can better anticipate and influence host-country factors and understand local market conditions.
• A case study of Mexico's Nacional Financiera (NAFIN) demonstrates the use of the Renewable Energy Financing Facility (REFF) to leverage US$70 million in concessional resources from the Clean Technology Fund (CTF), with an estimated total mobilization of US$1.19 billion to US$1.54 billion in project costs.
• To maximize the effectiveness of NDBs in climate finance, the report recommends enhancing coordination between national and international actors, strengthening the dialogue between policymakers and NDBs, and building NDB capacity for monitoring, reporting, and verification (MRV).

APA

Smallridge, D., Buchner, B., Trabacchi, C., Netto, M., Lorenzo, J. J. G., & Serra, L. (2013). The Role of National Development Banks in Catalyzing International Climate Finance. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2013/03/IDB-The_Role_of_National_Development_Banks_in_Catalyzing_International_Climate_Finance-20131.pdf

Chicago

Smallridge, Diana, Barbara Buchner, Chiara Trabacchi, María Netto, José Juan Gomes Lorenzo, and Lucila Serra. The Role of National Development Banks in Catalyzing International Climate Finance. Climate Policy Initiative, 2013. https://www.climatepolicyinitiative.org/wp-content/uploads/2013/03/IDB-The_Role_of_National_Development_Banks_in_Catalyzing_International_Climate_Finance-20131.pdf.

Wikipedia

{{cite report |last1=Smallridge |first1=Diana |last2=Buchner |first2=Barbara |last3=Trabacchi |first3=Chiara |last4=Netto |first4=María |last5=Lorenzo |first5=José Juan Gomes |last6=Serra |first6=Lucila |title=The Role of National Development Banks in Catalyzing International Climate Finance |publisher=Climate Policy Initiative |date=March 2013 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2013/03/IDB-The_Role_of_National_Development_Banks_in_Catalyzing_International_Climate_Finance-20131.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{smallridge2013role, author = {Smallridge, Diana and Buchner, Barbara and Trabacchi, Chiara and Netto, María and Lorenzo, José Juan Gomes and Serra, Lucila}, title = {{The Role of National Development Banks in Catalyzing International Climate Finance}}, institution = {Climate Policy Initiative}, year = {2013}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2013/03/IDB-The_Role_of_National_Development_Banks_in_Catalyzing_International_Climate_Finance-20131.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }