Strengthening Collaboration to Scale Climate and Development Finance

The report analyzes the complementary roles of VCEFs, MDBs, and NDBs in the climate finance architecture, focusing on financial instruments like guarantees, equity, and local currency lending. It identifies systemic barriers such as complex accreditation and slow approval processes and proposes a framework for non-financial collaboration through country platforms, technical assistance, and the creation of enabling policy environments. The document provides a set of short- and mid-term recommendations to harmonize metrics, simplify due diligence, and unlock the potential of NDBs to increase the flow of climate finance to emerging markets and developing economies.

• MDBs are the primary contributors of co-financing for VCEF projects, providing USD 17 billion between 2019 and 2023, with an average of USD 107 million per co-financed project, predominantly through debt.
• There is a systemic investment gap for adaptation, as VCEF mitigation projects attract significantly more co-financing and mobilization, leveraging five dollars for every VCEF dollar compared to only three for adaptation.
• Climate finance co-financing and mobilization are heavily skewed toward middle-income countries (MICs), which received 43% of volumes, while low-income countries (LICs) received only 8%.
• Guarantees can be more effective at mobilizing private finance than loans, with larger credit guarantee facilities potentially leveraging 6-25 times more financing, though MDBs have historically led their use while VCEFs and NDBs use them modestly.
• Currency risk is a major barrier in emerging markets and developing economies (EMDEs) because project revenues are typically in local currency while financing is in hard currency, increasing the cost of servicing external debt.
• Collaboration is hindered by inefficient processes, including complex and time-consuming accreditation to VCEFs, slow project approvals and disbursements, and a lack of interoperability in due diligence processes.
• Country platforms serve as a critical coordination mechanism to align VCEF, MDB, and NDB support with national priorities, such as Long Term Strategies, NDCs, and National Adaptation Plans.
• Technical assistance (TA) is essential for developing bankable project pipelines and unlocking private finance, with MDBs providing significantly larger volumes of TA funding (USD 1.9 billion for adaptation in 2023) compared to VCEFs.

APA

Abraham, S., Negreiros, P., Buchner, B., Sharma, J., Yahmed, Z. B., Allisy, J., Khanna, M., Diaz, J., Stout, S., Phillips, G., & Pataud, A. (2025). Strengthening Collaboration to Scale Climate and Development Finance. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/07/Strengthening-Collaboration-to-Scale-Climate-and-Development-Finance.pdf

Chicago

Abraham, Sasha, Priscilla Negreiros, Barbara Buchner, Jyoti Sharma, Zeineb Ben Yahmed, Juliette Allisy, Mridhu Khanna, et al. Strengthening Collaboration to Scale Climate and Development Finance. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/07/Strengthening-Collaboration-to-Scale-Climate-and-Development-Finance.pdf.

Wikipedia

{{cite report |last1=Abraham |first1=Sasha |last2=Negreiros |first2=Priscilla |last3=Buchner |first3=Barbara |last4=Sharma |first4=Jyoti |last5=Yahmed |first5=Zeineb Ben |last6=Allisy |first6=Juliette |last7=Khanna |first7=Mridhu |last8=Diaz |first8=Jose |last9=Stout |first9=Sean |display-authors=etal |title=Strengthening Collaboration to Scale Climate and Development Finance |publisher=Climate Policy Initiative |date=July 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/07/Strengthening-Collaboration-to-Scale-Climate-and-Development-Finance.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{abraham2025strengthening, author = {Abraham, Sasha and Negreiros, Priscilla and Buchner, Barbara and Sharma, Jyoti and Yahmed, Zeineb Ben and Allisy, Juliette and Khanna, Mridhu and Diaz, Jose and Stout, Sean and Phillips, Gareth and Pataud, Arthur}, title = {{Strengthening Collaboration to Scale Climate and Development Finance}}, institution = {Climate Policy Initiative}, year = {2025}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/07/Strengthening-Collaboration-to-Scale-Climate-and-Development-Finance.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }