CLIMATE FINANCE AND INVESTMENT
Access to finance is fundamental for creating momentum and raising ambition but countries continue to face challenges in securing the financial resources needed to achieve NDC targets. One critical aspect to unlocking financial flows is putting in place a transparent enabling environment that can reduce, transfer or compensate for investor risks. This includes not only financial instruments, but equally importantly, targeted public policy interventions that allow governments to strategically leverage scarce public finance to catalyse and scale up private finance.
UNDP is supporting developing countries to address the barriers and risks that can hold back climate finance and private sector investments, thereby hindering achievement of the Paris Agreement and the SDGs. The Programme uses a structured approach that is tailored to country development needs and priorities, and directly responds to the financial strategies elaborated for national and sectoral NDC implementation plans. The country-level support is further underpinned by strategic partnerships at the global level that leverage excellence and innovation from around the world.
Objectives include:
- Preparing risk-informed, sectoral investment plans and prospectuses and private sector engagement strategies to support NDC financial resource mobilization strategies.
- Mapping of climate finance flows to assess sectoral investment trends and leveraging effects of public policies.
- Systematic assessment of investor risks, implementation of a de-risking strategy that addresses risks and incentivizes private sector investments that are aligned with the SDGs.
- Strengthening capacities of national actors to access, structure and coordinate climate finance.
- Systematically engaging financial and industry decision-makers throughout the NDC process, including project development and partnerships for inclusive NDC targets.
- Encouraging high-level political leadership and forums with the private sector to overcome mistrust and highlight mutual benefits as a way to galvanize ambition.
What are some of the current challenges for NDC finance and investments?
- Lack of a transparent, enabling environment that can reduce, transfer, or compensate for investor risks in ways that create an attractive risk-return profile for NDC priority actions.
- Low awareness of private sector investors regarding the opportunities afforded by the NDCs, or the perception that there are no “investment-ready” project pipelines.
- No clearly defined strategies for engaging and incentivizing the private sector to invest in sectors where the government seeks their investment to achieve NDC targets.
- Insufficient evidence base for successful risk-informed NDC investments.
- Lack of data underpinning returns and impact over time to support recurring investments.
