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Public Financing Instruments to Leverage Private Capital for Climate-Relevant Investment

Focus on Multilateral Agencies

This working paper is part of WRI’s Climate Finance Series, which tackles a broad range of issues relevant to public donors, intermediaries, and recipients of climate finance. A subset of this series, including this working paper, examines how public funds can leverage private sector investment in climate-relevant projects to help meet developing countries' significant investment needs. This paper maps climate-relevant investments of select multilateral agencies – the World Bank Group, the Global Environment Facility (GEF), and the Clean Technology Fund (CTF) – to identify trends in their investment practices. Subsequent working papers will map the activities of other public institutions. The aggregated findings will be synthesized into recommendations that inform the future public provision of climate finance with respect to leveraging private sector capital.

Key Findings

Executive Summary

As private sector investment flows within and into developing countries rapidly increase, the public sector has a unique opportunity to ensure that these flows are directed to meet critical climate change investment needs. This paper informs the use of public funds to leverage private sector investment in climate-relevant projects. It focuses on the public sector’s use of financing instruments, which can help improve the risk-reward profile of climate-relevant projects, especially when combined with a foundation of complementary climate change policies and financial regulations.

This paper draws on the experiences of two types of multilateral institutions responsible for providing or intermediating finance to climate change projects in developing countries: (1) climate funds and (2) development banks. It maps the financing instruments available to various public actors, with a focus on three significant institutions: the Global Environment Facility, the Clean Technology Fund, and the World Bank Group. Future working papers will map the activities of other public institutions, including bilateral, national, and regional development banks; government agencies; and public-private partnership funds.

The results of these working papers will be aggregated into detailed analyses and recommendations that inform the future public provision of climate finance with respect to leveraging private capital.

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