Sustainable Finance in 2026: 6 Opportunities to Move Beyond the Headwinds

2026 is set to be another year of clashing trends in sustainable finance, particularly for emerging markets and developing countries (EMDCs), where the greatest capital shift needs to take place.

Last year, the world poured record levels of money into clean energy investments, and green bonds and loans hit an all-time high. But those tailwinds were matched by severe cuts in international public climate finance (most notably in the U.S.) as well as some countries watering down ESG regulations. Rather than derailing underlying momentum, however, these headwinds have sharpened the focus on where a rebound in leadership, innovation and coordination is most urgently needed.

We identified six strategic opportunities in 2026 for public and private investors to scale up finance needed to address the climate crisis, protect nature and improve people’s lives.

1) Generating Policy Leadership to Implement the New Finance Roadmap

Against the odds, the 2025 UN climate summit (COP30) solidified the Baku to Belém (B2B) Roadmap. This lays out a comprehensive strategy to meet the ambitious global goal agreed at COP29: delivering $1.3 trillion a year in international finance to EMDCs for clean energy, adaptation, nature, just transition, and loss and damage by 2035.

In 2026, the focus must shift to implementation so that progress can be demonstrated by COP31 this November. This will, of course, be aided by leadership from the key international bodies for financial governance. However, the G20 is set to be missing in action as a driver of sustainable finance and climate this year under the U.S. presidency. At the high-income G7 summit, France — this year’s chair — will undoubtedly aim to broaden the dialogue with EMDCs and make progress on several granular areas of climate finance (possibly including prudential regulation). This leaves the BRICS, with its 11 major EMDCs, with a chance to pick up the baton. Under India’s leadership this year, the group can deepen its 2025 commitment to “lead a global mobilization for a fairer and more effective International Monetary and Financial System to enhance climate finance.” (We examine opportunities for South-South cooperation in more detail below.)

Beyond high-level summits, 2026 needs to see governments and stakeholders turn to the nuts and bolts of implementing new finance commitments. Across its more than 100 member countries, the Coalition of Finance Ministers for Climate Action will give attention to expanding fiscal space in developing countries, increasing adaptation finance and supporting the new generation of country platforms. Meanwhile, the central bank and regulator Network for Greening the Financial System (NGFS) is deepening its focus on the short-term risks of climate inaction for growth, financial stability and inflation.

2) Rebooting Private Finance Flows

One of the biggest tasks for 2026 will be to show how the B2B Roadmap’s heroic goals for expanding private finance can be achieved over the next decade. Half of the $1.3 trillion in external flows needs to come from private sources by 2035, according to the Independent High-Level Expert Group on Climate Finance (IHLEG) — up 16 times from the $40 billion delivered in 2022. And of the $1.9 trillion needed from domestic sources, 40% must come from the private sector (including households), a ninefold expansion from today’s levels.

The good news is that 2026 opens with core banking, investor and insurance commitments on climate and nature finance relatively robust, despite well-publicized attacks and the shuttering of net-zero alliances for banking and insurance. In fact, the Net Zero Asset Management (NZAM) initiative will be relaunched early in the year. Leading asset owners have also helped to restore confidence through new allocations to sustainability themes: According to a recent Morgan Stanley survey, 86% of asset owners in North America, Europe and Asia Pacific expect to increase allocations to sustainable investments in the next two years.

2026 offers several key opportunities to continue increasing private finance flows:

• Expanding private investment in clean electrification in the developing countries that continue to miss out, notably in Africa. This will often require investors to work closely with multilateral development banks (MDBs) and development finance institutions (DFIs) in the construction of bankable pipelines, platforms and policies, as well as placing a priority on worker and community benefits.
• Overcoming the structural challenges facing blended finance to make it more efficient and impactful in mobilizing private capital. In 2026, the multi-country SCALED initiative is set to move into its second phase of standardizing blended finance requirements, vehicle types and processes.
• Aligning finance flows with nature. The next UN biodiversity summit (COP17) in October will focus attention on how to both meaningfully increase the still-tiny private finance flows into nature-based solutions (currently around $23 billion) and structurally curb the far-larger $4.9 trillion in private capital directed into nature-negative activities.
• Attracting private finance to adaptation. While adaptation finance has historically been viewed as a solely public sector priority, we expect this year to bring increasing evidence of private sector adaptation financing, including through resilience bonds.
• Bringing taxonomies closer together. In terms of financial plumbing, last year’s climate summit successfully launched a set of common principles to make the world’s more than 50 sustainable taxonomies interoperable. There’s opportunity to build on this in 2026, which could cut barriers to sustainable finance that stem from unnecessary definitional differences and help to further reduce transaction costs.
• Closing the insurance protection gap. One of the most specific of the B2B Roadmap’s short-term priorities is for the insurance industry to work with climate-vulnerable developing countries in the V20 and beyond, as well as donor governments, to reduce the financial protection gap. The goal is to deliver a plan by October 2026 that would show how a set of pre-arranged tools could be designed to ensure that funds reach people and enterprises immediately after disasters.

3) Reviving Concessional Finance

The B2B Roadmap reemphasized the perennial need for “developed countries to achieve manyfold increases in the delivery of grants and concessional climate finance.” But the availability of concessional funding will continue to face downward pressure in 2026, with previously announced cuts to development finance (ODA) from the U.S. and most other OECD countries further squeezing the available resources for climate action. One projection from Donor Tracker suggests that ODA will fall from a peak of $213 billion in 2023 to just $145 billion in 2026.

Visible progress will be needed from MDBs, bilateral development finance institutions and others to expand the quantum of concessional capital by stretching balance sheets, hybrid capital and other measures. As part of the mix, the proportion of concessional funds flowing to resilience needs to be increased in line with the tripling goal for 2035 agreed at COP30. The various soul-searching reviews of international finance currently underway also provide scope for development, climate and nature finance across MDBs, vertical climate funds and bilateral mechanisms to work better together as a coherent, well-allocated whole.

One particular opportunity for progress is to expand the number of countries backing the Premium Flyers Solidarity Coalition. The goal of the Coalition is to introduce levies on business class, first class and private jets as a way to channel new climate and development finance to EMDCs.

Another focus will be driving deployment of existing instruments that can make concessional funds go farther, both in terms of leveraging additional investment and securing maximum impact. This will be a major test for the growing focus on development finance to be “ market shaping,” “ transformational ” and “ systemic.” There is no shortage of available mechanisms that need to move into an expansion phase this year. One cluster is the more than 50 green guarantee structures now in existence, such as the World Bank Group’s Guarantee Platform, which consolidates products at the Multilateral Investment Guarantee Agency (MIGA), freeing up lending for climate finance.

Another approach is the growing use of structured products as a way of tapping bond markets to generate a flow of concessional capital. For example, the Climate Investment Funds (CIF)’s Capital Markets Mechanism issued a first-of-its kind $500 million bond last year to frontload funding for climate technologies. Further bond issues in 2026 would be a positive sign of momentum. The Tropical Forests Forever Facility (TFFF), championed by Brazil at COP30, is a much larger model, aiming to raise $100 billion through the issuance of highly-rated bonds along with $25 billion in public and philanthropic capital (which would absorb losses in a blended finance approach). This pool would then be invested to generate $4 billion per year for tropical countries, with at least 20% of payments directed to Indigenous Peoples and local communities. A key test for the TFFF in 2026 will be whether it can achieve critical mass in securing the upfront public funds it needs, building on the $6.6 billion secured at COP30.

4) Adding Urgency to Transition Finance

The long-waited introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM) on the first day of 2026 has lent new urgency to the transition finance agenda in developing countries. The CBAM introduces a charge on imports into the EU based on carbon performance, matching the price paid by domestic companies through the European Emissions Trading System (ETS). This means companies in affected sectors — cement, iron and steel, aluminum, fertilizers, hydrogen and electricity — will increasingly be seeking financing options for new modes of production that can cut emissions and thereby avoid carbon costs.

Another policy trigger spurring transition finance will be the intensifying focus on how to speed up fossil fuel phaseout. In April, Colombia will host the first global conference on the just transition away from fossil fuels, in partnership with the Netherlands. This will bring together the growing number of countries seeking to accelerate clean energy deployment, diversify their economies from coal, oil and gas, and thereby avoid stranded assets and stranded communities. Alongside this, Brazil is driving a domestic strategy to transition away from fossil fuels (TAFF) and will lead a dialogue through to COP31 for a coordinated international approach to TAFF.

All this will place increased pressure on business to develop credible transition plans and transition finance instruments. Here, the main arena to watch in 2026 will be the market take-up of the recently launched guidance on dedicated transition bonds and loans from the International Capital Market Association (ICMA), the Loan Market Association (LMA) and the Asia Pacific Loan Market Association (APLMA). Critical to this will be closing the gap between different national benchmarks of credible transition performance for key low-carbon products.

5) Boosting Climate Innovation Ecosystems

At the other end of the investment spectrum from today’s incumbent fossil fuel technologies lie the diverse ecosystems of climate innovation. Climate tech businesses around clean energy, battery storage and sustainable mobility attracted $56 billion in the first nine months of 2025, more than they did in all of 2024.

This finance remains unevenly spread, however. While climate tech investment in Africa rose to upwards of $1 billion last year, funding tended to flow to larger, more proven businesses. Continued declines in global ODA will likely mean further reductions in international grants for early-stage climate ventures.

As EMDCs advance their ambitions of becoming high-income economies, they will be looking for opportunities to boost private sector productivity and provide value-added links to global supply chains. In parallel, many are working to scale sustainable solutions to meet their climate targets. This year, we could see an increase in national policies geared toward boosting local green innovation that can attract commercial investment, especially in EMDCs where this is a priority. One example is Vietnam’s resolutions 57 and 68, agenda-setting frameworks that prioritize private sector-led innovation to boost economic growth.

EMDCs may look for ways to increase the volume of their climate pipelines by integrating them with other sectors that are currently attracting investment, such as linking data centers to renewable energy sources. Additionally, we are likely to see global supply chains begin to shift as many countries look to diversify to new suppliers, creating further opportunities for green start-ups in EMDEs.

Based on the high emphasis placed on adaptation during COP30, as well as rising costs and risks of the physical impacts of climate change, we will likely see investors prioritize investments in startups focused on building climate resilience. Additionally, the adoption of adaptation indicators at COP30, while needing additional refinement, and the emergence of voluntary investment frameworks will help establish a standardized way to measure progress and allow for clearer investment opportunities.

6) Charting the New Role of South-South Finance

In the past, international climate finance discussions have largely focused on North-South flows and domestic resource mobilization. But today’s geoeconomic turbulence makes South-South financial cooperation an increasingly critical arena. Already, South-South climate cooperation amounts to about $17 billion a year — greater than direct flows of international private capital, according to IHLEG.

At COP29 in Baku, governments agreed that South-South cooperation would form a voluntary component of the New Collective Quantified Goal (NCQG) on climate finance. This inclusion reflects a paradigm shift: Developing countries are not only recipients, but also contributors to global climate solutions. While these contributions remain non-obligatory, they signal a growing commitment among EMDCs to share resources and expertise, reinforcing solidarity and mutual responsibility in addressing climate and development challenges.

These collaborations amongst the BRICS, least developed countries and the capital hubs of the Gulf not only mobilize resources, but also foster knowledge exchange and capacity building tailored to the unique challenges faced by emerging economies. As clean-economy opportunities increase and climate impacts intensify, the role of South-South finance in bridging gaps and accelerating action has never been more vital.

For 2026, the BRICS has signaled its intent to deepen collaboration on climate finance, creating a platform for emerging economies to pool resources and share best practices. This year, expect discussions on operationalizing joint investment vehicles and green bond markets under this framework. These efforts could unlock significant capital for renewable energy, resilient infrastructure and low-carbon technologies across the BRICS member states and beyond.

One crucial institution to watch is the youngest MDB, the New Development Bank, set up by the BRICS a decade ago. As part of its 2022-2026 Strategy, the Bank committed to dedicate at least 40% of its portfolio to climate-related finance as well as 30% in local currencies. The latest data presented at COP30 shows that climate finance is 31% of the bank’s total portfolio (excluding COVID loans). But the pace is stepping up, with climate accounting for over 55% of approvals in 2024. These goals open the door for large-scale investments in clean energy, sustainable transport and resilience projects across BRICS and other partner countries, and the potential for increased climate ambition in the NDB’s next strategy. Leveraging this commitment will require coordinated pipelines of bankable projects and innovative financing structures to maximize impact.

While South-South cooperation is gaining prominence, it is not — and should not be viewed as — a stand-alone channel separate from other international flows. In practice, these financial contributions are often channeled through existing multilateral institutions and implemented in partnership with traditional donor countries. This interconnected approach ensures that resources are deployed efficiently and aligned with global priorities. The real opportunity to watch in 2026 is how South-South cooperation can become an integral part of global climate finance architecture — working together with North-South structures to scale up implementation of the B2B Roadmap.

From Commitment to Deployment

These six opportunities are just some of the areas where we could see real movement toward a more sustainable financial system. Ultimately, progress in 2026 will depend less on new pledges and more on execution: translating roadmaps into monitored action, commitments into deployment, and partnerships into measurable impact for people, nature and climate.