Introduction

Despite its ostensible appetite for risk, philanthropy has been notably reluctant to fund climate change solutions, with estimates indicating that less than 2 percent of global philanthropic spending is allocated to this critical area. Historically, philanthropy in the development sector has prioritized health and education over other domains, favoring less risky and often less complex interventions. While this trend is beginning to shift – exemplified by the COP28 Call to ActionFootnote ¹ by the ClimateWorks Foundation – the potential to leverage philanthropic capital to attract additional private commercial finance remains largely untapped.

To limit global warming to less than 2ºC, emerging markets and developing economies (EMDEs), excluding China, must secure trillions in annual investment by 2030, with a significant portion allocated to green infrastructure. However, less than 20 percent of the necessary capital is currently available, despite the growing commercial viability of climate solution investments as technological advancements drive them toward key tipping points.

Philanthropy can play a pivotal role in addressing this challenge. While the scale of capital required is vast, equally large pools of institutional capital are actively seeking the long-term, stable returns that green infrastructure can provide. The primary obstacle lies in the mismatch between the risk-adjusted return expectations of institutional investors and the perceived investment opportunities at a viable scale, particularly in EMDEs. This gap is largely driven by a lack of coordination among governments, financial institutions, and private-sector actors in effectively de-risking investment sectors and opportunities. With its neutrality and ability to act as a bridge between stakeholders, philanthropy is uniquely positioned to help close this coordination gap and unlock much-needed investment.

This chapter presents the Green Development and Investment Accelerator (GDIA) as a strategic proposal to demonstrate how philanthropy can play a crucial role in de-risking and scaling investible deal flow. Through a multistage framework, it outlines the importance of strategically convening diverse stakeholders to optimize scale and reduce risk. The chapter explores philanthropy’s potential contributions at every stage of this process, including shaping country- and sector-specific policies, structuring contracts and regulations, coordinating government and business efforts across value chains, supporting pipeline development at scale, facilitating access to blended finance instruments, and syndicating investible deals to targeted investor groups. Additionally, it examines case studies of green infrastructure de-risking initiatives in EMDEs, offering a road map for leveraging philanthropy as a catalyst to mobilize investment.

The Challenge: Limited Philanthropic Capital and Private Finance

Philanthropic support for climate change mitigation from individuals and foundations represented less than 2 percent of global philanthropic giving in 2022, a total of only around $8–13 billion and roughly equivalent to the total in 2021, according to analysis by ClimateWorks Foundation.Footnote ² Annual foundation support for sustainable finance in 2022 represented only $140 million.Footnote ³ Given the devastating and accelerating impacts of climate change, there is a clear need for an increase in the ambition, deployment, and scale of philanthropic capital toward climate action.

However, in terms of the mobilization of broader pools of public and private capital, over the last few years, the COVID-19 pandemic, the war in Ukraine, and the tightening of global financial conditions have complicated an already challenging financial outlook for many EMDEs. These events have put further pressure on constrained public finances, both domestic and multilateral, and threatened to cut off such markets from many key private financial flows, jeopardizing financing for important development outcomes. Such EMDEs must now simultaneously mobilize resources not only for long-standing economic and social development goals but also to move their economies to low carbon trajectories while making them resilient in the face of increasing possible climate impacts. Faced with this daunting challenge, EMDEs need to mobilize greater financial resources than ever before. With limited domestic savings pools, such economies cannot rely on domestic resources alone to achieve this and must turn to international financial flows.

At the core of this financing challenge is the issue of mobilizing vast resources for the new power, transportation, building, and industrial infrastructure sectors that EMDEs require, and especially the additional finance required to ensure that this new infrastructure is “green” (low carbon) and climate resilient.

Making the global financial architecture work for green infrastructure investment in EMDEs, therefore, should be an urgent priority for philanthropies. This crucial objective has been highlighted by Vera Songwe, Nicholas Stern, and Amar Bhattacharya in their Independent High-Level Expert Group reports on climate finance. The Raising Ambition and Accelerating Delivery of Climate Finance report launched at COP 29 in 2024 notes that EMDEs (excluding China) will need to invest $2.3–2.5 trillion annually by 2030 and around $3.1–3.5 trillion annually by 2035 on transforming the energy system, responding to the increasing vulnerability of developing countries to climate impacts, and investing in sustainable agriculture and restoration of ecosystems and biodiversity.Footnote ⁴

Their earlier report, released at COP27 in 2022, estimated that around half of the finance needed could come from domestic sources of public finances, which is “challenging but feasible and an essential foundation given the importance for core public spending priorities, recurrent spending and creditworthiness.” It also estimated that EMDEs will require “an additional $1 trillion per year by 2030 … in external flows and private finance to meet the projected investment needs.”Footnote ⁵

Updated analysis suggests that domestic resources could feasibly finance $1.4 trillion per year of the $2.4 trillion total investment needed by 2030 and $1.9 trillion per year of the $3.2 trillion required by 2035. Meanwhile, external finance from all sources will need to bridge the remaining gap, amounting to $1 trillion per year by 2030 and approximately $1.3 trillion per year by 2035, to meet global climate investment needs.Footnote ⁶

However, there is a significant gap in the current flow of climate finance investments. The global total was $1.62 trillion in 2022, well short of the projected $4.3 trillion required annually by 2030 to meet globally shared climate objectives.Footnote ^7, Footnote ⁸ The regional disparities in the flows of climate finance are also concerning, as “more than 90 percent of the increase in clean energy investment since 2021 has taken place in advanced economies and China.”Footnote ⁹ There is a particularly acute shortfall of private climate finance outside China and advanced economies in Western Europe and North America.Footnote ¹⁰ Increasing capital for EMDEs is essential to prevent the lock-in of carbon-intensive infrastructure that will be a source of future emissions growth and transitional risk going forward.Footnote ¹¹ In contrast, transformative investments in clean energy systems will power growth and development.

Yet, with public debt levels already high in most G20 economies, rising interest rates, inflation, and the other demands on public finances, public-sector resources clearly cannot provide the full answer to such needs. On the other hand, unlike during the period when the Bretton Woods system was first established, private capital markets today dwarf public-sector resources in advanced economies. Resources have been accumulated over decades in private-sector institutions (such as asset owners, asset managers, banks, and insurance companies) with the scale and sophistication to make significant global investments. These institutions, in turn, face the need for growing and predictable cash flow streams to match liabilities that large-scale green infrastructure projects in EMDEs can often provide. In return for such predictability, asset owners and managers are, in theory at least, willing to accept reasonable risk-adjusted returns, which could facilitate the lower cost of capital that is crucial for the development of EMDEs. Much of the capital required for green infrastructure that will keep the 2ºC goal alive could, therefore, come from private sources into sectors that are investible, or soon will be.

Despite this potential, the reality is disappointing: private capital is not flowing nearly fast enough or at the scale required. Over the decade from 2011 to 2020, “The growth rate of private climate finance was slower (4.8 percent) than that of the public sector (9.1 percent) and must increase rapidly at scale.”Footnote ¹² The reasons for this are well documented, from scale to transaction costs.Footnote ¹³ Perhaps most important is the mismatch between real and perceived risk in project opportunities in these EMDE markets on the one hand and the needs (and perceptions) of international institutional investors on the other. These risks can be partially mitigated through carefully structured “blended finance” mechanisms such as guarantees or first-loss capital. This understanding has driven accelerated efforts to mobilize public resources from donors, multilateral institutions, and climate funds to develop more effective de-risking instruments. These efforts aim to reduce transaction costs, enhance focus on climate outcomes, and engage earlier with countries and private capital to maximize impact.

Despite ongoing efforts, large-scale private institutional capital is not flowing at the speed and scale required to address climate finance gaps. Mobilizing new fiscal resources and scaling successful blended finance instruments must remain central to the solution, building on the road map and vision laid out by Songwe and colleagues. Various organizations and initiatives are addressing different aspects of this road map, including reforming the role of multilateral development banks (MDBs; see also Chapter 1) and leveraging blended finance to tackle debt and liquidity challenges.

Further consolidation of this approach is essential to enhance the effectiveness of blended finance in mobilizing private capital. A key factor is philanthropy’s potential to enable a multistage process of country-sector platform de-risking that involves all key stakeholders. As becomes clear in other chapters of this volume, this approach has already shown success in certain EMDEs, and its institutionalization could dramatically increase the leverage of public finance and expand private financial flows.

The recommendations presented in this chapter are based on extensive engagement with some of the world’s largest long-term private investors – including sovereign wealth funds and pension funds – on mobilizing capital for green infrastructure in EMDEs. A clear conclusion from this work is that the lack of significant bankable deal flow with appropriate risk-adjusted returns is a primary obstacle to scaling climate finance. Additionally, insights have been drawn from consultations with organizations such as the Glasgow Financial Alliance for Net Zero (GFANZ), the Green Finance Institute (GFI), the European Development Finance Institutions (EDFI), the Global Infrastructure Hub, members of the Independent High-Level Expert Group on Climate Finance, the Impact Investing Taskforce, and the Blended Finance Taskforce.

The Role of Philanthropy

Philanthropy has a vital role to play in mobilizing private finance for green infrastructure. According to Bhattacharya et al., “there is scope for private philanthropy to further augment the scale of its financing and leverage its strengths to deliver much-needed grant financing with flexibility and agility.”Footnote ¹⁴ However, as mentioned earlier, annual foundation support for sustainable finance in 2022 represented only $140 million.

Much of this grant capital has traditionally been directed toward disclosures, reporting, and other financial system initiatives – efforts categorized as “greening finance” rather than directly funding climate change mitigation infrastructure, or “financing green.” For instance, The Rockefeller Foundation has provided multi-year funding to the Taskforce on Nature-related Financial Disclosures (TNFD), an initiative modeled after the Task Force on Climate-related Financial Disclosures (TCFD), which aims to improve corporate reporting on nature-related financial risks.Footnote ¹⁵ While such initiatives play a crucial role in integrating climate considerations into financial decision-making, they do not directly contribute to emissions reductions through renewable energy projects, electric mobility, or industrial decarbonization. Encouragingly, this trend is shifting, with more philanthropic capital being directed toward tangible climate solutions that drive systemic change and accelerate the transition to a low-carbon economy.

For instance, at COP29 in Baku, Azerbaijan, the Global Energy Alliance for People and Planet (GEAPP) and The Rockefeller Foundation signed a Memorandum of Understanding with ALTÉRRA, the world’s largest private investment vehicle for climate finance launched with a $30 billion commitment from the UAE, to enhance and strengthen cooperation. The three organizations plan to establish a collaborative platform aimed at scaling up climate investment in developing countries – an example of a supply-side effort to increase private capital flows toward sustainable investments.Footnote ¹⁶ While such initiatives are promising, they remain the exception rather than the norm when it comes to philanthropic engagement in scaling investments in green infrastructure.

However, given the limited availability of blended finance – whether from philanthropic capital or development finance – philanthropy can play a crucial role in addressing both real and perceived risks. It has the unique ability to occupy a strategic white space by convening multi-stakeholder processes to tackle systemic challenges. By leveraging its influence and resources, philanthropy can create platforms for knowledge sharing, capacity building, and risk assessment that bring together key stakeholders.

For example, philanthropic organizations can facilitate structured dialogues and process tracks that drive systems change, engaging industry leaders, financial institutions, government representatives, and civil society in complementary roles. By fostering trust and transparency, philanthropy can help mitigate investment risks, making sectors such as renewable energy, battery storage, electric mobility, green hydrogen, sustainable buildings, and industrial decarbonization more attractive to private financiers.

Additionally, philanthropy is well positioned to advocate for policy reforms and innovative financial instruments that support sustainable investments. By strategically de-risking markets and mobilizing diverse stakeholders, philanthropy can play a transformative role in unlocking private capital in EMDEs.

In this regard, there is much to learn from philanthropy’s role in India’s National Electric Bus Programme (NEBP), which has become a global case study for transport decarbonisation. This effort has involved navigating several challenges to transform electric mass mobility into an infrastructure asset class. India’s NEBP efforts present financing opportunities of $10 billion for 50,000 e-buses and the associated infrastructure and will also create green jobs in roles such as manufacturing, technology development, digitalization, and operations and maintenance.Footnote ¹⁷

Through philanthropic convenings starting in July 2022, the National Electric Bus Program (NEBP) was introduced to a diverse group of finance providers, including pension and sovereign wealth funds, bilateral and multilateral development finance institutions, and philanthropic funders. Between these convening moments, philanthropic organizations actively engaged with stakeholders across industry, government, and financial institutions through action track discussions focused on contracts, financial structures, and other mechanisms to address residual investment risks.

This collaborative effort ultimately led to the Indian and US governments establishing a joint Payment Security Mechanism (PSM) with a $390 million fund to incentivize e-bus operations. The initiative was launched at COP28 by US Special Presidential Envoy for Climate John Kerry and Indian Minister of Environment, Forest, and Climate Change Bhupender Yadav.

From facilitating the de-risking process to providing partial capital for the PSM, philanthropy played a critical and catalytic role in enabling this initiative. The five-step de-risking framework outlined in the following sections has emerged as a structured approach, informed by close engagement with India’s NEBP and other global de-risking efforts.

The Green Development and Investment Accelerator: Mitigation to Mobilize Climate Investment

Expert analyses on the risks associated with private climate infrastructure investment are extensive and well established. These assessments have taken various approaches, including sectoralFootnote ¹⁸ or project-typeFootnote ¹⁹ analysis, project development stage evaluation, and broader analytical frameworks. Despite these different methodologies, they consistently recognize that investment risks are primarily shaped by three key factors: institutional (particularly counterparty) risk, regulatory risk, and country and currency risk. While the latter is often assessed through economic analysis agencies such as credit rating agencies and the International Monetary Fund, institutional and regulatory risks require more context-specific evaluation.

Similarly, proposed risk mitigation solutions typically involve a broad set of recommendations directed at host governments, international financial institutions (IFIs), development finance institutions (DFIs), and MDBs.Footnote ²⁰ However, these recommendations often lack a structured, cohesive framework, appearing as a disconnected list of potential measures rather than an integrated approach. Many of these proposals are also externally driven, shaped by G7 government policies and financial mechanisms that lie beyond the direct control of host governments, making implementation more complex and fragmented.

Strengthening De-risking Approaches for Climate Investment Existing approaches to climate investment de-risking could be significantly enhanced by addressing two central questions: What can a deeply committed host EMDE government do in a structured, comprehensive manner to de-risk country-sector investment pathways and attract large-scale private institutional investment? How might philanthropy play a complementary role in supporting these efforts?

Successful case studies, such as India’s NEBP and its broader renewable energy sector, demonstrate that the systematic implementation of de-risking processes, grounded in multi-stakeholder consultation, is critical to mobilizing private capital at scale. India’s ability to attract financing for its expanding renewable energy sector and the early success of its sustainable transportation initiatives illustrate the impact of well-structured, government-led de-risking strategies. These cases highlight the need for similar integrated de-risking processes in other EMDEs.

While existing global, regional, and national financial and planning institutions could lead comprehensive de-risking efforts, such efforts could also be further catalyzed through a philanthropy-backed, purpose-built institution – a Green Development and Investment Accelerator (GDIA). Establishing a GDIA would significantly accelerate the pipeline of bankable projects by acting as a global coordinating body that supports country-specific de-risking initiatives and scales best practices internationally. Insights from institutional investor engagement strongly indicate that such an accelerator could help reduce investment risk and develop a robust project pipeline.

The proposed GDIA would serve as a centralized de-risking, learning, and best-practice hub, linking and integrating currently fragmented de-risking initiatives across sectors and countries. This platform would facilitate knowledge-sharing and accelerate project development in large-scale decarbonization infrastructure worldwide. Moreover, its methodologies and processes could be embedded within MDBs, DFIs, international NGOs (INGOs), and other relevant institutions while simultaneously leveraging the extensive expertise these organizations already possess.

While many existing institutions and national governments engage in de-risking efforts, these processes could be significantly improved through a structured, systematic approach. A trilateral de-risking process – formally bringing together institutional infrastructure investors, key federal and local government actors, and private-sector developers – could optimize de-risking strategies and enhance investment effectiveness.

The GDIA could accelerate such de-risking processes on a global scale while concentrating on specific sectors and geographies. For instance, after three years of working on the zero-emissions mobility financing challenge, a large collaborative launched the Collective for Clean Transport Finance (CCTF) at COP27.Footnote ²¹ The CCTF, incubated by the World Business Council for Sustainable Development,Footnote ²² aims to reduce risk and transaction costs to attract large-scale private finance to clean transport projects in EMDEs. “Country-specific sectoral” approaches could also be adopted by willing national or international actors or consortia whether related to the Just Energy Transition Partnerships or in other circumstances. Establishing a GDIA would help coordinate, refine, and scale such initiatives, ensuring a structured and effective de-risking process to mobilize private capital.

An Integrated De-risking Framework for Private Capital Mobilization

At the core of the GDIA approach to mobilizing private capital is the implementation of a comprehensive sectoral de-risking framework tailored to specific country contexts. This framework is built around five key steps (see Figure 9.1), designed to be executed through a structured trilateral consultation process involving institutional investors, government stakeholders, and private-sector developers, as outlined in the following steps:

• Step 1: Vision – Establish Clear, Timebound National Investment and Climate Goals

  Define a clear, realistic, and timebound national vision for investment and climate action, providing strong policy signals to the market. Institutionalize strategic targets through structured engagement with key domestic and international stakeholders, ensuring alignment and commitment. A well-defined, chronologically structured national vision significantly reduces investment risk by enhancing policy predictability and market confidence.

• Step 2: Real Economy – Implement Sectoral De-risking

  Translate economy-wide ambitions into sector-specific transition plans through the following key actions:

  • Strengthening the enabling environment – Reduce information asymmetry for investors by developing clear policy frameworks, regulatory guidelines, and contractual mechanisms that minimize uncertainty. Promote data sharing to bridge information gaps and enhance investor confidence.

  • Enhancing multi-sectoral coordination – Align industry, government, and financial institutions to synchronize and de-risk individual sectors. This includes securing supply chains, streamlining development pathways, and addressing sectoral interdependencies to reduce systemic risks.

  • Facilitating aggregation – Many green sectors in EMDEs consist of subscale individual assets that, on their own, may not be attractive to institutional investors. However, through aggregation strategies, these assets can be bundled into larger, scalable investment opportunities, increasing their appeal to private capital.

• Step 3: Supply and Demand – Accelerate Pipeline and Strengthen Intermediation

  • Enhance local capacity to generate a robust pipeline of high-quality, transition-aligned, bankable projects by strengthening project origination and development capabilities.

  • Leverage international expertise to scale and optimize project preparation funding, ensuring projects meet investor requirements.

  • Facilitate investor engagement and local presence to effectively match supply and demand by, for example, establishing country platforms that connect project developers with potential financiers.

• Step 4: Finance – Develop and Mobilize Targeted De-risking Mechanisms to Address Residual Risks

  • Bridge key investment risks – such as country, technology, currency, and customer risks – through fit-for-purpose financial instruments that blend concessional and commercial capital efficiently.

  • Enhance the role of MDBs and DFIs by optimizing their ability to mitigate risk through contractual mechanisms, policy interventions, and structured private-sector engagement.

  • Lower the cost of borrowing and expand non-sovereign lending to accelerate the deployment of critical green infrastructure.

  • Ensure blended finance is effectively targeted – Steps 1–3 help address risks that can be mitigated domestically, allowing blended finance to focus on residual risks that require international support.

  • Strengthen EMDE government leadership in co-designing blended finance programs with international investors and MDBs, ensuring these instruments effectively identify and address residual risks to maximize impact.

• Step 5: Syndicate – Mobilize Large-Scale Capital

  • Match investment opportunities with appropriate investor categories based on risk-return preferences, ensuring that de-risked projects reach the right capital providers.

  • Create mechanisms to unlock institutional investment by improving market access, streamlining syndication processes, and enhancing investor confidence.

  • Bridge information gaps by strengthening intermediation between project developers, financial institutions, and traditional capital market players, ensuring that high-potential, de-risked projects are effectively structured and presented to investors.

  • Engage capital markets intermediaries to facilitate structured deal flow, enabling better risk allocation and scaling up investment in green infrastructure.

Figure 9.1 The GDIA’s five-step de-risking process.

Source: Khemka Foundation/Blended Finance Taskforce.

Figure 9.1Long description

The steps are. 1. Vision, set national ambition for climate action. 2. Real economy, drive sectoral derisking. 3. Supply and demand, accelerate the pipeline, and strengthen intermediation. 4. Finance, design targeted derisking mechanisms. 5. Syndicate, mobilise large-scale capital.

Given the scarcity of concessional capital (concessional finance was 16 percent of total climate finance between 2011 and 2020)Footnote ²³ and the limited fiscal capacity of governments, this series of de-risking processes will enable more efficient leverage of this capital. Such de-risking processes could use limited blended solutions for residual de-risking (stage 4 of the five-step process) rather than earlier in the process. This strategy will require less units of concessional capital for investments in large-scale green infrastructure.

In collaboration with the Global Blended Finance Alliance, launched under the Indonesian G20 presidency, the GDIA would serve as a coherent, centralized hub that integrates and strengthens individual de-risking centers. By connecting fragmented networks of actors across different sectors and countries, the GDIA would accelerate the development and deployment of large-scale decarbonization infrastructure projects worldwide.

The transition to a low-carbon, more inclusive global economy is both urgent and investable. Mobilizing capital at the necessary speed and scale – particularly in emerging markets – requires a coordinated, strategic approach that philanthropy is uniquely positioned to catalyze. By building a new pathway to unlock private investment, philanthropy can play a pivotal role in managing risk, lowering the cost of capital, developing a high-quality project pipeline, and empowering key stakeholders.

To capitalize on growing momentum and activate leadership, it will be essential to align around a clear narrative and priorities. This will involve leveraging key global platforms, including the World Bank Annual Meetings, UN General Assembly/Climate Week, ASEAN, COP30, the G20, and other high-level convenings that bring together leaders from the public and private sectors, as well as the financial industry.

Recommendations: Leveraging Philanthropy’s Catalytic Potential

Based on this analysis and the global imperative to accelerate the pace and scale of investments in climate action (especially mitigation-focused green infrastructure), this chapter offers the following actionable recommendations to philanthropy:

Conclusion

While philanthropy may not have the financial capacity to dramatically scale its annual grant outlays to match the urgency and magnitude of the climate crisis, its unique ability to convene diverse stakeholders, mobilize catalytic capital, and bridge systemic gaps can play a transformative role in enabling large-scale private investment in climate mitigation infrastructure. By supporting the creation of the GDIA, philanthropy can help break down the structural barriers that currently prevent the flow of capital into EMDEs, where green infrastructure investment is both most needed and most underfunded.

The GDIA’s comprehensive, multisectoral de-risking approach offers a way to reduce investment risks, lower the cost of capital, and build a high-quality pipeline of bankable projects. By integrating structured de-risking strategies across governments, financial institutions, and the private sector, it can bridge the persistent mismatch between institutional investors seeking stable, risk-adjusted returns and climate infrastructure projects in need of capital. If scaled properly, this mechanism can unlock billions in institutional investment, accelerating the financing of renewable energy, sustainable transport, battery storage, green hydrogen, and climate-resilient infrastructure.

For the GDIA to be most effective, it must work in close coordination with existing financial institutions, MDBs, IFIs, and national development agencies. It should complement the establishment of domestic de-risking centers in EMDEs, modeled after successful initiatives like the G20 Global Blended Finance Alliance, ensuring that global best practices are tailored to local contexts and specific sectoral needs.

Beyond its financial impact, the GDIA can play a central role in transforming the global financial architecture for climate action. By creating a structured process for de-risking and syndicating investment opportunities, it can enable EMDEs to attract long-term institutional capital, reducing their reliance on expensive sovereign borrowing. This shift is essential not only for meeting climate goals and limiting climate warming but also for driving economic growth, job creation, and social resilience in developing markets.

Philanthropy has a once-in-a-generation opportunity to reshape climate finance by not just funding projects directly but by strategically de-risking and enabling private capital to flow at scale. By embracing this role, philanthropy can catalyze an era of accelerated green investment, ensuring that the transition to a low-carbon, climate-resilient future happens at the speed and scale that science and global equity demand.