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.

Introduction

Latin America and the Caribbean (LAC), a region renowned for its rich biodiversity and acute vulnerability to climate change, stands at a pivotal moment on its journey toward sustainable development. As highlighted in the 2019 report Getting to Net-Zero Emissions: Lessons from Latin America and the Caribbean,Footnote ¹ the region faces complex challenges but also holds significant opportunities to build a sustainable, resilient, and inclusive future – one that balances economic growth with environmental preservation. The report underscores the urgent need for bold climate action, emphasizing that to limit global warming to between 1.5°C and 2°C above preindustrial levels – aligned with the Paris Agreement – net-zero CO₂ emissions must be achieved by 2050, with significant reductions required by 2030. Although LAC countries have pledged to adhere to the prescriptions of the Agreement, their current nationally determined contributions (NDCs) fall short of achieving the established targets.

At the core of this issue lies the Amazon – the world’s largest tropical rainforest and biological carbon reservoir and home to 10 percent of the world’s biodiversityFootnote ² – which spreads across nine Latin American countries and represents the largest stake in the fight against environmental destruction in the region.Footnote ³ Home to more than 16,000 tree species and 390 billion individual trees, this region represents an ecological treasure and a vital resource for socioeconomic development. However, it is yet to be recognized as such by many, even as it faces critical existential threats from rampant deforestation and accelerating species extinction.

At Latimpacto, our mission is rooted in enabling the growth of impact funding and increasing the flow of human and intellectual resources toward climate action. As a network of capital providers, we unite our diverse members through dialogue and peer learning to strengthen the community of impact organizations. Together, we aim to incubate, pilot, and scale nature-based solutions that protect this invaluable natural asset by empowering sector actors to engage across the full spectrum of capital – from venture philanthropy to large-scale impact investing – in co-creating and executing systemic, long-term solutions.

To date, efforts to safeguard the Amazon have been hindered by a lack of cross-border coordination, significant logistical challenges (such as access and distance), chronic underfunding, and insufficient local capacity building. Addressing this last challenge is critical to attracting sustained, long-term investment. Here, philanthropy, amplified by the strength of our sector network, can play a transformative role.

Philanthropic capital embraces risk, making it well suited for incubating comprehensive nature-based solutions and then levering in additional sources of capital to scale. Public-sector action and regulations have often proven insufficient in dampening the negative externalities of the private sector. Indeed, the most recent State of Finance for Nature report highlights that, despite various international climate commitments, governments continue to finance activities that exacerbate the planetary crisis and bear a net-negative impact on natural capital. According to the report, some $7 trillion in public and private capital flows accrue annually to nature-negative activities such as fossil fuels, intensive agriculture, and urban development, while only $200 billion are allocated to nature-based solutions.Footnote ⁴

In this chapter, we examine the role of philanthropy in addressing this imbalance by acting as a catalyst, not only increasing available funding but also providing seed capital to test and validate innovative solutions to climate change. We will highlight new approaches to building climate resilience being developed by our member organizations. The examples included will illustrate how empowered local organizations can successfully design financially viable and scalable business models that hold potential for replication across the region. We demonstrate how philanthropy can contribute to building biodiversity resilience, advancing locally driven climate resilience, and fostering cross-border peer-learning opportunities. Additionally, we will show how philanthropic capital can serve as a foundation for forming partnerships that amplify impact.

From Climate Change to System Change

Much has been made of the dearth of philanthropic investments in climate change solutions. The Climate Works Foundation notes that climate-oriented giving accounts for less than 2 percent overall philanthropic contributions, with health and education remaining the largest recipients.Footnote ⁵ Even where the environmental crisis is addressed in the philanthropic sector, it is often approached through a “climate change lens” that aims to minimize carbon footprint rather than build systemic solutions. However, this trend overlooks the efforts of civil society in the LAC region, which recognizes the importance of nature-based solutions and is actively collaborating to develop innovative approaches for conserving biomes and protecting regional assets.

As the State of Finance for Nature report notes, “The triple planetary crisis—climate change, nature and biodiversity loss, and pollution and waste—is causing nature to atrophy, and with it our chances of ending poverty, hunger and inequity through the UN Sustainable Development Goals.”Footnote ⁶ The magnitude of the current crisis points to a critical need for additional financial resources: clearly, philanthropic capital alone cannot fill the gap. Current philanthropic investments in nature-based solutions in LAC account for some $100 million of investment – a drop in the ocean compared to the $1.7 trillion of public funding flowing each year to environmentally harmful subsidies.Footnote ⁷

Philanthropic and broader financial resources remain disproportionately focused on decarbonization and sustainable solutions in the Global North while neglecting the urgent need for ecosystem restoration in the countries of the Global South, particularly in critical regions like the Amazon, where direct action could yield immense impact. Moreover, philanthropic investments in climate change mitigation are heavily concentrated in clean energy – primarily electricity – while largely overlooking or disregarding hard-to-decarbonize sectors.

There is cause for hope. According to Convergence’s latest State of Blended Finance report, since 2018, philanthropic investors have contributed approximately $400 million to climate blended finance initiatives.Footnote ⁸ They are the only investor class with a balanced focus on both climate mitigation and adaptation, with more than 60 percent of their investments supporting adaptation and cross-cutting measures. The report notes that philanthropic investors primarily allocate their resources to climate funds (49 percent from 2018 to 2023), followed by direct investments in companies (31 percent). They target mainly lower- and middle-income countries (71 percent), particularly in Sub-Saharan Africa (51 percent) and LAC (31 percent), with upper- and middle-income countries comprising 31 percent of investments.Footnote ⁹

One such initiative is the Catalytic Green Fund, a collaboration between Latimpacto and IDB Lab, the innovation laboratory of the Inter-American Development Bank (IDB). Designed to accelerate decarbonization and climate resilience, the fund strengthens entrepreneurial support organizations that promote nature-based solutions such as reforestation, regenerative agriculture, circular economies, and sustainable waste management. By providing both financial and technical support, the fund fosters an innovation ecosystem where climate-focused business models can scale effectively, with a particular focus on vulnerable regions like the Amazon basin. As a blended finance mechanism, the Catalytic Green Fund exemplifies how philanthropy can de-risk climate investments and catalyze a more systemic approach to environmental and economic sustainability.

This chapter explores three case studies that further highlight philanthropy’s impact in LAC. We begin with the Arapyaú Institute, a Brazilian philanthropic organization that leads networks such as the Amazon Concertación, focused on rainforest regeneration and preservation. Arapyaú also engages in blended finance mechanisms in partnership with Tabôa Fortalecimento Comunitario, promoting inclusive, low-carbon development in Brazil. In Paraguay, we highlight the Moisés Bertoni Foundation, which advances equitable and inclusive development by integrating conservation and sustainable livelihoods. Finally, we examine Grupo Argos Foundation in Colombia, which is leading territorial conservation efforts by protecting strategic ecosystems like the Andean Forest and working closely with local communities to foster long-term sustainability.

Through these case studies, this chapter demonstrates that philanthropy can play a transformative role in building climate resilience, conservation, and nature-based solutions. We highlight how philanthropic organizations leverage their proximity to local communities, collaborating with civil society networks, public institutions, and private-sector actors to develop trust-based, integrated approaches to adaptation and sustainability.

The Arapyaú Institute

The Arapyaú Institute, founded in 2008, is a Brazilian philanthropic network dedicated to fostering sustainable development through fair, inclusive, low-carbon projects.Footnote ¹⁰ Deeply rooted in the ecosystems it seeks to protect, the Institute leverages grassroots action and scientific expertise to maximize its impact. It embraces a holistic approach to sustainable development that integrates natural, social, and economic dimensions and recognizes the Amazon rainforest as a central factor in addressing regional conservation challenges. Preserving this vital natural asset entails not only operational and financial hurdles but also profound philosophical and intellectual dilemmas. Balancing the complex ecological threats facing the “lungs of the world” with the need for economic and social development in LAC nations demands an institutional mindset that is both adaptable and resilient, capable of evolving with shifting challenges.

In line with this vision, the Arapyaú Institute prioritizes scientific research in forest restoration, aiming to develop systemic solutions that safeguard natural ecosystems and capital. Reshaping perceptions to position natural capital as both a valuable asset and a finite resource, deserving thoughtful stewardship, is central to its mission. By advocating for its inclusion in Brazil’s standard economic indicators such as gross domestic product (GDP), the Institute seeks to elevate environmental preservation as a core strategy for economic and social progress rather than a peripheral concern. This approach positions Brazil among global leaders who recognize the interdependence of environmental health and economic vitality.

As Roberto Waack, Chair of the Arapyaú Board, notes, “global climate challenges require coordinated action as well as space to decant and mature new ideas that can lead to effective transformation.”Footnote ¹¹ The Institute’s role, therefore, extends beyond sharing knowledge and expertise. In a rapidly changing world, it strives to provide clarity and direction amid competing narratives, leveraging networks and partnerships to incubate and co-create innovative, network-based solutions.Footnote ¹² This collaborative approach underpins the Institute’s belief that philanthropic capital – through its resources and capacity for innovation – can catalyze Brazil’s transition to a nature-based economy.

In 2008, the Institute launched a sustainable credit program to support small agroforestry cocoa producers in the South of Bahia, aiming to support the region’s economic development by reinforcing and boosting the cocoa and chocolate chain. Their work, in partnership with Tabôa Fortalecimento Comunitario, contributed to developing scalable blended finance mechanisms to match private and concessional funding with technical assistance. This initiative has secured assisted credit for more than 200 small producers in Bahia, previously working at the margins of the financial system and lacking access to technical assistance. It contributed to increasing the income for producers by an average of 40 percent, with a default rate close to zero, encouraging social entrepreneurship through the offer of “financial services, training and support for socioenvironmental projects.”Footnote ¹³

The program’s success in achieving a low default rate can be attributed to its comprehensive and tailored approach, which combined financial assistance with technical support and training designed specifically for small agroforestry cocoa producers. By addressing both the financial and technical barriers these producers faced, the initiative ensured that participants not only had access to much-needed funds but also possessed the knowledge and skills required to use them effectively. This targeted design, focused on individuals working at the margins of the financial system, met the unique needs of the local community, empowering borrowers who were motivated to improve their livelihoods but previously lacked the means to do so. Based on the outcomes, the program is currently being expanded to the state of Para, with the support of both public and private providers such as Solidaridad Network and the Brazilian National Development Bank, with an upcoming third phase on an even larger scale.

The Arapyaú Institute mobilizes diverse sectors of society and influences decision-makers to foster policies that reconcile economic growth with environmental conservation. It played a key role in developing the Amazon Concertacion, a network of more than 800 leaders – mainly from the private sector – focused on transforming dialogue into actionable proposals for sustainable regional development. Arapyaú’s support for Conexao Povos da Floresta (Forest People Connection) facilitated rapid internet access for more than 550 indigenous, quilombola, and extractivist communities in the Brazilian Amazon, connecting more than a million people across 5,000 communities.Footnote ¹⁴ This unprecedented connectivity initiative has enabled telemedicine, distance learning, financial integration, and regenerative economic practices while promoting low-carbon development. The Institute also aided Concertacion in advocating for the inclusion of their “proposals for integrated development”Footnote ¹⁵ in the government’s Environmental Working Group report, securing the adoption of eleven out of fourteen proposals, five of which were formally embraced by President Luiz Inácio da Silva’s new administration. These proposals were incorporated into the revogaço (“massive cancelation), a set of fifty-two decrees and four provisional measures aimed at reversing environmental damage – the most extensive legislative action taken within the first forty-eight hours of a new government in Brazil.

The Arapyaú Institute’s collaborative approach, particularly its engagement with the public sector, underscores the importance of systemic alignment in addressing climate and environmental challenges. By working with public institutions, the Institute helps create robust policy frameworks that provide the foundation for long-term, sustainable action. Public-sector involvement ensures that initiatives like the Itinerarios Amazônicos program gain legitimacy, scalability, and alignment with regional development goals. This collaboration allowed the Institute to embed environmental knowledge into public education systems across eight states in the Legal Amazon region, emphasizing the Amazon’s significance not just as an ecological asset but as an integral part of students’ academic and civic education. Training educators and developing tailored curricula ensured that the program would have a lasting impact by fostering a generation of environmentally aware citizens equipped to address regional and global challenges.

Simultaneously, the Institute supports private-sector action by encouraging education, learning, and innovation. Its partnership with Agni to develop the science, technology, and innovation agenda for the forest-based bioeconomy highlights its commitment to fostering market-based solutions rooted in ecological preservation. By integrating scientific research with local economic opportunities, this agenda creates pathways for a sustainable bioeconomy, addressing economic development and conservation in tandem. The synergy between public policy, private-sector engagement, and education amplifies the Institute’s ability to address environmental issues holistically, ensuring that its efforts resonate across multiple societal levels and sectors.

Despite Arapyaú’s successes, the Institute acknowledges that building an ecosystem-wide, community-led approach is a formidable task that requires method, systematic processes, and robust governance. The lack of relevant theoretical frameworks and empirical evidence gaps create transaction costs and hinder facts-based decision-making, but Arapyaú endeavors to distill institutional learning and share best practices across relevant networks. Building lasting change requires a balance between national and local action, with a blend of public sector impact to devise policies that support sustainable development and of private-sector philanthropic action to target marginalized communities and build collective resilience. Change does not arise from isolated efforts, and promoting linkages between grassroot civil society networks, academia, governments, and the private sector is key to creating spaces for the exchange of knowledge, experience, and resources.

The Institute firmly believes that Brazil has the potential to catalyze a natural capital-based economy, capable of improving well-being for its populations while preserving its environmental heritage. However, the road ahead is long, and lasting change will require continuous advocacy and considerable investment. Although the Amazon rainforest covers 60 percent of Brazilian territory, accommodating around 13 percent of its population, and contributes some 9 percent of GDP, it receives less than 3 percent of national funding toward scientific research and technological innovation.Footnote ¹⁶ Collective efforts led by Arapyaú and its partners risk being curtailed if nature-based solutions are not consolidated and made central to this new development trajectory, thus reducing the potential for systemic change.

The Moisés Bertoni Foundation

The Moisés Bertoni Foundation, a private nonprofit organization based in Paraguay, advances sustainable development by conserving biodiversity and protecting the environment.Footnote ¹⁷ Its mission, akin to the Arapyaú Institute’s, is rooted in preserving Paraguay’s unique natural and cultural heritage, which includes rare bioregions, ecosystems, and native species. Many of these exist on private properties, beyond the reach of public conservation frameworks. This limitation highlights the need for inclusive strategies engaging diverse stakeholders – landowners, communities, and policymakers – to achieve effective conservation and sustainable development goals.

The Foundation partners with landowners and local communities to implement productive practices that align with environmental preservation, offering practical models for balancing economic activity with ecosystem protection. Private land conservation tools, such as conservation easements or payment-for-ecosystem-services programs, are central to its strategy. These tools complement state-protected areas, providing an essential layer of protection for threatened biomes. By embedding scalable, replicable private conservation models, the Foundation fosters biome regeneration and long-term ecosystem health.

This approach integrates property rights and market mechanisms to drive systemic change, linking economic incentives with environmental stewardship. For example, its efforts to promote eco-certifications for sustainably harvested goods have unlocked new markets for local producers, demonstrating how conservation can yield tangible economic benefits. The Foundation’s vision aligns with global shifts toward circular economies, offering adaptive solutions to the complexities of sustainable development. Through initiatives that unite the private sector, civil society, and market forces, the Foundation demonstrates how localized efforts can contribute to global sustainability while addressing economic, social, and environmental challenges.

Since its inception in 1988, the Foundation has prioritized improving the livelihoods of marginalized communities by creating social and economic value through biodiversity preservation and equitable development models. It adopts a holistic approach, amplifying the voices of diverse stakeholders in regions marked by inequality and complex socio-environmental dynamics. As “articulators” of collaborative efforts, the Foundation addresses interconnected challenges, ensuring that natural resource preservation supports broader territorial development and social inclusion. By fostering linkages between local communities, private entities, and public actors, the Foundation anchors inclusive development models that resonate with on-the-ground realities. This approach is strengthened through grassroots engagement, local volunteerism, and the cultivation of community expertise, fostering advocacy and a shared sense of responsibility.

Over its thirty-five-plus years of action, the Moisés Bertoni Foundation has developed a diverse portfolio of initiatives rooted in these principles. Its proximity to the communities it serves enables a dynamic, evidence-based approach to understanding and addressing real needs, eschewing one-size-fits-all solutions. Among its key focus areas is nature tourism, which leverages the region’s unique ecosystems to create sustainable livelihoods and financial opportunities. For example, in the Mbaracayú Forest Natural Reserve (RNBM)Footnote ¹⁸ in northeastern Paraguay, the Foundation promotes tourism that respects the region’s natural, cultural, and social environments while generating value for local communities.

The RNBM, designated as a UNESCO Biosphere Reserve in 2000,Footnote ¹⁹ exemplifies the Foundation’s large-scale conservation efforts. This recognition facilitated the institutionalization of conservation activities with clear community development objectives. The Reserve’s management strategy incorporates training programs to equip local communities with the technical knowledge needed to combat deforestation, forest fires, and climate change. By engaging younger generations, the Foundation fosters resilience and sustainability. Complementary environmental education programs target teachers and students, emphasizing biodiversity and endangered wildlife conservation. International collaborations with organizations like the World Wildlife Fund amplify these efforts. The Mbaracayú Educational Centre, a flagship initiative, has supported 448 young people in their studies, fostering a new generation of sustainability advocates.

Despite notable successes, the Foundation continues to grapple with the scale of environmental and socioeconomic challenges in its territories. To build resilience, it invests in sustainable farming practices, carbon sink preservation, and native vegetation restoration in partnership with organizations like the ProYungas Foundation and the Argentine Association of Direct Sowing Producers. These efforts reflect the Foundation’s commitment to systemic change, grounded in local action.

A significant component of the Foundation’s strategy is its exploration of global carbon credit markets to stabilize funding for environmental projects. This move aligns with its broader goal of advancing circular economy pathways. By engaging the private sector in reducing, reusing, and recycling raw materials, the Foundation fosters employment and economic opportunities for vulnerable communities. Its Cities Without Waste initiative exemplifies this approach by strengthening the productive and logistical capacities of small recycling associations and partnering with collection centers in Paraguay.

The Cities Without Waste initiative tackles multiple dimensions of waste management and, by strengthening small-scale recycling associations, addresses systemic inefficiencies in waste collection and processing infrastructure. Many developing regions, including Paraguay, struggle with fragmented or informal recycling sectors that lack the capacity to manage waste efficiently. The initiative addresses these gaps by building organizational capacities and creating networks that facilitate better resource flows and operational efficiency. For instance, partnerships with collection centers streamline the sorting and processing of recyclables, ensuring a higher rate of material recovery and reducing environmental impact.

The program’s emphasis on private-sector engagement enhances its sustainability. By aligning the financial interests of businesses with environmental objectives, the initiative generates economic incentives for long-term participation. Companies are encouraged to adopt responsible waste management practices, invest in recycling technologies, and support the growth of circular economy markets. This creates a feedback loop in which environmental benefits translate into tangible economic gains, fostering a broader cultural shift toward sustainability.

The Cities Without Waste initiative also prioritizes the empowerment of vulnerable communities. By generating employment opportunities and supporting local entrepreneurship, it directly addresses socioeconomic disparities. Small-scale recycling workers, often operating in precarious conditions, benefit from improved infrastructure, training, and formal recognition of their contributions. This not only enhances their livelihoods but also integrates them into a more organized and equitable waste management system. The initiative’s focus on capacity building ensures that these communities are equipped with the skills and resources needed to sustain their efforts independently over time. The holistic nature of the Cities Without Waste initiative – combining environmental stewardship, economic empowerment, and social inclusion – makes it highly replicable in other regions. Its integrated approach offers a scalable blueprint for tackling waste management challenges in areas with underdeveloped systems. By demonstrating the tangible benefits of targeted investment and multi-stakeholder collaboration, the initiative illustrates how local actions can drive systemic change.

The Grupo Argos Foundation

Like its counterparts in Brazil and Paraguay, Colombia’s Grupo Argos Foundation works to harmonize the relationship between human beings and nature, aiming to promote territorial development and sustainable resource management through education, volunteer actions, and linkages with civil society.Footnote ²⁰ The Foundation aspires to become one of Colombia’s “most powerful vehicles of corporate social responsibility”: its efforts are focused on addressing challenges associated with forest and water conservation faced by local communities. Through a community-focused approach that emphasizes internal and external capacity building, the Foundation demonstrates agility in responding to ever-changing climate issues. The emphasis is on fast and tailored action that is responsive to individual needs. Like its regional peers, the Foundation prioritizes collective action via partnerships, working closely with more than sixty public- and private-sector organizations to enhance impact.

The Foundation’s initiatives are aimed at preserving and providing access to water and biodiversity, as well as transforming territories by identifying income-generating opportunities. It has built an integrated portfolio of programs that leverage its internal expertise while also sharing lessons learned with organizations within and beyond their direct ecosystem. By fostering partnerships with academic institutions, governmental bodies, and nongovernmental organizations, the Foundation can create scalable solutions that can be replicated and adapted in different contexts. Between 2018 and 2023, the Grupo Argos Foundation contributed to restoring more than 24,800 hectares of Andean forests, tropical forests, and mangroves, pushing for conservation agreements that protect strategic ecosystems through sustainable production methods. It engaged in planting more than 5 million trees (including 124 native species) across six counties in Colombia, generating thousands of direct and indirect jobs and strengthening water management and preservation.

The Foundation’s recognition of the need for locally rooted nature-based solutions is crucial for effective impact. By working closely with local communities, it ensures that solutions are co-created and culturally appropriate. This is particularly evident in its environmental education programs, which are tailored to the local biodiversity and community needs. The preservation of key species such as the Andean bear, an “umbrella species” vital for seed dispersal, highlights the Foundation’s focus on protecting critical ecosystems. This species’ role in regenerating ecosystems through seed dispersal illustrates the importance of biodiversity in maintaining ecological balance. The Foundation’s educational programs have a wide reach, targeting more than 90,000 students, 3,500 teachers, and 350 schools in 38 municipalities across Colombia. Through these programs, the Foundation fosters environmental literacy and practical engagement with sustainability issues.

Moreover, the Foundation collaborates with various partners to share knowledge and experiences, building scalable models for nature-based solutions. Their participatory ecological restoration program Sembrando Futuro was selected by global climate technology provider Terraformation for its Forest Carbon Accelerator. This partnership aims to offset emissions and accelerate restoration processes in the South-West of Antioquia, planting 2.3 million trees and capturing an expected 372,000 tons of CO₂ over 30 years. This initiative not only integrates the project into the global voluntary carbon credit market but also opens up funding opportunities from institutional investors and corporations. This makes Sembrando Futuro an international reference in reforestation and highlights the Foundation’s commitment to creating scalable, replicable solutions to climate change.

The Foundation’s iterative approach to nature-based solutions is key to its success. By working hand in hand with other actors to test and pilot new approaches, the Foundation demonstrates flexibility and adaptability. This approach involves developing water management strategies, biodiversity conservation methodologies, and engaging local communities to co-create solutions. Through these partnerships, the Foundation enhances not only its own capacity but also that of local organizations and communities to sustain efforts beyond the initial project phases. The Foundation’s focus on education, community building, and leadership development is critical for empowering local stakeholders and ensuring long-term impact. By providing access to education, job opportunities, and environmental stewardship roles, the Foundation helps break the cycle of dependency and enables local communities to become self-sufficient in their sustainability efforts.

The success of the Grupo Argos Foundation can be attributed to its commitment to integrating diverse stakeholders into its interventions, from local communities to global climate partners. This multilevel strategy ensures a holistic focus on sustainability, considering ecological, social, and economic factors. By promoting collective action, the Foundation builds a network of support that amplifies its impact across regions. The Foundation’s focus on sustainable development aligns with global goals, particularly those related to biodiversity conservation, climate action, and water sustainability. This alignment not only enhances its credibility but also ensures that the solutions it advocates for are relevant on a global scale.

A key component of the Foundation’s strategy is its educational initiatives, which not only raise awareness but also provide practical skills and knowledge. The Verde Vivo program, targeting more than 90,000 students, integrates lessons on biodiversity preservation with real-world applications, such as waste management and water monitoring. This holistic approach ensures that students understand the interconnectedness of environmental and social issues and equips them to contribute to solutions. Additionally, the Foundation’s scholarship programs like the Territorial Development Program provide financial support and mentorship to students from underserved communities, empowering the next generation of environmental leaders. This investment in human capital is critical for sustaining long-term change.

The Grupo Argos Foundation’s approach to partnership also illustrates a sophisticated understanding of the challenges and opportunities in sustainability. By working with more than sixty public- and private-sector organizations, it can leverage diverse expertise and resources. This network approach enables the Foundation to pilot innovative solutions and scale successful ones across different regions. The partnerships with Terraformation and other global organizations not only enhance the Foundation’s impact but also position it as a thought leader in sustainable development. The integration of these partnerships into local projects allows the Foundation to adapt solutions to specific environmental and social contexts, enhancing the effectiveness and sustainability of its interventions.

The Grupo Argos Foundation’s success as a model of corporate social responsibility and sustainable development can be attributed to its integrated, multi-stakeholder approach. By focusing on nature-based solutions, education, and local partnerships, the Foundation can address complex environmental challenges in a way that is both scalable and replicable. Its focus on creating value for both people and the planet, while fostering collective action, sets it apart as a leader in its field. The Foundation’s success in areas such as reforestation, water preservation, and community empowerment provide a road map for other organizations seeking to implement sustainable development practices in their own regions. Through its continued efforts to innovate and adapt, Grupo Argos Foundation is paving the way for a sustainable future in Colombia and beyond.

Conclusion

The case studies presented in this chapter exemplify the transformative potential of philanthropic capital in advancing nature-based solutions to combat climate change and environmental degradation. These cases illustrate how nonprofit organizations act as catalysts for sustainable development, leveraging multiple channels – including advocacy and philanthropic funding – to address pressing environmental challenges. From Brazil’s Arapyaú Institute fostering sustainable territorial development to Paraguay’s FMB bridging communities and governments and Grupo Argos in Colombia integrating reforestation into carbon credit markets, these initiatives highlight how philanthropic funding delivers measurable impact while mitigating risks for future investments. They lay the groundwork for systemic change, offering scalable and replicable solutions that, with additional resources, could be expanded to new contexts. This underscores philanthropy’s capacity to reconcile urgent environmental needs with economic growth and social development by bridging concessional and commercial capital.

As demonstrated, philanthropic capital enables innovative, community-led solutions that transcend national borders to benefit both people and the planet. These initiatives are rooted in local knowledge, blending the creativity and resilience of communities with technical expertise and partnerships. Philanthropy, therefore, transcends traditional funding, serving as a dynamic catalyst for co-creating scalable, long-term solutions.

However, while promising, these examples underscore the need for a cohesive global investment community to integrate country-specific initiatives and foster collective learning for regional scale-up. In LAC, impact funds often operate in isolation from broader philanthropic efforts, missing opportunities for collaboration. Networks like Latimpacto play a pivotal role in addressing this gap by offering platforms for knowledge sharing, cross-border partnerships, and coordinated public–private action to enable the pooling of expertise and the creation of evidence-based, scalable solutions that drive impactful regional initiatives.

The urgency of this work cannot be overstated. CO₂ emissions in LAC are projected to rise from 1,660 million tons (Mt) in 2022 to 1,690 Mt by 2030,Footnote ²¹ driven by urban expansion, reindustrialization, and population growth. With the regional population expected to reach 750 million by 2050 and economic activities expanding, the pressure on natural ecosystems is intensifying. Scalable nature-based solutions are essential to alter this trajectory. Initiatives like reforestation, mangrove restoration, and soil conservation not only capture carbon but also enhance climate resilience, preserve biodiversity, and foster community development. By strategically investing in these solutions, LAC countries can reduce emissions while fostering inclusive and sustainable economic growth.

LAC philanthropy has a unique opportunity to position the region as a global leader in climate action by funding, de-risking, and connecting critical initiatives. To unlock this potential, philanthropy must focus on supporting long-term institutional resilience and delivering lasting impact: investing in governance, operational capacity, and human capital. This is particularly vital for nature-based solutions and environmental progress, which often take decades to materialize. Restoring forests, rebuilding ecosystems, and fostering sustainable community practices require enduring investments, which must also withstand uncertainties like shifting climate patterns and evolving policy environments.

The true power of philanthropic capital lies in its ability to bridge sectors, foster collaboration, and adopt a long-term perspective. By acting as a connector between the third sector, concessional investors, and commercial players, philanthropy can unify efforts to tackle shared challenges. This involves not only demonstrating the potential of nature-based solutions but also advancing shared strategies, such as blended finance models. Blended finance allows philanthropic investments to de-risk projects, attract private-sector funding, and catalyze greater flows of capital into high-impact environmental solutions. When paired with policy advocacy and public-sector engagement, this cross-sectoral approach amplifies the reach and effectiveness of nature-based solutions, enabling them to scale at the pace needed to confront the global climate crisis. Together with a collaborative framework, philanthropy can transform into a driving force for sustainable, systemic change.

The future of climate action in the LAC region lies in collaboration, connectivity, and co-creation. By leveraging philanthropic capital to seed, scale, and sustain transformative initiatives, the region can inspire a greener, more equitable global transition. These efforts offer hope not only for reversing environmental degradation but also for reimagining economic systems that prioritize resilience, inclusivity, and sustainability. Through strategic partnerships and a commitment to patient capital, we can unlock the full potential of nature-based solutions, empowering communities and ecosystems to thrive in harmony. This shared vision, rooted in action and innovation, is the foundation for a more sustainable future.

Introduction

Adaptation lies at the heart of effective climate action, especially for the economies of the Global South. While global platforms like the Conference of Parties (COPs) and the UN Sustainable Development Goals (SDGs) recognize its importance, a pressing need remains to emphasize its significance continuously. This becomes even more critical in light of the tendency of financial institutions – such as Multilateral Financial Institutions (MFIs) and Development Financial Institutions (DFIs) – to prioritize mitigation projects, particularly those centered around energy transitions (Buchner et al. Reference Buchner, Falconer, Hervé-Mignucci, Trabacchi and Brinkman2011; Abadie et al. Reference Abadie, Galarraga and Rübbelke2013; Cao et al. Reference Cao, Alcayna, Cuevedo and Jarvie2021). As a result, adaptation financing often takes a backseat. This funding gap has stalled progress in adaptation planning and implementation globally, underscoring the urgent need for renewed focus and commitment. Striking a balance between mitigation and adaptation is essential to achieving holistic climate resilience.

The 2024 UNEP Adaptation Gap Report paints a sobering picture: the financial needs for climate adaptation in developing countries far outweigh the available funding from all sources, including governments, businesses, nongovernmental organizations, philanthropy, and multilateral and development financial institutions (UNEP 2024). The gap between what’s needed and what’s being provided is widening dramatically, with an estimated 10- to 18-fold difference. The adaptation funding the developing countries need is a hefty $215 billion annually for this decade alone (UNEP 2023). However, the financial injections required to actualize domestic adaptation blueprints soar even higher, demanding a formidable $387 billion yearly (UNEP 2023). Despite the urgent call to action, public multilateral and bilateral adaptation finance to the global south coffers witnessed a concerning 15 percent dip in 2021 (UNEP 2023).

However, since then, there has been a revival: global public adaptation finance to developing countries increased from $22 billion in 2021 to $28 billion in 2022, marking the highest-ever absolute and relative year-on-year increase since the Paris Agreement (UNEP 2024). Though prima facie this is a good development from the perspective of progress toward the Glasgow Climate Pact, which urged developed nations to at least double adaptation finance to developing countries from $19 billion (2019 levels) by 2025, it needs to be noted that achieving the Glasgow Climate Pact goal would only reduce the adaptation finance gap, which is estimated at $187–359 billion per year, by about 5 percent. This therefore requires a clarion call for renewed commitment toward adaptation financing with the renewed targets.

For the Global South, the adaptation needs are vast, but resources remain scarce. Though climate-related allocations under Official Development Assistance (ODA) have increased with 32.9 percent of allocable bilateral ODA supporting climate initiatives between 2021 and 2022, of all climate-related activities in 2021–2022, 34 percent addressed adaptation, 37 percent mitigation, and 29 percent both objectives (OECD 2024). Figure 11.1 shows Development Assistance Committee (DAC) members’ bilateral ODA to climate-related activities, which indicates that adaptation financing is increasing over time.

Figure 11.1 DAC members’ bilateral climate-related ODA (2013–2022).

Source: Prepared by the author based on OECD (2024).

Figure 11.1Long description

The graph tracks three distinct categories, namely, mitigation only, both mitigation and adaptation, and adaptation only. The vertical axis represents the amount of funding in U S D billions, ranging from 0 to 20. The horizontal axis represents the years, starting from 2013 to 14 and extending to 2021 to 22. The line for mitigation only follows 12, 14, 13, 15, 14, 14, 17, and 18. The line for both mitigation and adaptation follows 4, 6, 7, 7, 8, 9, 10, and 14. The line for adaptation only follows 7, 5, 9, 10, 11, 10, 17, and 17. Note, all values are approximated.

However, the figure hides more than what it reveals. OECD (2024) provides a closer examination of the ODA data revealing that climate change was the primary objective for activities solely concentrated on mitigation in more than two-thirds of the cases by value. However, for activities centered on adaptation or those with dual objectives, climate change was the primary focus in less than 30 percent of the cases by value. In essence, mitigation activities were more frequently designed with climate change as the main goal, whereas adaptation was often treated as a secondary consideration within broader development cooperation efforts (OECD 2024).

On the other hand, Table 11.1 shows that as of December 2023, cumulative data on the pledges, deposits, and project approvals made by multilateral climate change funds show a clear bias against adaptation.

Certain definitions will help comprehend Table 11.1 better. Pledges are verbal or signed commitments from donors to provide financial support for a particular fund; Deposits or committed funds are the funds transferred from the donor into the fund account(s). The money officially approved and earmarked for a specific project or program is delineated as Approved in the table, while funds spent are represented by Disbursement. The bias in favor of mitigation projects against adaptation projects by the funding agencies is discernible from the fact that adaptation pledges are barely 40 percent of the mitigation pledges, while deposit proportions are even lower, as shown in the table.

While the generic picture reveals an anti-adaptation financing bias, it needs to be mentioned here that certain funds are making good strides in adaptation. The Green Climate Fund (GCF) has set a benchmark by dedicating 50 percent of its portfolio to adaptation projects, reflecting one of the more balanced approaches in climate finance. The Green Climate Fund (GCF) stands out as one of the few funding bodies with a significant share (~44 percent) of its portfolio dedicated to adaptation projects, highlighting a more balanced approach. However, GCF funding alone is not nearly enough to close the massive gap in adaptation finance. Their allocation remains insufficient in addressing the vast adaptation needs across developing regions (GCF 2024). In 2022, multilateral funds including the Adaptation Fund, the GCF, and the Global Environment Facility launched $559 million in new adaptation projects, a 10 percent increase from previous years (UNEP 2023). Yet, despite these gains, the annual funding required to support adaptation in developing countries dwarfs these efforts.

Hence, the question is: Where would the necessary funds come from? This creates an important entry point for the chapter. In its attempt to search for various options for financing, this chapter proposes a case for tapping into philanthropic finance to fund climate adaptation. At the very outset, it is important to understand the imperatives for climate adaptation, especially for the developing world. The second section of this chapter highlights the importance of adaptation financing. The third section talks about the various adaptation financing pathways. The fourth section creates a case for philanthropy toward climate adaptation finance. The fifth section takes up the case for India as a representative of the Global South and highlights the role it has played in climate finance, especially adaptation finance. The concluding section summarizes the chapter, highlights some important takeaways, and places some recommendations to enable philanthropic financing of adaptation.

The Imperatives for Adaptation Financing

The imperatives for adaptation financing are twofold: one rooted in epistemology and the other in ethics. The first, a “positive” imperative, is grounded in neoclassical economic theory and embedded in the concept of social cost of carbon (SCC). This concept offers an estimate of the cost of the damage with the emission of an additional ton of carbon. Therefore, SCC also mirrors the estimate of the benefit of an action that reduces a ton of carbon emissions. Mitigation projects like energy transition directly reduce atmospheric carbon, thereby reducing societal and economic costs that a unit of carbon emission would have imposed otherwise. On the other hand, adaptation projects, unlike mitigation projects, have no impact on carbon emissions mitigation; adaptation enhances the community’s resilience to climate change, thereby reducing the social costs of carbon. In other words, there are long-run impacts of not financing adaptation. These long-term social and environmental costs associated with climate change, such as increased risks to public health and safety, damage to infrastructure and property, and impacts on ecosystems and biodiversity, escalate the social cost of carbon. These costs, though significant, are frequently excluded from investment, production, or consumption decisions (Hambel et al. Reference Hambel, Kraft and Schwartz2021).

This leads to the second, “normative” imperative, which is ethical. The Global South historically has borne the brunt of the unsustainable consumption of the Global North. These regions require time for a just transition as many nations set their “net zero” targets. Meanwhile, the Global South must adapt to the adverse effects of climate change that disrupt lives and livelihoods. Building resilient communities in such circumstances is paramount, making adaptation a pressing necessity for the Global South (Ghosh Reference Ghosh2022, Reference Ghosh, Chakrabarty and Prabhu2024).

Neglecting investment in adaptation measures can have severe long-term cascading impacts across economies, societies, and ecosystems, exacerbating vulnerabilities and undermining development gains. While adaptation measures aim to build resilience against the adverse effects of climate change, such as rising temperatures, sea level rise, extreme weather events, and resource scarcity, adequate investment in adaptation magnifies these challenges.

Economically, the absence of adaptation aggravates infrastructure damage and agricultural losses and results in a decline in productivity and opportunity (Mukhopadhyay and Danda Reference Mukhopadhyay and Danda2022). For instance, recurrent floods and droughts can lead to billions in damages, disrupt global supply chains, and heighten risks for industries reliant on natural resources. Additionally, uninsured losses increase fiscal pressures, particularly in developing nations with limited capacities to absorb shocks.

Socially, lack of adaptation disproportionately affects vulnerable communities, exacerbating inequalities. Marginalized groups, particularly in the Global South, face displacement, loss of livelihoods, and food and water insecurity. Health systems become strained, as climate-induced diseases and heat-related illnesses increase without protective measures (Ghimire and Chhetri Reference Ghimire and Chhetri2022; Ghosh Reference Ghosh, Leeb, Wiesner and Lahner2024a).

Environmentally, the degradation of ecosystems intensifies. Without adaptation such strategies as restoring wetlands or improving water management, natural buffers against climate impacts erode, amplifying biodiversity loss and reducing ecosystem services essential for human well-being (Ghosh et al. Reference Ghosh, Danda, Bandyopadhyay and Hazra2016; Danda et al. Reference Danda, Ghosh, Bandyopadhyay and Hazra2019).

Furthermore, political stability can be threatened as competition over scarce resources, such as water or arable land, escalates. Ignoring adaptation not only risks immediate crises but also undermines long-term sustainability, creating a vicious cycle of vulnerability and fragility that hinders progress toward global goals like the SDGs (Ghosh and Ray Reference Ghosh and Ray2023).

The Indian Sundarbans Delta can be a case in point. The Delta in the eastern state of West Bengal, India, is shrinking due to sea level rise, leading to subsidence of land, agricultural land loss, and human habitat loss. The problem has been exacerbated by lack of soil formation and soil resuscitation caused by a diminishing supply of sediment from upstream as a result of the construction of the Farakka barrage that bifurcates the Ganges River and its distributary, Hooghly (Ghosh et al. Reference Ghosh, Danda, Bandyopadhyay and Hazra2016). In the process, there is a threat to the future survival of large parts of the delta ecosystem. Additionally, saltwater intrusion has significantly harmed agriculture. Although there is a reduction in the overall frequency of storms, depressions, cyclones, and surges, the proportion of high-intensity events is increasing, likely due to rising sea surface temperatures (Ghosh et al. Reference Ghosh, Danda, Bandyopadhyay and Hazra2016; Danda et al. Reference Danda, Ghosh, Bandyopadhyay and Hazra2019).

In this context, the importance of a managed and strategic retreat from climatically vulnerable areas and ecosystem regeneration in the Indian Sundarbans Delta has been highlighted by Danda et al (Reference Danda, Ghosh, Bandyopadhyay and Hazra2019). While studies indicate that managed and strategic retreat, combined with ecosystem regeneration in vacated spaces, is economically beneficial in the long term, implementation challenges and funding constraints remain significant barriers. Local politicians in particular may be hesitant to support such initiatives due to concerns that they do not yield immediate political gains within their tenure. Additionally, these projects can face community resistance and may even contribute to anti-incumbency sentiments during elections (Danda et al. Reference Danda, Sriskanthan, Ghosh, Bandyopadhyay and Hazra2011).

Although these views may appear short-sighted from a developmental perspective – particularly regarding life and livelihoods – they can be mitigated through the emergence of visionary local leadership. However, challenges related to securing adequate funding are likely to persist.

What Leads to the Chasm?

Several challenges need to be combated to bridge the adaptation financing gap. The first challenge is based on the return on investment (ROI) argument, as stated in the introduction. The long gestation periods and imperceptible short-term economic returns do not make adaptation financing worthwhile. Add to this, the “public goods” nature of adaptation projects often leads to non-excludability and non-rivalry in consumption, thereby creating problems in identifying beneficiaries for charging “user fees.” This, axiomatically, gets associated with a lack of the cost recovery mechanism, thereby deterring private-sector participation in the financing game.

The third challenge lies in identifying the appropriate sectors for financing adaptation efforts, largely due to a lack of understanding and empathy toward on-the-ground adaptation activities across society (Boyer et al. Reference Boyer, Meinzer and Bilich2016; Ghosh Reference Ghosh and Arora2024b). This is particularly evident in adaptation measures such as the “strategic retreat” of populations from climatically vulnerable regions, which is often misinterpreted as a “failure of adaptation.” As a result, such initiatives face low acceptance among local politicians and decision-makers, who perceive them as politically risky due to the potential loss of their vote bank (Danda et al. Reference Danda, Ghosh, Bandyopadhyay and Hazra2019).

The fourth challenge lies in differentiating between adaptation and development projects, which are often indistinguishable. Accommodative or adaptative infrastructure projects like the construction of bridges or embankments are often construed as development projects rather than adaptation projects. Regulatory and governmental policy interventions could help, but there is a notable absence of policy initiatives to incentivize or channel funds in this direction.

The fifth challenge is with the complexities associated with adaptation projects that often require a multidimensional “whole of society” approach. Unlike mitigation, which entails clear business cases in the form of straightforward measures like switching to renewable energy, adaptation projects require a substantially nuanced approach. For instance, a project like “strategic retreat” requires a holistic and deep understanding of community features, societal and cultural nuances, aspirations, counseling and reskilling, physical capital development, and job creation, and will be associated with extensive threat points that can include community backlash for inadequate rehabilitation (Ghosh et al. Reference Ghosh, Danda, Bandyopadhyay and Hazra2016; Danda et al. Reference Danda, Ghosh, Bandyopadhyay and Hazra2019).

Finally, a major hurdle in adaptation finance is the absence of a standardized definition of adaptation itself. Unlike mitigation, which is measured in emissions reductions, adaptation spans a wide range of initiatives – often with impacts that are hard to quantify. Without clear criteria, funders struggle to track progress, prioritize investments, or accurately assess needs. This ambiguity also leads to inconsistent reporting, making it harder to direct resources effectively or identify projects that genuinely build climate resilience. As a result, adaptation often takes a back seat to mitigation, where results are easier to measure and track (Ghosh Reference Ghosh, Leeb, Wiesner and Lahner2024a, 2024b).

Adaptation Financing Pathways

The paucity of adaptation financing in the Global South makes creating new adaptation financing pathways imperative. This has been emphasized by the G20 New Delhi Leaders’ Declaration (G20 India 2023) and the Think20 India Communique (Think20 India 2023 Secretariat 2023), both of which highlighted the important role the G20 needs to play in helping subnational governments in the Global South nations enable project development capacities. What is important now is that the Global South nations successively assuming the G20 presidency – Indonesia, India, Brazil, and South Africa – will need to prioritize the demand for adaptation finance, especially for the developing and the underdeveloped world. Some of the ways to do so are summarized here.

Making a Business Case of Adaptation. The first imperative is to attract private finance for adaptation. For that, a business case for adaptation needs to be made. From the government’s side, this will require institutional and fiscal incentives such as tax incentives for money invested in adaptation projects (Ghosh Reference Ghosh, Leeb, Wiesner and Lahner2024a). However, large businesses globally now acknowledge that projects that create public goods and result in a social rate of return can result in a win–win solution by helping conservation goals, furthering the cause of the SDGs, and creating positive outcomes for the value chain and the ecosystem players including the investors, communities, and the natural ecosystems (Ghosh Reference Ghosh and Arora2024b).

Adaptation financing, therefore, needs the lens of shared value creation as postulated by Porter and Kramer (Reference Porter and Kramer2011). This marks a unique space of intersection between the needs of the businesses and the broader social ecosystem in which the businesses operate and generates economic value for both entities. It helps businesses in corporate branding and creating a sustainable bottom-line framework. At the same time, for societies, the critical adaptation financing needs are met, which also helps the cause of the business.

Bolstering Blended Finance. Blended finance for adaptation is still a minor player in climate finance, leaving its vast possibilities largely unexplored. Private capital, integrated with public funding, should merge climate finance with disaster management funding while promoting nature-based solutions. Nature-based endeavors such as coastal ecosystem regeneration can effectively support both adaptation and mitigation efforts (Global Mangrove Alliance 2018).

The advantage of blended finance is that it enhances the risk–return profile of investments by combining capital with varied return expectations within a structured framework. The collaborations leverage public-sector expertise and private-sector efficiency and innovation, fostering investor confidence and scaling adaptation investments.

This approach mitigates uncertainties and knowledge gaps, thereby catalyzing private-sector involvement in funding initiatives that address climate adaptation. Public-sector guarantees and first-loss provisions can make adaptation investments safer and more appealing for private players. The Global Fund for Coral Reefs, for instance, used first-loss equity of $125 million from the GCF to attract threefold private investment, supporting coral reef protection and related economies (GCFR 2021).

Guarantees and co-financing mechanisms help attract private capital by mitigating investment risks. For example, the Multilateral Investment Guarantee Agency provided a $13.1 million guarantee in Jordan to protect private equity investments in water treatment infrastructure, addressing climate-induced challenges like storms and droughts (Choi et al. Reference Choi, Jang and Laxton2023).

Risk-absorbing capital can mobilize private investment in adaptation projects. Similarly, Lightsmith Climate Resilience, a private equity fund, leverages donor capital to create a junior risk-absorbing layer, enabling private investment in climate-resilient technologies, as evidenced by its $186 million fund closure in 2022 (Choi et al. Reference Choi, Jang and Laxton2023).

The need for and importance of blended finance for meeting adaptation financing needs cannot be overemphasized. Innovative instruments like resilience bonds and catastrophe swaps offer creative ways to link adaptation efforts with disaster risk financing. There is a need for institutional catalysts to bring about a change in thinking; multilateral development banks (MDBs) can fill that void by unlocking blended finance and structuring solutions that mobilize private capital for climate resilience.

Boosting South–South Cooperation towards Adaptation Financing. Cooperation among nations of the Global South can be an important source of adaptation financing. Due to common experiences and mutual respect, a southern economy, with wherewithal and money, understands the unique adaptation challenges of the developing and underdeveloped world better than any Global North–dominated institution (Bhowmick and Ghosh Reference Bhowmick, Ghosh, Kant and Saran2024). As highlighted by the successive G20 presidencies of the four global south nations from 2021 to 2025, South–South cooperation nurtures mutually beneficial alliances, enhancing the role of the least developed countries and small island developing states in global development governance. The United Nations Office for South-South Cooperation envisions these partnerships providing new development finance sources, including concessional loans and untied grants (Bhowmick and Ghosh Reference Bhowmick, Ghosh, Kant and Saran2024).

North-South Partnerships for Adaptation Financing. The dynamics of North–South partnerships need to change and should be built on equitable terms (Chakrabarty and Prabhu, Reference Chakrabarty and Prabhu2022). Development efforts must prioritize the needs and preferences of lower-income countries, necessitating reforms in institutions like the International Monetary Fund and World Bank, which are dominated by the Global North–led paradigm of development (Saleh et al. Reference Saleh, Danwanzam and Stephen2019; Hickel Reference Hickel2020). These institutions often focus disproportionately on mitigation projects, neglecting adaptation needs in the Global South (Murphy and Donaldson Reference Murphy and Donaldson2023). Trilateral partnerships, as suggested by Chakrabarty and Prabhu (Reference Chakrabarty and Prabhu2022), offer innovative solutions, particularly in the realm of adaptation financing.

Need for a Climate Adaptation Taxonomy Suited for the Global South. There is a clear dominance of taxonomies on climate change mitigation in the domain of climate financing, while adaptation-focused frameworks remain underdeveloped. The EU taxonomy is mitigation-centric and barely incorporates “do no significant harm” rules to prevent maladaptation. The UNDP and World Bank, despite offering promising principles, lag behind in providing adaptation taxonomies due to unique challenges (Korostikov Reference Korostikov2024). It needs to be understood that adaptation is inherently country specific, drawing less international investment compared to mitigation’s global impact. Moreover, its diverse needs resist universal criteria, unlike clear mitigation benchmarks, such as emission limits for energy. However, neglecting adaptation poses severe risks, from uninhabitable regions and mass migration to disrupted global businesses. Addressing these gaps is crucial for sustainable and inclusive climate resilience.

The adaptation needs are more for the Global South, especially the underdeveloped, climatically vulnerable regions, which may not have the wherewithal for immediate green transition. Their adaptation financing needs are therefore quite immediate. Given the adaptation financing gap as discussed earlier, current investment frameworks undervalue the adaptation needs. Again, adaptation projects often turn out to be a top–down approach, undervaluing local and indigenous knowledge in adaptation strategies (Pulido-Velazquez et al. Reference Pulido-Velazquez, Marcos-Garcia, Girard, Sanchis-Ibor, Martinez-Capel, García-Prats, Ortega-Reig, García-Mollá, Rinaudo and Kondrup2022).

This creates the case for a new taxonomy for adaptation highlighting the needs of the Global South (Korostikov Reference Korostikov2024). There is a need for the identification of adaptation projects (as distinct from development projects) in the taxonomy so that even fiscal incentives can be worked out to attract adaptation financing. Better definition and classification of adaptation projects could help prevent “adaptation-washing” while ensuring genuine adaptation projects receive appropriate funding.

A G20 Development Financial Institution. Ghosh et al. (Reference Ghosh, Chakrabarty and Prabhu2024) propose a development financial institution (DFI) at the G20 level to address some of the critical gaps in development financing including the adaptation financing gap, given the failure of existing institutions to cater to those needs. Such an institution can support the nations of the Global South for their SDG funding needs and revitalize the global economy during times of crisis. The G20 DFI will consider long-term social returns rather than short-term economic returns – the typical characteristics of adaptation projects. Similarly, a G20 DFI can mobilize resources for financing loss and damage (L&D), the setting up of which has been a highlight of COP27 to support the vulnerable communities of the Global South. As such, L&D financing is about financing permanent loss and damage to the Global South communities by the Global North economies and is, as such, a compensatory payment.

The response so far has been lukewarm, as there is no return associated with such payment (Ghosh and Kumar Reference Ghosh and Kumar2025). With the G20 being the platform combining the Global North and South economies, the G20 DFI might be the ideal platform to mobilize such funding from various sources including national economies, philanthropies, and others. The big problem of valuation of L&D and the right formula that needs to be arrived at should be addressed by an institution that combines the attributes of Global North and South economies, and not by institutions dominated by the Global North interests (Ghosh et al. Reference Ghosh, Chakrabarty and Prabhu2024).

The Role of Corporate Social Responsibility. Many governments of the Global South earmark a percentage of the profit for corporate social responsibility (CSR) purposes. For instance, in India, businesses are required to allocate at least 2 percent of their average net profits from the past three years to CSR activities. To align this spending with development and adaptation priorities, governments could mandate that 35 percent to 50 percent of total CSR expenditures be directed toward achieving SDGs. Within this SDG-focused CSR allocation, 25 percent could be designated specifically for adaptation financing. Such a measure would ensure dedicated funding for adaptation efforts, significantly enhancing financial resources for these critical purposes.

Innovative Financial Instruments. While a large number of financial instruments have been used for the mobilization of adaptation funds (IISD and NAP Global Network 2023), the need for innovation does not halt there. In many contexts, green bonds, sustainability bonds, sustainability-linked bonds, blue bonds, social bonds, and the like have been used to enable access to resources from financial institutions, private investors, institutional investors, impact investors, businesses, and other philanthropists, creating the opportunity to be blended with traditional sources of financing. Several other types of innovation – water credits, weather derivatives, and water index futures, to name just a few – have also taken place in the United States, Chile, and Australia to help the farm community adapt to the water availability risk (Ghosh Reference Ghosh2022, Reference Ghosh2024c). Such models need to be improvised for adoption in the Global South.

While various financing options are available, await further boosting, or are being innovated and should be used in conjunction with one another, philanthropy must work hand in hand with them. Given the massive adaptation financing chasm that exists, one or a combination of the existing ones may not be sufficient. The capacity of philanthropy to narrow this yawning gap hardly seems to have been acknowledged.

The Case for Philanthropy toward Climate Adaptation Finance

Why Philanthropy?

Philanthropy is delineated as “private initiatives for the public good, focusing on quality of life” (McCully Reference McCully2008: 13). Since philanthropy differs from business creating private value or private good through its initiatives, and is rather concerned with the creation of “public goods,” there is never an expectation of material ROI or the pure economic rate of return based on monetary metrics for private gains. With altruism being the prime motive, philanthropy is an ideal option for undertaking initiatives and funding for public good creation that are non-excludable and non-rival in consumption (perfect public goods), such as public infrastructure, public education, and public health, among others (Oakland Reference Oakland1987). With public finance often turning out to be insufficient, and profit-focused private finance abstaining from funding such initiatives, there is a financing vacuum for projects such as poverty alleviation schemes or food rationing projects. Philanthropy has often been forthcoming in bridging this gap.

In previous sections, it has already been argued that climate adaptation finance has largely been elusive due to its “public goods” nature, and therefore not catering to the criterion of ROI. However, there is a high social rate of return on these projects. The Global Commission on Adaptation (2019) suggests that a global investment of $1.8 trillion in merely five areas, namely early warning systems, climate-resilient infrastructure, dryland agriculture, mangrove protection, and resilient water resource management, could generate $7.1 trillion in total net benefits in a decade. In other words, failing to seize the economic benefits of climate adaptation with high-return investments would undermine trillions of dollars in potential growth and prosperity.

Philanthropy has a vital role to play in addressing the climate finance gap, yet it remains heavily skewed toward mitigation over adaptation. In 2022, it was found that companies gave a median amount of $637,500 specifically for climate change mitigation, largely channeling funds into research, advocacy, and actions to reduce emissions. In contrast, there were no similar commitments recorded for adaptation, underscoring the disparity in philanthropic support between these two crucial areas.

The broader landscape of philanthropic giving mirrors this imbalance. ClimateWorks Funding Trends Report reveals that in 2021, philanthropic contributions to mitigation from foundations and individuals ranged from $7.5 billion to $12.5 billion – a marked increase from previous years. Mitigation funding has been growing by about 25 percent annually, yet it still comprises less than 2 percent of global philanthropic giving. Adaptation finance, however, remains significantly underrepresented, without an equivalent surge in philanthropic support (Desanlis et al. Reference Desanlis, Matsumae, Roeyer and Yazaki2021).

Philanthropic funding also shows sector-specific priorities, with clean electricity, forests, and food and agriculture as the top recipients. In 2021, clean electricity received $300 million (11 percent of total funding), forests received $260 million (9 percent), and food and agriculture garnered $240 million (9 percent). Despite a rising corporate focus on climate and nature themes – evident in the $607 million donated to these areas in 2022, up 127 percent from 2018 – the emphasis remains on mitigation, while adaptation lags behind (Figures 11.2–11.5). Major economies like the United States, Europe, and China contributed around 70 percent of corporate philanthropic funding recently, reflecting a growing interest from these regions in climate action (Desanlis Reference Desanlis, Lau, Janik, Suttenberg and Menon2022).

Figure 11.2 Average annual cross-sectoral funding by region (in $ billion).

Source: Prepared by the author by estimating from the data presented by Desanlis (Reference Desanlis, Lau, Janik, Suttenberg and Menon2022).

Figure 11.2Long description

The vertical axis ranges from 0 to 160. The horizontal axis represents regions, namely, Africa, Asia and Oceania, Brazil, China, Europe, Global, India, Indonesia, Latin America, Other or unknown, and U S and Canada. The graph plots bars for Carbon dioxide removal, cities, super pollutants, other climate mitigation strategies, and total. The values are 5, 0, 0, 2, and 7 for Africa. 0, 0, 0, 2, and 2 for Asia and Oceania. 0, 2, 0, 0, and 3 for Brazil. 2, 8, 2, 8, and 19 for China. 23, 12, 2, 37, and 70 for Europe. 30, 30, 20, 70, and 150 for global. 3, 2, 0, 5, and 14 for India. 0, 2, 0, 0, and 4 for Indonesia. 2, 3, 0, 0, and 4 for Latin America. 2, 0, 0, 6, and 8 for other or unknown. 22, 37, 8, 60, and 124 for U S and Canada, respectively. Note, all values are approximated.

Figure 11.3 Average annual funding for enabling environment by region (in $ billion).

Source: Prepared by the author by estimating from the data presented by Desanlis (Reference Desanlis, Lau, Janik, Suttenberg and Menon2022).

Figure 11.3Long description

The vertical axis ranges from 0 to 250. The horizontal axis represents regions, namely, Africa, Asia and Oceania, Brazil, China, Europe, Global, India, Indonesia, Latin America, Other or unknown, and U S and Canada. The graph plots bars for core and capacity building, governance, public engagement, sustainable finance, and total. The values are 0, 3, 0, 5, and 5 for Africa. 3, 3, 3, 2, and 5 for Asia and Oceania. 3, 3, 3, 3, and 5 for Brazil. 10, 15, 5, 15, and 45 for China. 5, 25, 25, 10, and 70 for Europe. 20, 40, 40, 55, and 155 for global. 4, 4, 3, 5, and 7 for India. 0, 0, 0, 0, and 0 for Indonesia. 0, 0, 0, 3, and 3 for Latin America. 0, 0, 0, 3, and 3 for other or unknown. 22, 53, 140, 15, and 230 for U S and Canada, respectively. Note, all values are approximated.

Figure 11.4 Average annual funding for land use by region (in $ billion).

Source: Prepared by the author by estimating from the data presented by Desanlis (Reference Desanlis, Lau, Janik, Suttenberg and Menon2022).

Figure 11.4Long description

The vertical axis ranges from 0 to 250. The horizontal axis represents regions, namely, Africa, Asia and Oceania, Brazil, China, Europe, Global, India, Indonesia, Latin America, Other or unknown, and U S and Canada. The graph plots bars for food and agriculture, forests, and total. The values are 22, 10, and 32 for Africa. 2, 0.5, and 3 for Asia and Oceania. 7, 21, and 29.5 for Brazil. 3, 2, and 7 for China. 35, 25, and 60 for Europe. 40, 35, and 75 for global. 9, 0, and 9 for India. 5, 12, and 19 for Indonesia. 2, 15, and 19 for Latin America. 0, 6, and 6 for other or unknown. 19, 9.5, and 8 for U S and Canada, respectively. Note, all values are approximated.

Figure 11.5 Average annual funding for sustainable energy by region (in $ billion).

Source: Prepared by the author by estimating from the data presented by Desanlis (Reference Desanlis, Lau, Janik, Suttenberg and Menon2022).

Figure 11.5Long description

The vertical axis ranges from 0 to 180. The horizontal axis represents regions, namely, Africa, Asia and Oceania, Brazil, China, Europe, Global, India, Indonesia, Latin America, Other or unknown, and U S and Canada. The graph plots bars for building, challenge fossil, clean electricity, cooling, industry, transportation, and total. The values are 0, 4, 24, 2, 0, 1, and 32 for Africa. 0, 4, 5, 1, 0, 0, and 12 for Asia and Oceania. 0, 0, 2, 1, 0, 0, and 4 for Brazil. 0, 8, 8, 3, 10, 4, and 38 for China. 30, 16, 22, 0, 18, 17, and 98 for Europe. 6, 35, 35, 15, 20, 14, and 120 for global. 2, 0, 30, 2, 2, 4, and 40 for India. 0, 1, 3, 0, 0, 0, and 4 for Indonesia. 0, 2, 1, 0, 0, 0, and 6 for Latin America. 0, 0, 6, 0, 0, 1, and 8 for other or unknown. 24, 44, 70, 0, 4, 24, and 164 for U S and Canada, respectively. Note, all values are approximated.

As Table 11.2 shows, between 2018 and 2022, a very small percentage of corporate philanthropic funding has gone into climate, though one can witness an almost 50 percent increase (of course at a much lower base as compared to funding from other sources). However, substantial opportunity remains in the context of adaptation and mobiliing funding. As such, there was a sharp increase in corporate philanthropic funding overall in 2020, possibly because of the pandemic, but that was not associated with any concomitant rise in climate and nature funding. Rather, there seems to be an increase only after 2020.

Table 11.2Corporate philanthropic funding for climate and nature themes

Year	Climate and nature funding ($ billion)	Others ($ billion)	Total ($ billion)	Share of climate and nature funding (%)
2018	0.4	9.4	9.8	4.08
2019	0.4	9.6	10	4.00
2020	0.4	23.4	23.8	1.68
2021	0.5	12	12.5	4.00
2022	0.6	11.7	12.3	4.88

Source: Prepared by the author on the basis of GAEA and WEF 2024.

A group of twenty-nine philanthropists made notable climate pledges, such as the $4 billion committed at the Global Climate Action Summit in 2018, with a target of reaching $6 billion by 2025 (GAEA and WEF 2024). Climate-focused giving by foundations grew by 14 percent between 2019 and 2020, totaling between $6 and $10 billion, with individuals contributing the majority (Desanlis Reference Desanlis, Matsumae, Roeyer and Yazaki2021). However, these promising trends still leave adaptation underfunded relative to mitigation.

Philanthropy for Climate Finance in India

In India’s federal structure, the states own the primary responsibility for adaptation-related interventions. Significant adaptation investment gaps exist at the state levels as revealed in the updated State Action Plans on Climate Change for many of the states (Sikka et al. Reference Sikka, Jena, Chakravarty and Pal2024). The collective annual investment requirement for just six states amounts to $5.21 billion from 2021 to 2030 (Sikka et al. Reference Sikka, Jena, Chakravarty and Pal2024). Financing climate adaptation is a major challenge for states, already stretched by the economic slowdown and COVID-19’s impact. The new fiscal rules have placed not only borrowing constraints but also pressures to bring fiscal disciplines by reducing existing debt burdens. This has restricted the states’ ability to raise funds for bridging the adaptation funding gap.

India needs a unified approach to climate risk and a clear system to assess how development programs address vulnerabilities. Despite these hurdles, momentum is growing, with new plans and policies taking shape nationwide, though progress varies widely across states. There is a need to establish a common framework across the states and the union territories for climate risk and a systematic methodology for evaluating the extent to which development programs address climate risk and vulnerability. However, the progress and focus of policies and schemes related to climate adaptation vary from state to state.

Can philanthropy play a role here in India in bridging the adaptation financing gap? Overall, Indian philanthropy has shown impressive growth, with private contributions reaching $13 billion in FY 2022, largely driven by CSR, family philanthropy, and retail giving. CSR spending alone has grown by 13 percent annually and is projected to maintain this upward trend, while family philanthropy and retail contributions continue to increase, bolstering the sector overall. In 2023, Indian philanthropy grew by 10 percent, indicating its steady expansion and rising potential (ICC 2024).

Despite this growth, only 0.5 percent of domestic philanthropic funding is directed toward climate action, meeting just 10 percent of India’s climate financing needs (ICC 2024). This limited allocation reveals a critical funding gap and a significant opportunity for philanthropy to support climate adaptation and resilience. Currently, most private philanthropic capital is focused on education, health care, and poverty alleviation (ICC 2024). However, with the sector’s expanding capacity, India’s philanthropic community is well positioned to shift resources toward climate resilience.

According to an India Climate Collaborative (ICC) study, Indian philanthropy has shown a concentrated effort in certain high-visibility sectors, with clean energy receiving the lion’s share – 30.8 percent – followed by agriculture, forests, and ecosystems at 23.7 percent. Urban resilience and rural adaptation account for 17.6 percent of the total funding (ICC 2024). Table 11.3 presents a snapshot of the sector-wise climate financing in India with most and least funded subsectors (2018–2023).

Geographically, the funding landscape is equally uneven. Regions such as Andhra Pradesh, Karnataka, Maharashtra, and Uttar Pradesh attract a disproportionate share of philanthropic support, receiving roughly one-third of CSR contributions between 2018 and 2023. In stark contrast, highly climate-vulnerable states such as Assam receive a mere fraction of this funding – less than 2 percent (ICC 2024).

Indian philanthropy, driven by leading organizations such as Tata Trusts, Rohini Nilekani Philanthropies, the MacArthur Foundation, and EdelGive Foundation, has the potential to play a transformative role in advancing climate adaptation efforts. Through the Indian Climate Collaborative (ICC), these entities are working together to strengthen India’s climate ecosystem and mobilize philanthropic funding to tackle climate risks.

Encouragingly, Indian philanthropy is increasingly embracing collaboration, bringing together various stakeholders through a 4P approach – public, private, philanthropic, and people – harnessing the collective power of these sectors to drive meaningful change.

One notable initiative is the Harit Bharat Fund, co-created by ICC and the World Resources Institute. This fund aims to accelerate land restoration in India, mitigating climate risks while simultaneously enhancing livelihoods, improving nutrition, and bolstering food security. It adopts a dual funding mechanism providing grants for nonprofits and low-interest loans for for-profit organizations (ICC 2024).

Therefore, philanthropic investments are strategically redirected toward climate adaptation, especially in vulnerable regions and sectors, India can harness this funding to address the pressing climate challenges it faces, filling critical gaps in adaptation finance and driving long-term, sustainable solutions.

Concluding Remarks

The goal of this chapter is to highlight the pivotal role played by philanthropy in supporting adaptation financing. This can be summarized in five points. First, adaptation projects, perceived as yielding low short-term economic returns, possess high long-term social benefits. Philanthropic funding can de-risk investments, directly engage communities, and establish sustainable climate-resilient initiatives supporting local livelihoods.

Second, philanthropy can blend private and public funds to reduce barriers to innovative investments in such projects, thereby creating a business case. Start-ups addressing socioeconomic challenges like climate-resilient infrastructure often face high administrative hurdles and lack investment pipelines. Philanthropic organizations can facilitate processes for these enterprises, enhancing their financial viability.

Third, philanthropy offers technical assistance to overcome knowledge gaps in adaptation projects. This includes providing advisory services, training, and operational guidance to improve the business sustainability of initiatives, ultimately boosting their investment performance.

Fourth, philanthropic capital is uniquely positioned to invest in long-term, transformative solutions across sectors and geographies, especially in areas where private and public financing struggle to reach. Funders, particularly those from emerging sectors like “next-gen” philanthropists, can take on higher-risk projects, experiment with diverse financial instruments, and promote collaboration among stakeholders. This flexibility enables philanthropists to support initiatives that advance climate resilience and adaptation in ways that may otherwise remain underfunded.

Finally, a key strength of philanthropy is its ability to provide unrestricted funding without expecting a return, which allows for sustained, ecosystem-wide support. Hence, philanthropy is a promising solution to addressing the gap in financing climate adaptation.

The following recommendations are made:

• First, governments need to foster an enabling environment for philanthropy to thrive, beyond fiscal incentives such as tax exemptions. Simplified entry and operational norms, performance recognition, and support for innovative blended finance products can enable philanthropy to channel resources effectively toward SDGs.

• Second, a centralized database tracking philanthropic funding can aid DFIs, MDBs, and other stakeholders in accessing, monitoring, and assessing financial flows. This can enhance transparency and reshape global funding mechanisms.

• Third, it is often found that the collaboration between philanthropy and governments aims to create public goods but is hindered by trust issues, stringent regulations, and accountability gaps. Clear demarcation of roles and alignment of objectives among stakeholders can mitigate overlaps, foster innovation, and establish long-term partnerships.

• Fourth, emerging economies such as India, China, and Brazil are shifting the development finance narrative. However, North–South funding disparities persist. While philanthropy can address these gaps by facilitating dialogues, stakeholder consultations, and localized funding solutions, establishing data hubs and investment options sourced from the North can bolster financing for climate adaptation in developing countries.

In summary, philanthropy holds significant potential to address the urgent challenges of climate adaptation, particularly in regions most vulnerable to climate impacts. While government and private-sector investments are crucial for scaling climate action, philanthropy can fill critical funding gaps, catalyze innovation, and support high-risk or early-stage initiatives that may not attract traditional financing. However, strategic reforms, collaboration, and data-driven approaches are essential for maximizing its impact.

Introduction

As of the end of 2024, fewer than 6 percent of Africa’s thirty-two measurable Sustainable Development Goals (SDGs) were on track to be met by 2030. Closing an annual funding gap of $1.3 trillion is crucial, but this challenge is compounded by declining overseas development assistance (ODA) and rising public debt, leaving governments with less capacity to invest in services and social programs.

The situation in Africa is constantly evolving, notably given its unique demographics and growing population. It is estimated that 10–12 million youths enter the workforce every year, while only 3.1 million jobs are added, leading to extremely high youth unemployment rates. Meanwhile, wealthy nations continue to debate the veracity of climate change while the dire impacts are already being felt across the continent. Africa accounts for less than 4 percent of global carbon emissions yet remains highly vulnerable to their associated impact. According to the 2024 Africa Sustainable Development Report, more than half of African countries have been impacted by climate change, with more than 110 million people directly affected by climate, weather, and water-related disasters.Footnote ¹

These metrics may suggest an overwhelming challenge, but they also highlight a remarkable opportunity for impact. The reality is that sufficient capital exists in the global economy to achieve the SDGs, and if any continent is primed for innovation and transformation, it is Africa. The scale and complexity of its social challenges create unparalleled opportunities for testing and refining impact-driven solutions. If a solution succeeds in Africa, it is likely to be globally scalable. This positions Africa not only as a continent capable of addressing its own challenges but also as a leading hub for social innovation worldwide.

Approximately 1 percent of total global wealth – estimated at $450 trillion in 2023 by UBS’s Global Wealth ReportFootnote ² – will be needed to achieve the SDGs, highlighting the critical role of private investment. However, many private investors still perceive social investments as too risky, believing they fail to offer attractive risk–return ratios. This underscores that the real challenge is not a lack of capital per se but rather a shortage of risk-tolerant capital to mitigate investment risks and unlock additional private funding in the impact space.

Achieving the SDGs without private-sector involvement is unrealistic, yet relying on a single source of finance is equally inadequate. A diverse spectrum of funding must be mobilized to meet the continent’s sustainable development needs. Among these, philanthropic capital holds a uniquely catalytic role due to its capacity to absorb risk, exercise patience and flexibility, and ensure impact additionality, intentionality, and integrity. These attributes position philanthropy as a powerful enabler of private investment, making it perhaps the most crucial financial lever for driving sustainable growth and scaling impact.

Catalytic capital typically includes debt, equity, guarantees, and other investments that accept higher risk and/or concessionary returns compared to conventional investments. Its primary goal is to generate positive impact while enabling third-party investment – particularly from private capital providers – that would not otherwise occur.Footnote ³ Additionally, catalytic capital encourages private investors to explore opportunities they might otherwise avoid.

This definition, however, overlooks a crucial element: philanthropy. Often underestimated, philanthropy carries a uniquely high risk appetite and is expanding rapidly both globally and across Africa. According to the 2021 African Giving Index, more than $10 billion in philanthropic capital is directed annually toward social causes on the continent.Footnote ⁴ This includes donations, grants, and investments from wealthy individuals, foundations, and impact investors, underscoring philanthropy’s growing role in development finance.

As the sole source of pure risk capital – prioritizing social impact over financial returns – philanthropy has the potential to be exponentially catalytic when deployed strategically. By absorbing risk in blended structures, philanthropy can help attract private capital into markets that would otherwise be deemed too risky. Over the long term, it plays a critical role in building investment-ready enterprises capable of securing patient and, eventually, large-scale commercial capital. The fundamental objective of catalytic philanthropy is leverage: For every dollar of philanthropic grant capital deployed, how much follow-on private capital can be unlocked?

This chapter examines the evolving role of philanthropy in driving impact and explores why Africa is uniquely positioned for this opportunity. The landscape of impact capital has expanded significantly beyond traditional donations, incorporating a wider range of financial tools to support sustainable development. We will explore philanthropy’s critical function in de-risking investments, particularly in early-stage enterprises, enabling them to scale, enter new markets, and foster collaboration across sectors.

However, recognizing philanthropy’s expanded role does not mean abandoning traditional grant-making. Grants remain essential, particularly for mobilizing concessional capital, but they should be viewed as part of a broader financial strategy rather than a stand-alone tool. By adopting more sophisticated funding models, philanthropists can enhance the effectiveness of grants, driving greater innovation and long-term sustainability.

Meeting Africa’s pressing challenges requires fresh solutions, diversified capital sources, and strategic partnerships. This transition demands new skills, stronger alliances, and a shift in mindset regarding the use of resources, technology, and finance. Time is critical – deploying risk capital swiftly is essential for addressing socioeconomic challenges at scale. As a uniquely flexible and adaptive funding source, philanthropy is well positioned to lead this transformation.

A Continent Ripe for Innovation

While Africa faces socio-environmental challenges similar to those of other developing regions, it also possesses unique assets that, when optimized, can drive innovative and sustainable solutions – not just for the continent, but for the world. Though Africa’s complex social challenges are often perceived as overwhelming or insurmountable, we see them as compelling opportunities for impact investing and social transformation.

Africa’s youthful and rapidly growing population is a powerful asset. As the workforce of the future, young Africans have the potential to drive growth in key sectors such as health care and technology, with entrepreneurship emerging as both a strength and an opportunity. However, this potential is often mischaracterized as a challenge rather than recognized as an unparalleled testing ground for innovation with globally scalable benefits.

A key myth fueling this misconception is the belief that profit-driven entrepreneurial solutions are incompatible with development or that Africans prefer free services over affordable, reliable products. In reality, market-based solutions that create sustainable incomes empower local communities and foster homegrown responses to development challenges – from financial inclusion to green energy–driven economies. Moreover, Africa’s lack of entrenched legacy systems and infrastructure gaps create a unique opportunity for innovation to leapfrog traditional barriers, as demonstrated by transformative successes like M-Pesa and Zipline.

The rise of social enterprises across Africa has begun to address these challenges, with a vibrant ecosystem of social start-ups emerging across the continent. According to research by the World Economic Forum, large numbers of social entrepreneurs are actively driving impact in Africa, including approximately 85,000 in Kenya, 135,000 in Egypt, 140,000 in South Africa, and an estimated 1.3 million in Nigeria,Footnote ⁵ underscoring the increasing role of entrepreneurship in tackling social and economic challenges through innovative solutions. The research also estimates that across Sub-Saharan Africa, social enterprises are estimated to directly create between 28 and 41 million jobs. The power of this movement can help inspire larger-scale private capital players toward a mindset shift and dispel the idea that solving for development needs cannot be financially viable.

Moreover, data increasingly shows that investment aligned with the SDGs can lead to acceptable financial returns. Three of the Goals – 6, 7, and 9 – across five African countries (Nigeria, Kenya, Ghana, Uganda, and Zambia) have attracted $200 billion in investment opportunities, promising long-term, robust returns.Footnote ⁶ Combining an entrepreneurial approach to social impact with sustainable financial returns requires strategic investment in capacity building. This involves equipping philanthropists and investors with a deeper understanding of returns-based impact while fostering a cohesive, rather than fragmented, community-driven approach to social and economic transformation.

Knowledge and information are crucial in this transition, enabling management teams and boards to make informed decisions. However, despite Africa representing the largest impact opportunity globally, only one university on the continent offers formal academic programs in sustainable and innovative finance.Footnote ⁷ This gap significantly hinders the development of a critical mass of impact-capable talent needed to mobilize and deploy capital at the speed and scale required for meaningful transformation. Addressing these foundational challenges remains an urgent priority.

The Continuum of Capital

Since gaining independence in the 1960s, African countries have primarily relied on governments, ODA, and, to a lesser extent, philanthropy for social investment. While these efforts have driven progress, the continent continues to face persistent challenges such as climate change, economic inequality, and a rapidly growing youth population with limited opportunities. These issues threaten food security, political stability, and broader systemic resilience. Addressing evolving challenges with outdated solutions is no longer viable – innovative, sustainable, and scalable approaches are urgently needed.

One of the greatest barriers to transformative change is the funding gap. The UNDP estimates that Africa requires an additional $1.3 trillion annually to meet the SDGs. However, neither ODA nor government spending alone can bridge this shortfall. Engaging investors with varying risk and return preferences can drive long-term impact while ensuring capital is deployed strategically and sustainably.

A key framework facilitating this shift is the “returns continuum,” introduced by Omidyar Network in 2017.Footnote ⁸ This model has gained traction within philanthropy and impact investment, offering a structured approach to deploying capital across financial and impact objectives. The continuum spans grants that prioritize social outcomes with no financial return, impact investments that accept concessionary returns in exchange for social or environmental benefits, and commercial investments delivering both high impact and market-rate returns.

Venture philanthropy extends this model by combining financial capital with nonfinancial resources such as expertise, technical assistance, and intellectual property. Organizations and individuals with restrictions on how they deploy capital can use the continuum as an interconnected ecosystem rather than operating in silos. Philanthropy can support early-stage enterprises with investment readiness assistance, while impact investors leverage these efforts to de-risk investments and build a stronger pipeline of commercially viable opportunities.

One of the most significant benefits of this approach is its ability to address Africa’s “missing middle.” Many early-stage enterprises struggle to secure capital because they are too large for microfinance but too small or risky for commercial banks. This misalignment between investor expectations and investment-ready businesses limits growth. Deliberate collaboration between diverse stakeholders, including ecosystem builders, networks, and intermediaries, is crucial to ensuring capital flows effectively to where it is needed most.

The capital continuum ensures that financing aligns with the specific needs of investee organizations at various stages of maturity, scale, and impact. It supports a diverse range of actors, from nonprofits addressing challenges unsuitable for commercial models to small and medium enterprises (SMEs) seeking growth capital and publicly traded companies investing in supply chain transformation. By matching the right capital to the right business model, this approach enhances efficiency and effectiveness in capital deployment.

Maximizing impact requires leveraging each funding type’s unique strengths: fueling innovation, de-risking early ventures, scaling proven solutions, and mobilizing larger investment flows. Clinging to outdated distinctions between philanthropic, concessional, and commercial capital only limits progress. A flexible, collaborative, and strategic approach to capital deployment is key to unlocking Africa’s financial ecosystem and driving sustainable, high-impact transformation. By embracing the capital continuum and fostering cross-sector collaboration, Africa can mobilize the necessary resources to address systemic challenges and build a thriving, inclusive economy.

Challenging the Traditional View of Philanthropy

In Africa, as in many other regions, both the private finance and the philanthropic sectors lack awareness of the opportunity of the continuum of capital. Perhaps more damaging, the language and intentionality mismatch creates a pseudo-philosophical divide that is difficult to bridge. Some philanthropies are skeptical of “profit-hungry” investors and some commercial investors are dismissive of “bleeding-heart” philanthropists. Even among the actors in the middle such as venture philanthropists and impact investors, there has been a history of division and distinction rather than harmony and collaboration, with many of them failing to recognize their respective synergies.

Impact investors have long grappled with the perception that adopting an impact lens necessitates a trade-off in financial returns. To attract large-scale capital providers, the impact investment community has focused on showcasing investments that challenge this assumption. Notably, the Ford Foundation made a bold statement in 2017 by allocating $1 billion of their endowment to impact investments, explicitly pursuing risk-adjusted, market-rate returns.Footnote ⁹ The high-profile nature of this allocation places significant pressure on the foundation to demonstrate that meaningful impact can be achieved without compromising financial performance – helping shift the narrative and create a pathway for more risk-averse investors.

At the opposite end of the spectrum, some philanthropists argue that grant capital is a scarce and invaluable resource that should be reserved for nonprofit organizations serving the most vulnerable populations. Many philanthropic funders are wary of using their capital to de-risk investments for commercial players, questioning why philanthropy should be leveraged to subsidize financial returns. However, catalytic capital is not about subsidizing private investors – it is about addressing market failures and filling critical gaps where traditional capital is unwilling or unable to go.

In regions like North Africa and Nigeria, philanthropy is often conflated with charity. In North Africa, for instance, there is no direct Arabic translation for “philanthropy,” limiting the vocabulary to more traditional forms of charitable or association-based giving. While local, one-off community donations play an important role, they must be expanded into more strategic, long-term approaches that tackle root causes rather than just symptoms. This shift requires a deeper understanding of the unique attributes of philanthropic capital – its high-risk tolerance, flexibility, and patience – which, when deployed effectively, can unlock systemic change and sustainable impact.

How Philanthropy Fits into the Capital Stack

Estimates of the size of the global philanthropic capital pool vary enormously with no single source of centralized data. According to the Global Philanthropy Tracker, “the countries covered by their 2023 report contributed $70 billion in philanthropic outflows in 2020. When combined with ODA, remittances, and private capital investment, the total rises to $841 billion … [with] the largest portion of this money [coming] from the high-income countries, which contributed about 95 percent of the total amount measured.”Footnote ¹⁰ Even when topped up with the $10 billion of estimated African giving, this is a mere drop in the ocean compared to the volume of commercial capital.

However, for all the reasons mentioned earlier, philanthropy has an outsized role to play. It can fund innovation by providing risk capital through grants, convertible loans, and patient capital to test new products, services, markets, and models. Beyond seed funding, philanthropy can also support growth-stage innovations by funding proof-of-concept initiatives, reducing risk, and enabling scaling through impact investors, governments, and eventually commercial capital. This allows innovative solutions to expand into new markets and geographies while maintaining their impact thesis and integrity, free from the pressure of profit-driven investors.

In Africa especially, the perceived risks for any small business are significant, and the venture capital industry is not as developed as on other continents. Entrepreneurs also have little option of getting funding from friends and family. Meanwhile, most financial institutions are not designed to respond to the needs of very early-stage entrepreneurs who tend to have little to no track record or collateral. Coupled with unfavorable sovereign credit ratings, the cost of capital in Africa tends to be higher than in similar economies. As an illustration of this issue, the average cost of capital for energy projects was about seven times higher in Africa than in Europe and North America,Footnote ¹¹ with Ghana recording the highest weighted average cost of capital from 20.47 percent to 22.87 percent.Footnote ¹² Philanthropic capital can provide guarantees, first-loss capital, and impact-linked incentives that help bring down this high cost of capital. As James Chen, a renowned venture philanthropist and founder and seed funder of Clearly, stated, “privatize failure and socialize success,”Footnote ¹³ pointing to private philanthropy as being able to take big risks and build the opportunities for more risk-averse funders to invest into downstream and scale-proven models.

Philanthropy as Seed Funding

Despite the structural and systemic challenges that hinder the full potential of catalytic capital in Africa, there is significant hope in the innovative models already emerging across the continent. One such example is the Segal Family Foundation (SFF), which has pioneered a blended approach to deploying patient capital in Africa. By combining grant-making with impact investments, SFF has strategically supported early-stage social enterprises – particularly those that are African owned and led – recognizing their potential to drive sustainable development and create lasting change. This model exemplifies how catalytic capital can be effectively leveraged to nurture local solutions, de-risk investments, and build a more resilient impact ecosystem.

Liana N. Nsengimana, SFF’s investment manager based in Kigali, Rwanda, highlights a major challenge: the lack of access to early-stage patient capital for African entrepreneurs. Despite increasing investment flows, African-led enterprises struggle to secure funding due to perceived market risks, limited cash flow or assets for debt financing, and their position in the “missing middle.”

In response to this gap in the market, SFF has taken a proactive approach by offering flexible and responsive financial instruments. These include a debt facility and recoverable grants, which provide patient capital to promising early-stage entrepreneurs developing scalable solutions to Africa’s social and environmental challenges. SFF believes that by identifying high-growth, high-impact enterprises and providing appropriate capital and support, these businesses can drive economic growth and long-term sustainability.

For many early-stage enterprises, the only available sources of seed funding come from accelerator programs that offer small cash prizes, typically ranging from $2,000 to $5,000. While these funds can help entrepreneurs take their first steps, they are often insufficient for businesses that are looking to grow. As a result, entrepreneurs are frequently forced to move from one competition to another, relying on small, fragmented sources of funding just to keep their operations running. In contrast, SFF offers seed funding in the range of $20,000 to $30,000, a level of support that Nsengimana notes has enabled entrepreneurs to build viable business models and position themselves for the next stage of funding.

Nsengimana is also keen to point out that the SFF has a “capital plus” model that stresses the importance of providing human and intellectual capital in addition to financial capital. Capacity support, technical assistance, and business development services help shore up the investment and bring value to the investee while also mitigating risk for the investor.

Another compelling example of philanthropy serving as seed capital is Villgro Africa, an incubator and impact investor supporting emerging health care businesses across the continent. As an intermediary, Villgro Africa strategically pools philanthropic capital from foundations, corporations, and government funders to provide innovative financing solutions tailored to early-stage businesses. These enterprises, often overlooked by traditional capital markets, benefit from Villgro Africa’s approach, which bridges funding gaps and enables high-impact health care innovations to scale sustainably. This model underscores the critical role of catalytic capital in nurturing ventures that might otherwise struggle to access the resources needed for growth and impact.

The innovative financing model employed by Villgro Africa is a unique approach that blends investment capital with tailored technical assistance. Typically, Villgro provides early-stage health care enterprises with a minority equity stake or convertible note investment of approximately $50,000, coupled with technical assistance vouchers of equal or greater value. These vouchers are often directed toward African universities, enabling locally contextualized market research that fuels the company’s next stage of growth. This dual-support model not only helps enterprises refine their business models but also strengthens their investment case, making them more attractive to future investors.

Villgro Co-Founder and Executive Chairman, Rob Beyer, highlights that for several health care start-ups, an initial investment of $50,000 in equity plus $50,000 in research vouchers has directly resulted in million-dollar follow-on investments from institutional investors. This success underscores the power of integrating capital with knowledge-driven support.

Additionally, Jackson Mwatha, the lead advisor for corporate finance and business support at Villgro, emphasizes that portfolio companies often value the technical assistance and advisory services more than the equity investment itself. Recognizing this critical market gap, Villgro has built a dedicated team of senior experts and mentors who offer industry-specific guidance in health care, as well as expertise in business and financial strategy. One of the most impactful services Villgro provides is sell-side support: helping enterprises in which it holds an equity stake evaluate term sheets and position themselves for follow-on investments.

Importantly, while Villgro is motivated to achieve strong returns on its investments, these returns do not benefit executives or original donors. Since the fund is backed by philanthropic capital, any realized returns are reinvested into the fund to support the next generation of African entrepreneurs. This approach ensures a sustainable, evergreen model that continuously nurtures innovation, scales impact and strengthens Africa’s health care ecosystem.

Philanthropy as Scaling Capital

Access to capital remains a major challenge for businesses in Africa, where commercial loan rates are prohibitively high. Nsengimana from SFF noted that average loan rates range from 18 percent to 20 percent, with some countries seeing even higher rates. To address this gap, SFF offers recoverable loans to companies with annual revenues between $50,000 and $80,000, allowing them to invest in equipment and production capacity to scale. These zero-interest loans have proven highly effective; one investee repaid their loan six months early while quadrupling their capital. Beyond financial relief, such de-risking mechanisms enhance business credibility, making it easier to secure follow-on funding from larger investors.

In Zambia, a similar effort is underway through the Catalytic Capital Consortium and the Zambia National Advisory Board for Impact Investing (NABII Zambia), which established a Credit Guarantee Fund (CGF) to improve SME access to financing.Footnote ¹⁴ With fewer than 30 percent of SMEs in Zambia having access to formal financial services, high lending rates – ranging from 22 percent to 30 percent annually – effectively block many from securing the capital needed for growth and productivity improvements. By lowering the risk for local lenders, the CGF makes it more viable for them to finance this underserved segment while also unlocking institutional capital from pension funds and other investors.

The effectiveness of catalytic capital is evident in its growth over the past two decades, having expanded more than fivefold while leveraging three to four times the original investment in additional funding.Footnote ¹⁵ One notable example is the Venture Capital Trust Fund (VCTF), which plays an enabling role by taking a first-loss position in investment funds. In this structure, if the fund incurs losses, VCTF’s equity absorbs them first, safeguarding other investors.Footnote ¹⁶ This de-risking mechanism is a powerful tool for attracting risk-averse institutional capital, such as pension funds, into impact investment. First-loss capital and other concessionary instruments, such as guarantees or below-market-rate returns, are fundamental to most catalytic finance models, helping unlock private capital for social impact.

SFF has observed a growing shift among philanthropists who are moving beyond traditional grant-making to deploy capital in a similar manner. However, this trend remains in its early stages and is largely driven by international philanthropists. To fully harness the potential of catalytic capital, there is an urgent need to connect philanthropic funding with Africa’s market realities and innovative investment strategies responsive to local contexts.

One example of a development-focused investor leveraging catalytic finance is GroFin, which provides long-term funding and business development services to entrepreneurs across Africa. With more than $300 million invested in more than 400 businesses across 13 countries, GroFin has created more than 50,000 jobs, many in high-unemployment areas. Its ability to scale was made possible by $10 million in grant funding from the UK-based Shell Foundation, which helped seed its operations and refine its business model before it became financially self-sustaining.

Recognizing the need for more coordinated catalytic funding, the African Venture Philanthropy Alliance (AVPA), in partnership with the Children’s Investment Fund Foundation (CIFF) and the US government’s Prosper Africa, has launched a collaborative catalytic capital fund. This pooled fund aims to mobilize $200 million in grants, leveraging at least ten times that amount from domestic private-sector investors and targets high-impact ventures addressing health care, education, agriculture, and climate resilience. By financing early-stage social enterprises and intermediaries with demonstrated potential for sustainable growth, the fund seeks to scale impactful solutions that deliver both financial and social returns. Its collaborative nature brings together diverse expertise and resources, strengthening Africa’s impact investment ecosystem.

Designed to unlock new opportunities for African entrepreneurs, the pooled fund enables them to seed and scale high-impact solutions while fostering cross-border investment and knowledge sharing. By incorporating credit guarantees, impact bonds, revenue-sharing models, and other innovative financing mechanisms, the initiative de-risks capital deployment for SMEs. Additionally, it addresses key ecosystem challenges such as impact measurement, deal sharing, investor readiness, and data collection, ensuring more informed decision-making across the investment landscape.

The ultimate goal is to mobilize more than $2 billion in domestic private capital, with a key focus on engaging local African foundations in the initiative. By inviting them to participate, the fund allows African philanthropists to shape the investment agenda while learning from global best practices in catalytic finance. Over time, this exposure equips them to establish their own catalytic funds, driving sustained capital flows into local impact opportunities.

Philanthropy as a Catalyst for Collaboration

These examples demonstrate how philanthropy acts as a catalyst for collaboration, enabling mission-aligned partners to pool resources and amplify impact. Collaborative funds play a crucial role in this process by leveraging shared capital to either scale direct support for nongovernmental organizations and SMEs or serve as catalytic capital to de-risk investments and attract private funding. By distributing risk, costs, networks, and investment pipelines across multiple stakeholders, these funds enhance efficiency while lowering barriers for private investors to engage in impact-driven initiatives.

Aligned funding strategies further strengthen this collaborative potential. CIFF, for example, prioritizes co-funding partnerships to enhance collective support for grantees. As a seed funder for the new AVPA Catalytic Fund, CIFF strategically aims for high leverage, ensuring that every philanthropic dollar mobilizes additional private capital to maximize.

Beyond financial contributions, collaborative philanthropy takes an active approach, offering investees more than just funding by helping them scale, refine business models, and secure follow-on investments. A compelling example is GGem Farming in Malawi, a long-time investee of SFF. GGem has expanded its impact by training farmers, improving infrastructure, and providing input loans while also creating an ethical marketplace that ensures greater financial returns for farmers. With SFF’s initial seed capital, GGem successfully raised $1.5 million in debt financing from investors in New Zealand, Australia, and the United States. Within a year, the company repaid its debt and secured an additional $2.5 million in funding. This success enabled SFF to exit and reinvest its capital into new social enterprises, demonstrating how philanthropy can bridge the financing gap, attract external investors, and sustain a cycle of impact-driven funding.

For Villgro Africa, catalytic philanthropy extends beyond individual investments to strengthening the broader impact ecosystem. Philanthropic investors play a critical role in increasing the pipeline, track record, and visibility of African enterprises, making them more attractive to domestic investors. This de-risking effect stimulates local investment flows while reducing reliance on external capital. While Villgro operates with a “for Africa, by Africa” vision, it also recognizes the importance of preparing international investors for long-term engagement in African markets. Equipping global capital providers with the insights and frameworks necessary for sustainable investment ensures that financing is aligned with local needs and realities, fostering more effective and enduring impact across the continent.

Rethinking Africa’s Sustainable Growth Model

Philanthropy has the potential to play a transformative role in Africa’s shift away from dependence on declining aid and shrinking government budgets toward more sustainable socioeconomic development models. However, for this potential to be realized, philanthropic capital must be deployed strategically – not in isolation but as part of a broader continuum that integrates grants, blended finance, and private capital to scale social interventions. The examples discussed in this chapter highlight key lessons in mindset, operational models, and funding priorities that can accelerate this transition and unlock Africa’s full economic potential.

A crucial shift required is prioritizing the problem over rushing to solutions. Too often, philanthropic interventions are developed in response to an assumed solution rather than a thorough understanding of the issue at hand. Without rigorous research and market data, these efforts risk being misaligned with actual needs, lacking an evidence base, and ultimately failing to deliver sustainable impact.Footnote ¹⁷ The most effective interventions emerge from an iterative process of understanding, testing, and adapting – where the problem is as much a focus as the solution itself.Footnote ¹⁸ Aligning philanthropic efforts with established frameworks like the SDGs, ensures that investments complement rather than duplicate existing initiatives, increasing their effectiveness and potential for scale.

Another major opportunity lies in reducing currency risk through local capital mobilization. Africa’s impact investment landscape remains heavily reliant on foreign capital, which exposes enterprises to currency fluctuations and increases financing costs. Philanthropists and impact investors must prioritize unlocking Africa’s own private capital, which is more stable and better suited to long-term investments. The African Development Bank estimates that $1.8 trillion in dormant capital sits in pension funds, insurance companies, and inactive bank accounts across the continent.Footnote ¹⁹ Catalytic capital can play a pivotal role in activating these resources, fostering a more resilient and self-sustaining financial ecosystem for impact-driven investment in Africa.

Beyond enterprise funding, building strong ecosystem connectors such as AVPA is essential.Footnote ²⁰ Intermediaries, incubators, accelerators, research institutions, and industry networks bridge critical market gaps, facilitate knowledge sharing, and drive investment alignment.Footnote ²¹ Without these connectors, the impact ecosystem remains fragmented, hindering collaboration and scalability.Footnote ²² Well-developed ecosystems not only align stakeholders around shared goals but also help cultivate the talent pipelines necessary to sustain long-term innovation and policy reforms that create an enabling environment for impact investing.Footnote ²³

A related priority is institutionalizing education and capacity building in sustainable finance. Despite Africa’s position as the world’s largest impact investment opportunity, specialized training in sustainable and innovative finance remains extremely limited. Without the development of local expertise, Africa risks falling behind in the global shift toward impact-driven economies. Recognizing this gap, AVPA, in collaboration with the Impact and Sustainable Finance Consortium, is working to establish dedicated programs that will equip African universities with the tools, curricula, and networks needed to train the next generation of sustainable finance leaders.Footnote ²⁴ Just as mobile banking revolutionized financial inclusion across Africa, strengthening human capital in impact finance could be equally transformative in mobilizing and deploying capital for sustainable development.

Expanding pools of catalytic capital on the continent is also crucial. Africa is not short on capital – it is short on risk-tolerant capital. With the triple challenge of declining aid, shrinking fiscal space, and a rapidly growing population, Africa must tap into private capital markets to close its $1.3 trillion SDG financing gap. This will require the growth of catalytic funding mechanisms, such as AVPA’s Catalytic Pooled Fund, which enables philanthropists to pool resources and provide first-loss capital, guarantees, and other risk mitigation instruments to attract commercial investment.

Finally, policy and regulatory frameworks must evolve to facilitate the mobilization and absorption of catalytic capital. Governments, lawmakers, and regulators must be engaged to develop policies that encourage impact investing and remove barriers that currently hinder philanthropic capital from flowing efficiently. Too often, regulatory environments misunderstand the role of catalytic capital, treating it as purely charitable rather than a critical enabler of market solutions. Strengthening regulatory capacity, leveraging technology – such as AVPA’s social investing dashboard – and improving impact data collection can create a more transparent and effective policy environment that fosters sustained capital flows.

A Call to Action: Unlocking Africa’s Potential

Africa stands at a pivotal moment where the convergence of challenges – from climate change to youth unemployment – demands an innovative and sustainable approach to financing development. The traditional reliance on ODA and government funding is no longer sufficient to address the continent’s pressing socioeconomic needs. However, within this challenge lies an unprecedented opportunity for philanthropy to evolve into a powerful catalyst for sustainable development.

By embracing its role as catalytic capital, philanthropy can unlock the continent’s dormant domestic capital, attract international investment, and drive long-term economic transformation. This requires a fundamental shift in how philanthropic resources are viewed and deployed – moving beyond conventional grant-making to embrace innovative financing models such as guarantees, first-loss capital, revenue-sharing mechanisms, and outcome-based financing.

To achieve this, we call on philanthropists to “fall in love with the problem” rather than predetermined solutions, allowing for more effective collaborations, market-aligned interventions, and scalable innovations. We urge greater support for ecosystem builders like AVPA, which can facilitate partnerships, knowledge exchange, and the growth of catalytic funding pools. Equally critical is the development of institutional capacity through universities and training programs, ensuring that Africa can cultivate its own pipeline of impact finance leaders who will sustain and expand these efforts in the years ahead.

The time for action is now. From traditional philanthropists to impact investors to commercial capital providers, each plays a vital role in this evolving ecosystem. By working together and leveraging philanthropy’s unique ability to take risks, exercise patience, and maintain impact integrity, we can unlock the tremendous potential of African innovation and entrepreneurship. The continent that has long been seen primarily as an impact destination is now poised to become a global laboratory for transformative social innovation – creating solutions that will work not only for Africa but for the world.