Leveraging private sector finance for climate compatible development: Lessons from CDKN

How can governments, international programmes and other stakeholders create an enabling environment for private investment in climate action? This new paper from Charlotte Ellis and Kamleshan Pillay shares the following key lessons from CDKN’s experience: Private sector engagement requires a country-based and context-specific approach. Public policy is a fundamental tool for influencing how the private sector views climate finance. The business case for private sector involvement is specific to an individual project’s characteristics, and its sector dynamics. Aligning language and interests with the private sector will help gain their buy-in. Leveraging private sector finance requires involving private sector actors in the design phase. Pilot projects help demonstrate the business case for private sector investment. Risk-sharing measures, such as insurance and guarantees, can reduce financial risks and facilitate private sector participation. Innovative financial instruments can facilitate private sector investment in climate compatible development projects. Using existing micro, small and medium-sized enterprises (MSMEs) and financial institutions presents a further opportunity to bring in private sector finance.