Climate finance (Image by: poco_bw via Adobe Stock, and second image by: Wisut Source via Adobe Stock)
From plans to pipelines: The case for country platforms
Developing countries need over USD 2 trillion annually to meet climate goals – yet investments in adaptation and mitigation continue to fall short. As world leaders gather for COP30, this blog explores how country platforms can bridge the gap by aligning national development plans with private capital, and the need for domestic leadership and coordinated policy reforms to support these efforts.
Climate adaptation and mitigation are estimated to cost over USD 5 trillion annually until 2030 – USD 2.4 trillion of which will be needed by developing countries. For many low- and middle-income countries (LMICs), public budgets alone cannot meet the scale of need. As world leaders gather in Belém for COP30 this week, economists at the International Growth Centre (IGC) are exploring how country platforms can help align national planning, de-risk investment, and build project pipelines that private capital can commit to.
Why isn’t money flowing where it needs to?
The financing gap between what LMICs need and what they receive is estimated to be USD 1 trillion per year until 2030. This was the backdrop for important conversations at the Africa Climate Summit in Addis Ababa, and the focus of research presented at LSE’s Environment Week in September.
Countries that most need climate finance often have the highest barriers to entry for investors due to:
- Macroeconomic volatility, fragmented and inconsistent policy networks, high levels of debt distress, currency risk, and exposure to tariffs
- Investor perceptions of risk – poor rule of law, governance, and high levels of corruption
- Poor project pipelines due to a lack of technical and institutional capacity, analytics, and other enabling factors
- Integrity concerns around quality and regulation in carbon markets and accreditations for project developers (‘greenwashing’)
Leveraging country platforms for sustainable development
Finance tends to follow the path of least resistance. To break down barriers to transformational and sustainable growth, the IGC is working with the Ministries of Finance in Tanzania and Zambia to explore whether the right conditions are in place for a “country investment platform”.
Country platforms (CPs) can take many different forms. Fundamentally, they are a set of frameworks that clearly identify priority sectors (linked with national development plans), address regulatory bottlenecks to create enabling conditions for private investment, facilitate this investment through the creation of project pipelines, and use innovative financial instruments to de-risk private investment by leveraging public and concessional capital. What this looks like depends on the country; however, all CPs have some forum for inter-ministerial cooperation, and a Secretariat that directly administers the CP.
What sectors can country platforms function in?
The success of a CP depends on creating the enabling conditions to crowd-in private capital – leverage matters. Private capital brings the scale and is the binding constraint. Given their complexity, CPs should start with specific sectors that hold transformational potential. For example:
- Egypt’s NWFE focuses on the nexus of food, water, and energy, and has successfully mobilised USD 4 billion in private capital since it was announced in 2022. NWFE is situated within the Ministry of International Cooperation and Development and is a cross-sector programme to align project pipelines with national climate commitments and to attract blended and concessional finance.
- South Africa’s Just Energy Transition Partnership (JET-IP) was a comprehensive package of financing targeting the energy transition, decommissioning coal in favour of renewables. The country’s implementation and investment plans are steered through the Presidential Climate Commission.
- Brazil’s Climate and Ecological Transformation Investment Platform (BIP), focusing on energy, mobility, and nature-based solutions, functions more like a clearing house for climate projects, matching investors with projects that need capital.
What does a successful country platform look like?
CPs are growing – in the run-up to COP30, an additional five have been announced (Brazil, Colombia, Madagascar, Bangladesh, and a regional platform in the Caribbean). Multilateral development banks (MDBs) are backing CPs, seeing it as an opportunity to address multiple binding constraints on investment in adaptation and mitigation in developing countries.
However, CPs live or die by their level of coordination, and the costs of coordination do not always outweigh its benefits. To be successfully implemented, they require four main factors:
- Country ownership, leadership, and technical capacity (human capital): This needs political buy-in and an organisational structure that ensures a whole-of-government approach. Climate change impacts multiple sectors and often necessitates challenging political decisions. Ensuring political backing over the medium- to long-term is crucial to meet this requirement.
- Appropriate sequencing: Political announcements cannot precede internal political coalition-building, understanding policy priorities, developing an initial project pipeline, and agreeing on technical pathways to decarbonisation. Walk before you run.
- Scope matters: Ensuring the sequencing of initial ‘quick wins’ can be important to sustain political momentum. This underlines the importance of designing platforms as sequential and incremental investment packages within a comprehensive framework that includes regulatory reform.
- Unlocking the potential of capital: CPs can bring together finance providers with different risk preferences. Structured in a smart way, this would allow public and concessional funding to be leveraged to crowd in private capital. In this way, billions can truly become trillions.
How can country platforms help overcome barriers to investment?
Country platforms can directly and indirectly create the conditions for sustainable development by:
- Creating an enabling environment for investment through regulatory change, identifying bottlenecks and solutions to address them. For example, South Africa’s JET-IP introduced vital energy policy reforms of electricity generation from renewables.
- Building and channelling technical capacity into preparing, financing, and delivering projects, establishing clear and ‘bankable’ projects. Egypt’s NWFE established project preparation units within line ministries (such as Electricity and Environment) with technical support from the African Development Bank and the European Bank for Reconstruction and Development.
- Improving institutional coordination by linking project finance and delivery directly with national plans and visions. This makes the approach programmatic and guided by domestic political leadership, instead of fragmented, project-based, and driven by donor priorities.
In combination, country platforms can address three of the four structural barriers to investment growth – macro volatility, investor risk, and lack of capacity. Through a greater emphasis on transparency, country platforms can also help to address greenwashing concerns.
What is needed to make country platforms work?
Given the scale of the climate challenge and the urgency of required action, country platforms are increasingly seen as an important coordinating mechanism for technical and financial support. But country platforms are only catalysers. They cannot substitute for country ownership, leadership, and a strategic vision. So, what do stakeholders need to do next?
- MDBs and donors need to mobilise funds and coordinate technical assistance towards supporting early-stage country platform preparation – analytics, sectoral analysis, and identifying regulatory and other bottlenecks.
- Governments should lead with vision, and be bold, ambitious, and focused when deciding what sectors to prioritise. Radical transparency and political convening are important to set the stage for potentially difficult political deliberations.
- Financiers need to help LMICs meet investor requirements without lowering their standards. This means helping to build technical capacity and encouraging country ownership.
As COP30 gets underway, the IGC will be sharing more insights on how developing countries can think about climate change and drive sustainable growth. Explore our full collection of blogs on climate priorities in developing countries.