Component 4
Strengthening enabling environments and de-risking
Barriers to investment limit the ability to mobilize resources for identified needs. Strengthening enabling environments is crucial to mobilize the necessary finance to achieve climate goals, creating conditions to leverage private sector investments at scale.
By strengthening national policies, regulations, incentives, and de-risking instruments, countries can unlock investments across climate-development priorities. For each priority investment, identify instruments and mitigation measures to overcome barriers, recognizing that barriers may vary between debt and equity, as well as between domestic and international sources of public and private finance.
Steps
- Step 7List, categorize, and sequence investment barriers by priority investment needs
- Step 8Identify and prioritize options to mitigate investment barriers and plan for their implementation
- Step 9Design and implement prioritized policies and regulations for the enabling environments to crowd in private-sector climate investments
Step 7
List, categorize, and sequence investment barriers by priority investment needs
High-priority investments should be systematically categorized based on shared barriers; identify and streamline common obstacles faced by investment needs with similar financing requirements. Shortlisting of prioritized investments and associated barriers should be carried out through robust stakeholder consultation processes involving the private sector, specialized national agencies and institutions, sectoral specialists, MDBs and DFIs, finance partners, civil society and academia.
Example: The Climate Change Division of Jamaica’s Ministry of Economic Growth and Job Creation, with support from the Commonwealth Climate Finance Access Hub, secured USD $582,000 from the GCF to implement a readiness initiative aimed at mobilizing the private sector to support low-carbon and climate-resilient development in Jamaica and other Caribbean countries. As part of this initiative, Jamaica is conducting a national scoping study to identify barriers preventing private sector engagement in climate investment. Additionally, the country is supporting private adaptation investments through the Climate Change Adaptation Line of Credit, specifically targeting the agriculture and tourism sectors. Furthermore, efforts are underway to assist private sector entities in directly accessing multilateral funds, with plans to identify at least two organizations that can meet the accreditation requirements of the GCF.
Step 8
Identify and prioritize options to mitigate investment barriers and plan for their implementation
Identify the measures—including regulatory/policy reforms, fiscal instruments and incentives, and financial de-risking—that can address barriers to create an enabling environment conducive to mobilizing and scaling up financial flows. Addressing barriers should contribute to transformational change by targeting interventions across sectors and improving confidence in the stability of policies and regulations over time. Technical working sessions on potential policy actions to address identified barriers should focus on discussing linkages between policy and regulatory solutions. These sessions can then be used to flesh out the necessary regulatory reforms and incentives that will attract private-sector investments, ensuring a well-sequenced approach to implementation and maximizing the potential for sustained financial flows.
Example: Namibia’s NDC Investment strategy recommends actions to create a better enabling environment for NDC private investment. Recommendations included introducing green business standards and a certification system, requiring environmental reporting for firms on the Namibian stock exchange, and introducing vehicle emissions standards. Thirty-seven strategies were developed based on a review of current and planned projects contributing to the NDC, literature review, and expert interviews.
Step 9
Design and implement prioritized policies and regulations for the enabling environments to crowd in private-sector climate investments
Once measures to address critical barriers have been identified, a country should seek support for designing and implementing these or proceed to implementation. Since enabling environments are crucial for scaling up financial flows and mobilizing private finance, actions on enabling environments should be treated as a critical part of the country’s financing strategy and monitored accordingly.
Example: In Jamaica, the Partnership is working with the Ministry of Science, Energy and Technology to help the country harness renewable energy technologies, energy efficiency and energy conservation. With support provided by the Partnership, the government is carrying out analysis and assessments of energy policies and regulations, developing constructive suggestions for improvements and funding instruments and financial models to develop cross-cutting solutions.
Support resources
The following resources can be considered. Explore the NDC Partnership Knowledge Portal Climate Toolbox for additional strengthening enabling environments and de-risking resources.