Component 3
Prioritizing investment needs
Prioritizing NDC investment needs helps direct financing to areas with the most potential for mitigation and adaptation and allows financing to be aligned with broader national priorities and development objectives. Prioritization should involve a consistent and transparent multicriteria assessment, using both qualitative and quantitative data to evaluate the strategic alignment of investments, their contributions to climate targets and sustainable development goals, and their feasibility. Extensive stakeholder engagement creates a more robust prioritization methodology; it improves the selection of relevant criteria, indicators, and weighting systems and increases buy-in.
Climate finance taxonomies can serve as valuable instruments in this prioritization process. These taxonomies provide a clear classification system for identifying and categorizing financial activities that contribute to climate goals. By using the categories from the country’s climate finance taxonomy, countries can align priorities with internationally recognized climate objectives, ensuring that financial resources are channeled toward projects with the highest potential impact. This approach not only enhances the transparency and consistency of the prioritization process but also helps build confidence among investors and financiers by clearly demonstrating how selected investments contribute to broader climate and sustainability targets.
Steps
- Step 8Map current and planned investment flows, secured financing, and financing gaps
- Step 9Define the process and methodology for prioritizing investment needs
- Step 10Prioritize investment needs using the defined methodology
- Step 11Engage stakeholders in order to validate the set of prioritized investment needs
Step 8
Map current and planned investment flows, secured financing, and financing gaps
Reviewing currently planned climate change investments, sector policies, and investment plans, as well as national policy documents related to these investments, helps governments understand attribution and financing gaps. Determining whether ongoing investments are positive, negative, or neutral in their contributions to climate goals will provide an overview of the country’s climate action. By reviewing government budget data, donor spending plans, and private-sector investments, decision-makers can comprehensively assess public and private financing already secured for NDC investments at the national and subnational levels. These reviews can reveal potential gaps and opportunities across crucial sectors for achieving climate targets and can help countries better understand investment needs. To avoid overestimating available funds, countries may use a sensitivity analysis to categorize investment activities.
Example: Rwanda mapped current and planned investment flows to align resources with its NDC goals, identifying USD 550 million in secured funding and USD 500 million in planned projects, leaving a financing gap of USD 3.45 billion toward its USD 4.5 billion target by 2030. This process improved stakeholder coordination, informed policies to address gaps, and enhanced funding proposals to secure additional support.
Step 9
Define the process and methodology for prioritizing investment needs
Prioritization methodologies select and use a set of criteria, indicators, and weights to prioritize a portfolio of investment needs. When developed through stakeholder consensus, a prioritized portfolio can facilitate the streamlining of resources and implementation, increasing buy-in. Methodologies may differ for investments in projects, supporting activities that build the enabling environment, and for public- and private-sector investments, as these may involve different needs.
Example: Jordan, Rwanda, Palestine, and Saint Kitts and Nevis have demonstrated strong investment need prioritization practices. All four are prioritized based on the mitigation and adaptation impact of the investment and the social and development impact. For the social and development impact, Jordan considered whether the investments contributed to the SDGs, Rwanda considered their contribution to economic growth and job creation, and Palestine considered the impact on knowledge and skills. Saint Kitts and Nevis conducted SCBA on projects to develop a list of top-priority projects. It also identified a set of gender equality indicators to assess the impact of its NDC on gender-related objectives.
Step 10
Prioritize investment needs using the defined methodology
As countries establish their prioritization methodology, they can utilize decision-support tools such as CBA , cost-effectiveness analyses (CEAs), and multicriteria decision analyses (MCDAs). The final weighting of criteria will be determined by each country’s climate and development priorities.
Example: Nigeria prioritized and costed its targets for the five key NDC sectors based on a data collection exercise involving government and private sector stakeholders. The costs collected spanned CAPEX (e.g., for oil and gas, cost of pipeline infrastructure developments) and OPEX (e.g., for oil and gas, cost of raw materials, wages, and subsidence fees imposed on oil wells). The costs were then modeled for each sector’s main mitigation and adaptation interventions, laying out the assumptions, reference scenario (BAU), and potential investment entities.
Step 11
Engage stakeholders in order to validate the set of prioritized investment needs
The central government should convene sectoral agencies, experts, and other relevant stakeholders to validate the complete set of prioritized investments, including planned and prospective projects and activities. At this stage, countries will also consider whether the set of investment needs aligns with existing efforts led by MDBs and DFIs, existing country engagement programs, and other sources of finance identified in the previous steps, both to avoid overlap and to leverage ongoing processes to secure financing. Countries may further consider how the priorities align with the capacities of stakeholders to inform and streamline mobilization processes for the most urgent actions.
Example: Antigua and Barbuda conducted a series of stakeholder engagement workshops to validate its NDC Investment Plan. These workshops brought together representatives from sectoral ministries, the private sector, and development partners. As a result, the country has successfully developed a robust climate finance pipeline aligned with its updated NDC, effectively positioning itself to scale up access to climate finance.
Support resources
The following resources can be considered. Explore the NDC Partnership Knowledge Portal Climate Toolbox for additional prioritizing invest needs resources.