Component 3
Unlocking private sector-led investments
Unlocking private sector–led investment involves identifying the investment’s requirements, objectives, and criteria and creating an enabling environment for them. This will involve addressing key barriers through regulatory and policy reforms, fiscal incentives, and de-risking measures in order to make the investment more attractive to private-sector players.
By ensuring a conducive enabling environment, private-sector investments can be more effectively mobilized to meet the prioritized climate and development goals.
Step 3
Develop and launch RFPs
In cases in which the private sector is expected to lead in addressing investment needs, decision-makers should prepare and publish Requests for Proposal (RFP) for the relevant pipeline of projects. RFPs will describe the investment needs, define the climate and development goals being pursued, and transparently lay out the process for evaluating the proposals.
Example: In São Tomé and Príncipe, the Partnership has helped develop project funding proposals, prioritizing six out of fourteen identified projects. One key initiative is an agriculture resilience project submitted to the Global Environment Facility (GEF), which secured a USD $280,000 project preparation grant. Another project, led by the United Nations Development Programme (UNDP), focuses on installing hybrid solar PV systems in all forty-five public healthcare facilities, enhancing energy security and reducing fossil fuel dependence. Moving forward, the Partnership will mobilize technical and financial resources to implement the country’s NDC Implementation Plan.
Step 4
Design and structure innovative catalytic vehicles or instruments to de-risk investment for private capital in-flows
When large amounts of capital are required to address systemic investment needs, countries may consider implementing policy and regulatory reforms, strengthening national institutions, and setting up or tapping into existing vehicles or instruments, such as co-investment platforms, to de-risk investments and attract financing at the needed volumes. These approaches may specifically target private-sector capital but usually also play a catalytic role in financing from various finance partners (please see Stage 4, Component 2, Step 2).
Example: Chile has developed an innovative de-risking strategy to attract private investment in renewable energy and green hydrogen through a combination of public guarantees, blended finance, and risk-mitigation instruments. The government, in partnership with CORFO (Chile’s Economic Development Agency), the Inter-American Development Bank (IDB), and private investors, has launched financing mechanisms such as credit guarantees, concessional loans, and public-private partnerships (PPPs) to reduce investor risk. One key initiative is the Green Hydrogen Fund, which provides first-loss capital and loan guarantees to incentivize private sector participation in this emerging industry. Additionally, the government has introduced contract-for-difference (CfD) schemes to stabilize energy prices and reduce revenue volatility for investors. These instruments have successfully mobilized billions in private capital for renewable energy, making Chile a regional leader in climate investment de-risking.
Support resources
The following resources can be considered. Explore the NDC Partnership Knowledge Portal Climate Toolbox for additional unlocking private sector–led investments resources.