How climate finance can deliver in a multipolar world – E3G
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How climate finance can deliver in a multipolar world
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18 Aug 2026
The global transition needs to accelerate at a moment when the world is becoming harder to navigate. Geopolitical fragmentation, conflict and weakening multilateral cooperation are making coordinated climate action more difficult, while debt burdens, high interest rates, fiscal pressures and declining development assistance are squeezing resources, particularly in developing countries. Yet, in a more volatile world, decarbonisation is becoming ever more important to economic resilience, energy security and development.
Recent geopolitical shocks have exposed the vulnerability of economies that are dependent on imported fossil fuels. Clean energy, resilient infrastructure and stronger domestic financial systems can reduce exposure to volatile energy prices and external shocks while creating opportunities for investment and industrial development
In this context, the challenge for climate finance is not just to increase the quantum. It is to build financial systems that are capable of supporting country-led economic transformation, and getting capital to the right places at sufficient scale and pace
Put country transformation first
Country-owned investment platforms can help bridge this gap if they seize the opportunity to become more than tools to coordinate international finance. They can become implementation mechanisms for national transition planning. The latter is an approach that is gaining ever more attention across jurisdictions in developing and developed economies, including the European Union
The next generation of country platforms should connect countries’ climate and development priorities with industrial policy, energy and infrastructure planning, fiscal policy and investable projects. Finance ministries have a critical role in connecting these agendas, while national development banks can translate them into programmes capable of attracting investment
This matters because climate risk is in effect economic risk and decarbonisation can build economic resilience. Climate impacts get transmitted through damaged infrastructure, disrupted supply chains and fiscal pressures. Meanwhile, renewable energy, grids, storage and electrification can reduce exposure to imported fuels and commodity shocks. For climate-vulnerable economies in particular, the choice should not be between resilience today and economic transformation tomorrow
Use public finance to create markets, not just finance projects
There is enormous private capital globally. Yet currency risk, weak project preparation, regulatory uncertainty and perceptions of emerging-market risk continue to prevent viable investments from reaching financing. Public finance therefore needs to move from simply supplying capital to creating the conditions for investment. Guarantees are one part of the answer. The Public Development Bank Guarantee Hub, launched by the International Development Finance Club (IDFC), the World Bank’s Multilateral Investment Guarantee Agency (MIGA) and the NDC Partnership, can strengthen the capacity of public development banks to use guarantees to mobilise investment rather than simply substitute for private capital.
But there is a deeper question around the financial system’s ability to correctly price the transition. E3G’s recent work with IDFC on rebalancing risk in credit ratings and prudential regulation shows how public development banks can be penalised by financial frameworks that fail to reflect actual risks. Our parallel work on adaptive and forward-looking prudential frameworks makes the wider case for financial rules to better reflect both evolving climate risks and the risk-reducing effects of public financial institutions investing alongside private capital.
We therefore need to both de-risk investment within today’s financial system and change the system so that it values the transition more accurately
Move from financing projects to financing transformation
In a multipolar world, there will be no single model for financing decarbonisation. But the ingredients are becoming clearer, ranging from country-owned investment frameworks and public banks capable of creating markets, to guarantees that mobilise capital and financial rules that better recognise the value of resilience and decarbonisation
The measure of success should not only be how much climate finance is committed, although this is critical too. Rather, it should be whether countries can build credible low-carbon investment pipelines faster, lower financing costs, mobilise capital and strengthen resilience
Thenext phase of climate financeshould move beyond financing climate projects towards financing economic transformation. In a more fragmented world, enabling countries to deliver their own pathways towards resilient, decarbonised economies may provide a more durable foundation for international climate cooperation
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