At COP29 in Baku, countries agreed on a strengthened climate finance trajectory through the New Collective Quantified Goal (NCQG). As nations prepare new climate pledges, including Nationally Determined Contributions (NDCs), ahead of COP30 in Belém, clarity is needed on how this scaling up will occur and how public and private, as well as domestic and international finance, will transform.

The Baku to Belém Roadmap aims to guide this transition by identifying a broad set of actions and measures by all actors needed to scale up finance for climate action, amid concerns around volatile market and geopolitical conditions. Public finance actors are increasingly vital for leveraging additional resources and closing climate finance gaps. Vertical climate
and environmental funds (VCEFs), multilateral development banks (MDBs), national development banks (NDBs), and the broader ecosystem of public development banks (PDBs) all contribute to development and climate goals, but differ significantly in their size, governance, mandates, and operations.

VCEFs—comprising the Global Environment Facility (GEF), the Adaptation Fund, the Climate Investment Funds (CIF), and the Green Climate Fund (GCF)—focus exclusively on climate and environment, providing primarily grant-based concessional finance through partnerships with multilateral, national, and private entities. Development finance institutions (DFIs) provide the majority of global public climate finance, of which MDBs delivered a record USD 125 billion in climate finance in 2023, combining large-scale financing—mostly as loans—with technical expertise and policy support to advance sustainable development (EIB, 2024). NDBs, a diverse group of national institutions focused on implementing national policies, can be important local intermediaries, leveraging their proximity to domestic actors and markets and their ability to provide finance in local currency to support project implementation and align international finance with national priorities. National DFIs (including both NDBs and subnational development banks) committed USD 268 billion in climate finance in 2022, demonstrating the vital importance of NDB financing in the wider landscape (CPI, 2024a).

This report examines how collaboration between VCEFs, MDBs and NDBs can scale climate finance—including from private institutions—and accelerate efforts to meet sustainable development goals. Commissioned by the G20 Sustainable Finance Working Group (SFWG), under the 2025 South African G20 Presidency, it aims to support the SFWG Priority 1 on strengthening the sustainable finance architecture. The analysis builds on the landmark 2024 Independent High-Level Expert Group Review of the VCEFs and explores how VCEFs, MDBs, and NDBs can leverage their distinct yet complementary institutional strengths to maximize their collective catalytic and transformational potential.

The report focuses on VCEFs’ collaboration with MDBs and NDBs and does not cover:

• Detailed access, accreditation, or efficiency issues within VCEFs.¹
• Climate ambition and institutional targets.
• Capitalization and resourcing challenges.
• Broader MDB-NDB cooperation.²

Financial collaboration between VCEFs, MDBs AND NDBs

Collaboration between these institutions is rich and varied, with strong potential to scale climate finance by building a diverse capital stack that makes the best use of each institution’s risk capacity and access to concessional finance. This report studies collaboration between VCEFs and MDBs, between VCEFs and NDBs, and among all three institutions.

Financial collaboration includes exploring and implementing financial instruments to rapidly mobilize private finance at scale. Private investors often face barriers to financing climate related projects in emerging markets and developing economies (EMDEs) due to various types of risk, spanning policy, political, currency, sovereign, credit, off-taker, liquidity, and sometimes technology factors (CPI San Giorgio Group, 2024). There is also uncertainty and unfamiliarity surrounding new markets and a lack of project pipelines. While MDBs, NDBs, and VCEFs have individually pursued efforts to better mobilize private finance through products that help private institutions better manage risks, these institutions can cooperate more effectively on this agenda, leveraging their unique strengths and capabilities. Some of the most promising instruments and forms of financial collaboration that VCEFs, MDBs and NDBs could focus on are:

• Guarantees. MDBs have led on guarantees to date, with VCEFs and NDBs using them only modestly. When strategically deployed, guarantees can be highly effective in supporting private finance mobilization, with larger credit guarantee facilities having the potential to leverage 6-25 times (CPI, 2024b) more financing than loans, though barriers to their broader application remain. Given that some MDBs require concessional capital to offer certain types of guarantees in some countries, VCEF-MDB collaboration could be helpful in unlocking a greater scale of highly MDB guarantees with relatively limited use of VCEF capital.
• Equity. Equity investment is important for project development and mobilizing additional private capital. Catalytic equity, which accepts sub-market terms to absorb early-stage risks, can be especially effective in unlocking private investment. While equity is not a core instrument for most VCEFs and MDBs, they—along with NDBs—are well positioned to leverage their respective capabilities to scale the deployment of catalytic equity in a financially sustainable manner. 

MDB-NDB financial collaboration is already extensive—exceeding USD 100 billion from 2014 to 2024 across all development areas (FERDI, 2025) and largely involving institutional lending arrangements such as on-lending. MDBs can also provide grants and guarantees to NDBs, and assist them in accessing financial resources, including from VCEFs and capital markets.

These and various other instruments can be used for climate co-financing to pool resources from multiple institutions and increase project scale. The average total value for VCEF-funded projects is USD 100 million with co-financing vs. USD 7 million without. Co-financing can also reduce fragmentation and lead to more effective deployment of concessional finance. It can support risk-sharing, help mobilize private finance, and leverage NDBs’ local knowledge (ODI, 2020). However, while co-financing can be useful between VCEFs, MDBs and other public institutions, it is not the dominant or always necessarily most effective form of MDB-NDB engagement. Realizing benefits of co-financing is often challenging due to differing standards and criteria, lengthy approval processes, and limited capacity.

Institutions differ in their definitions of co-financing and of mobilization, demonstrating the need for harmonization in tracking methodologies. Data gaps and inconsistent reporting limit a full analysis of co-financing between VCEFs, MDBs and NDBs. That said, available ex-ante data from VCEFs from 2019 to 2023 provides insights on the scale and trends of co-financing and mobilization associated with VCEF projects (a detailed methodology can be found in Annex 1):³

• MDBs are the biggest contributors of co-financing with VCEFs, totaling USD 17 billion in co financing from 2019 to 2023, providing an average of USD 107 million per co-financed project from 2019 to 2023, mostly through debt.
• Private finance is mobilized through larger projects. The average value of VCEF-funded projects with private sector investment was USD 135 million, compared to USD 78 million for projects that are financed only by VCEFs and other public actors.
• Mitigation projects attracted more co-financing and mobilization than adaptation, with every VCEF dollar leveraging five for mitigation vs. only three for adaptation. This skew could be due to stronger returns and more mature markets for mitigation, and points to a systemic investment gap for adaptation.
• VCEF projects in middle-income countries (MICs) attract more co-financing and mobilization than those in low-income countries (LICs). MICs received 43% of co-financing and mobilization volumes, compared to just 8% for LICs, reflecting differences in capacity, fiscal constraints and difficulty attracting private investment in some countries.

VCEFs, MDBs and NDBs can also collaborate to increase availability of local currency financing. Currency risk management is key for increasing climate investment in EMDEs, where project revenues are typically generated in local currency while financing is provided in hard currency, creating vulnerability to exchange rate fluctuations. Joint collaboration between VCEFs, MDBs and NDBs to offer more local currency financing options, alongside policy and capacity building efforts, can help to make financing more viable and predictable for recipients and help to mobilize broader finance.

There is an opportunity to address the challenges to financial collaboration between VCEFs, MDBs and NDBs. Despite shared goals and concerted efforts, collaboration between these actors can be hindered by inefficient processes, limited feedback loops, and information asymmetries. These barriers also create substantial transaction costs for private sector entities looking to partner with VCEFs, MDBs, and NDBs, limiting the uptake of the tools these institutions offer to mobilize private finance. Our analysis identified the following barriers:

• Accreditation to VCEFs is complex and time-consuming. The GCF has accredited the most NDBs (25 to date), with limited NDB accreditations by other VCEFs. While NDBs can access VCEF finance via MDBs, more standardized or direct options could be expanded. Private entities can be accredited, but the process is lengthy; future reforms to address this issue are being developed.
• Project approvals and disbursements are often slow. The GCF launched the “Efficient GCF” initiative in 2023 to speed up reviews to under nine months.
• Diverse standards, taxonomies, and processes cause duplication and inefficiency. Mutual reliance initiatives improve efficiency by delegating common tasks to one institution. Harmonization of key financing definitions across institutions should be pursued.
• There is a need for due diligence interoperability. VCEFs, MDBs and NDBs could reduce administrative burdens that slow project progress with a view to incentivize private sector engagement through harmonization or mutual recognition of their respective due diligence processes.
• Information asymmetries make it harder for institutions to work together. Digital solutions, including data sharing and accessible, up-to-date repositories of information on potential sources of finance and the associated requirements are needed.
• Weak feedback mechanisms mean that lessons from collaborations are often lost or poorly documented. Regular, light touch feedback mechanisms including workshops and surveys could improve learning and coordination.

Realizing the potential of VCEFs, MDBs AND NDBs

This report focuses on VCEF-MDB-NDB non-financial collaboration in three key areas: (1) supporting country platforms to coordinate financing in line with national priorities, (2) collaborating on technical assistance (TA) to build capacity and prepare projects for successful implementation, and (3) enhancing the enabling environment through policies and regulations to expand and mainstream climate finance.

• Country platforms can be an important instrument for improving collaboration and coordination to scale climate finance. Country platforms offer an opportunity for VCEFs, MDBs, NDBs, and other key actors to coordinate support around a country-led long-term investment plan, aligned with Long Term Strategies, NDCs, and/or National Adaptation Plans (NAPs). Climate finance providers need to go beyond project-by-project investments to consider how to align with national priorities, including how to maximize the impact of limited concessional and risk-bearing capital. They must also collaborate to produce a strong bankable project pipeline, catalytic policy and regulatory changes, and innovative instruments and programs that can crowd in private capital.
• TA provided to foster capacity building, project preparation, and policy development can enable current and future climate finance and unlock opportunities for additional sources, including from the private sector. These tools are particularly valuable for supporting governments and organizations with insufficient capacity and technical expertise to design policies, implement climate-resilient projects, market transformation activity, integrate new climate technologies, and access funds.
• Efforts to build an enabling environment can address persistent challenges such as regulatory gaps, price distortions favoring fossil fuels, limited awareness of green opportunities, and policy uncertainty that impede investment. MDBs, VCEFs, and NDBs can all play distinct but complementary roles in supporting countries to shape these environments: MDBs bring technical expertise, policy-based lending, and close working relationships with governments; VCEFs provide grants and TA to countries with weaker institutional capacity; and NDBs can advise on local barriers to investment and help translate national climate plans into actionable, investable projects. The availability and access to robust data are also essential to enabling informed decision-making on climate finance. VCEFs, MDBs and NDBs need to collaborate to ensure their valuable work is being tracked, reported, and monitored, and to eliminate the data gaps that hinder progress. Working toward a coordinated approach to sharing data and knowledge exchange, as well as uniform
  measurement and reporting requirements, could accelerate implementation on the ground.

Recommendations

Potential steps that VCEFs, MDBs and NDBs could take to improve collaboration and enhance their collective climate finance provision and private capital mobilization could include the following⁴:

Collaborate to provide targeted programmatic support for country platforms

• VCEFs, MDBs and NDBs, with the support of national governments, should utilize their respective strengths and work as a system and within the system to enhance country platforms, guided by country-led priorities, aligned with Long Term Strategies, NDCs, and/or National Adaptation Plans.
• Where country platforms are already established or emerging, MDBs, VCEFs, and the relevant NDBs should coordinate their work to ensure strategic alignment and enable information exchange, including for mobilization of private capital, under the leadership of national governments.
  • Timeline: Short-term

Pursue interoperability to simplify engagement

• VCEFs, MDBs and NDBs should harmonize due diligence processes between and within institution types to ease private sector engagement, potentially involving or relying on existing MoUs or mutual reliance agreements between organizations, thus making approvals transferable across institutions. Throughout these efforts, ensure the
  highest environmental and social standards for safeguards are attained.
• VCEFs should enable cross-recognition of accreditation across funds in specific contexts, such as when an Accredited Entity has delivered financing in a specific sector with one fund, and is seeking similar financing from a fund to which it is not yet accredited.
  • Timeline: Short-term

Unlock the full potential of NDBs

• VCEFs should establish dedicated funding for proposals from Accredited Entities, including MDBs, that involve co financing or partnering with unaccredited NDBs to expand NDBs’ access to VCEF funds.
• NDBs and national governments should work together to build a coherent “whole-of PDB system” by mirroring the ongoing MDB roadmap to PDBs and enabling mutual recognition of procedures and standards among all actors. This includes setting out how collaboration between VCEFs and MDBs can support the delivery of this roadmap.
  Note: this recommendation is also related to the work of the International Financial
  Architecture Working Group of the G20.
  • Timeline: Mid-term

Enhance knowledge sharing

• VCEFs, MDBs and NDBs should formalize routes for sharing lessons learned and best practices from co-financing efforts to mitigate risks of delays and to avoid high transaction costs, moving forward.
• VCEFs, MDBs and NDBs should develop and formalize exchange or secondment programs from NDBs with capacity-building needs to other DFIs, MDBs, and VCEFs, in order to develop in-house knowledge concerning climate finance solutions.
  • Timeline: Short-term

Maintain momentum on improving the efficiency of key VCEF processes

• VCEFs should build on recent improvements to processes for accreditation, approvals and disbursements.
  • Timeline: Short-term

Collaborate to deliver transformational finance

• VCEFs and MDBs, with NDBs’ support, should jointly identify where financial collaboration can establish new markets in climate finance and financing SDGs, particularly for adaptation and biodiversity.
  • Timeline: Short-term

Structure programs to allow responsiveness to private mobilization opportunities

• Within programmatic structures and facilities, VCEFs should reserve Board approvals for program-level decisions and explore the delegation of project-by-project approvals to the Accredited Entity. This can improve flexibility and enable agile responses to fast-changing market conditions and associated investment opportunities
  • Timeline: Short-term

Explore innovative finance approaches and enhance resource efficiency

• Pursue innovative instruments with the private sector taking a leading role, supported by effective partnerships between VCEFs and MDBs. This may include using grants and/or concessional finance from VCEFs to enable the provision of guarantees, catalytic equity financing and other innovative financing tools, where appropriate. This should ensure additionality and minimum concessionality, taking stock of the MDBs constraints.
  • Timeline: Mid-term
• Develop innovative partnerships between VCEFs and MDBs to increase the financial leverage of VCEF resources directed toward the public sector. This could include VCEFs investing in new financial instruments created by MDBs, such as guarantees and hybrid capital.
  • Timeline: Short-term

Reduce fragmentation in the provision of TA

• VCEFs and MDBs should set up long-term climate finance TA programs focused on knowledge transfer in consultation with NDBs. These programs should be equipped with sustained funding for long-term TA and capacity building to support institutional and technical development within NDBs.
  • Timeline: Short-term

Maximize the impact of project preparation support

• VCEFs and MDBs, with NDBs’ support, should create a streamlined pathway from project preparation support to project financing to ensure valuable pipeline opportunities move toward implementation, also through joint VCEF-MDB-NDB PPF programs.
• Where relevant, NDBs should be leveraged to develop a pipeline of bankable projects. This could be aided through concessional project preparation support from VCEFs and MDBs, with the support of national governments, looking first to existing facilities.
  • Timeline: Mid-term

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¹ This issue is covered by the 2024 VCEFs Independent High-Level Expert Group (VCEF IHLEG) Review.

² This issue is covered by the 2023 CPI & E3G paper ‘Enhancing MDB-NDB Cooperation’ and the paper ‘Realizing the Potential of National Development Banks to Boost Sustainable Development Financing with MDB Support’ by Thomas Marois, Jacob Woolford, Ali Riza Güngen, and Régis Marodon.

³ As this analysis has been performed using ex ante data, realized financing outcomes may differ from the values presented here.

⁴ These recommendations aim to foster more and better climate action by VCEFs, MDBs and NDBs by 2030, in line with international climate targets. Short term = 1-2 years (by 2026-2027) and Mid-term = 3-4 years (by 2028-2029).