Nationally Determined Contributions (NDCs) will play a critical role in the achievement of the goal established by the Paris Agreement of 2015 to limit global warming to “well below” 2 degrees Celsius. Meeting NDCs requires the mobilisation of the private sector, and, in many cases, players such as national development banks (NDBs) in developing countries can play a key role in coordinating and promoting private sector investment toward climate mitigation and adaptation. However, in many countries, NDBs may lack awareness of global best practices or success cases in establishing fitting financial and regulatory mechanisms to support climate-related private sector investment.

As a result, the German development agency GIZ contracted IPC to develop a “global knowledge product” as part of the Climate Finance Readiness Programme to support partner countries and national financial sectors in designing appropriate approaches to finance national climate goals and strategies. Part of IPC’s assignment included describing the fundamental challenges associated with the present political, regulatory and financial framework and identifying the most suitable instruments and actors—such as NDBs—to address and overcome bottlenecks in catalysing national private investment.

IPC created a set of publications consisting of four individual country analyses—focusing on Indonesia, Mexico, Morocco and Peru—and one general study incorporating global lessons learned and key findings from the four countries analysed. In order to create this knowledge product, IPC conducted a detailed review of global best practices and innovation in establishing financing initiatives/mechanisms promoting NDCs, analysing success factors and bottlenecks. IPC also conducted on-site missions in Indonesia, Mexico, Morocco and Peru, seeking to better understand the specific function and role of national NDBs in catalysing climate-related financial sector involvement and private sector investment in those four countries.

The findings show that, in addition to the opportunities arising from capacity building and innovative financing instruments, the NDBs could benefit from better access to national and international capital and closer alignment and coordination of climate actions at political and regulatory levels.