5 ways NDCs can become private climate finance catalysers
Nationally determined contributions (NDCs) must be ambitious in their climate goals. Image: Getty Images
- Nationally Determined Contributions (NDCs) must be ambitious in their climate goals and also attractive to investors to ensure successful implementation and funding from public and private sectors.
- To mobilize private investment, five elements NDCs should include are clear targets and ambitious goals, a stable policy and regulatory framework, transparent governance and accountability, integration of climate finance mechanisms and global consistency and harmonization.
- Future UN Climate Conferences (COP), particularly COP29 and COP30, will play a pivotal role in increasing the ambition and investibility of NDCs.
NDCs are pivotal in the global fight against climate change. These commitments, provided by countries under the Paris Agreement, outline their efforts to reduce greenhouse gas emissions and adapt to climate impacts.
However, for NDCs to be effective, they must not only be ambitious but also investible. In other words, they must attract funding and support from the public and private sectors to ensure their successful implementation. The New Climate Quantified Goal (NCQG) is instrumental in assessing and enhancing the delivery of NDCs.
Investible NDCs offer a dual opportunity for states and investors. Countries can attract private finance, which is crucial for achieving climate and economic development goals and supplementing public funds. Meanwhile, investors gain insights into policy landscapes and sector-specific investment potentials, enhancing asset allocation and risk management strategies.
Crucially, enhanced NDCs facilitate formal engagement between countries and the finance sector, including institutional investors. This collaboration addresses investment barriers, manages systemic risks and develops opportunities aligned with countries’ climate ambitions, leveraging diverse finance sources such as lending, project finance and capital markets.
Investible NDCs: 5 must-haves
Investible NDCs are those that attract financial investments, domestically and internationally, to support their implementation. Achieving investibility involves creating an environment where investors see NDCs as viable opportunities that offer reasonable returns while contributing to climate goals.
For NDCs to be investible, they must possess certain characteristics that appeal to private and public, domestic and international investors and financiers.
Five essential elements that NDCs should incorporate to mobilize private investment:
1. Clear finance targets and ambitious goals
Investible NDCs start with clear, measurable targets demonstrating a country’s commitment to climate action. These targets should be ambitious yet achievable, providing a roadmap for emissions reductions and resilience-building measures. It should also include the key information that private investors look at, as well as a reference to the key investment opportunities that stem from the NDC.
2. Policy and regulatory framework
A stable policy and regulatory environment is crucial for investors. Clear rules and incentives encourage private sector involvement and help mitigate risks associated with climate investments. Governments play a pivotal role in creating these frameworks that support NDC implementation.
Supporting policy and regulatory frameworks must be designed collaboratively with stakeholders to ensure broad support and effectiveness in achieving decarbonization goals, as well as working towards stronger definitions of legitimate transition assets and climate finance pathways, to better define boundaries.
3. Transparent governance and accountability
Transparency builds trust among investors. Countries need robust governance structures that ensure accountability in NDC implementation. Reporting mechanisms and monitoring frameworks help track progress and demonstrate results, enhancing credibility and attracting further investment.
Strengthen governance and the stakeholder engagement process around NDC development and implementation, ensuring regular and open dialogue with key stakeholders – from public and private sectors – involved. This engagement ensures that diverse perspectives are considered in NDC development, enhancing the legitimacy of climate actions and fostering a conducive environment for investment.
4. Integration of climate finance
Financing is essential for NDC implementation. Countries should integrate climate finance mechanisms into their strategies, leveraging public and private sector funding. Innovative financial instruments such as blended finance can mobilize resources effectively.
Quantify investment needs and prepare financing strategies alongside NDCs, helping investors identify long-term investment opportunities aligned with climate goals. By preparing financing strategies alongside NDCs, countries can outline how they plan to mobilize public and private funds, fostering confidence in the stability and profitability of their investments.
5. Global consistency and harmonization
Engaging stakeholders, including communities, businesses and civil society, enhances the legitimacy and effectiveness of NDCs. Projects that generate social co-benefits, such as job creation and improved public health, are more likely to garner support and funding.
Harmonizing NDCs globally enhances transparency and comparability, which is crucial for investment decision-making. Consistent methodologies for measuring emissions reductions and assessing progress facilitate the collection and analysis of data across countries, enabling investors to evaluate risks and opportunities more effectively. This supports informed investment decisions that contribute to global climate objectives.
Next steps
The COP conferences provide a platform for countries to strengthen their climate commitments.
The upcoming COP29 in Baku, Azerbaijan and the subsequent COP30 in Brazil in 2025 will be pivotal in enhancing the ambition and investibility of NDCs worldwide. Discussions will revolve around innovative financing mechanisms, private sector engagement and scaling up investments in climate-resilient infrastructure and technologies. Countries will showcase successful NDC projects and seek partnerships to attract the capital needed to accelerate climate action globally.
The journey towards investible NDCs requires concerted efforts from governments, businesses and civil society to create an enabling environment for sustainable investments. By incorporating clear targets, robust governance, and innovative financing, countries can attract investments that accelerate their transition to a low-carbon economy and pave the way for a greener, more resilient world.
Don't miss any update on this topic
Create a free account and access your personalized content collection with our latest publications and analyses.
License and Republishing
World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.
The views expressed in this article are those of the author alone and not the World Economic Forum.
The Agenda Weekly
A weekly update of the most important issues driving the global agenda
You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.
More on Climate ActionSee all
Giorgio Parolini and Yiran He
December 6, 2024