PriyaPatelTLDR:
Key Points:
- Cross-border guarantees are crucial in mobilizing private climate finance in emerging markets and developing economies (EMDEs).
- Climate Policy Initiative conducted a mapping exercise to understand the landscape of guarantees for EMDEs.
In a recent study, Climate Policy Initiative (CPI) analyzed 52 cross-border guarantee instruments from 34 key entities to better understand the landscape of guarantees for climate finance in EMDEs. The study found that these guarantees are crucial in mobilizing private finance, with the potential to leverage significant amounts of financing. However, the landscape of guarantee instruments and actors is fragmented.
The study categorized guarantees based on geographical coverage, climate focus, instrument type, risk coverage, and sectoral coverage by provider type. The findings showed that more than half of the guarantees are intended for EMDEs, with a focus on middle-income countries. The majority of guarantees do not exclusively focus on climate issues, and there is an opportunity for MDBs to increase the number of climate-exclusive guarantees they offer. The study also found a predominance of debt guarantees over equity investments and a need for further research on how guarantees can ease constraints on climate finance flows.
Recommendations for future research include exploring the cost of obtaining guarantees, delivery mechanisms, scalability of guarantees, utilization rates, duration of guarantees, and comparative analysis with other financial instruments. The study highlights the importance of tailored guarantees for different climate-related projects and the role of national development banks and MDBs in catalyzing guarantee providers at a regional and national level.
